We all know the friend who never misses their bedtime, wakes up early to exercise, and makes sure lunch is always packed. Not only that, but they’re also the ones leading group trips or outings- making sure everyone has a place to go and something fun planned!
If I’m being honest, that’s me. While some may view my personality as “dull” or too safe, one area where taking the reins is essential: is retirement planning! Being mindful and prepared here can make a world of difference when it comes to your financial future.
I’m only 23, yet I’ve already made a smart move for my future financial security: saving for retirement! At just 18 months post-graduation, I know that this decision is the right one. Even though it’s only been since January that I’ve started building up funds to retire later down the line – and let me tell you; it feels amazing!
Time Is Money
Time is essential when it comes to saving for retirement, and that’s thanks to the miraculous power of compound interest. Even Albert Einstein recognized this force, allegedly remarking that compound interest is “the most powerful force in the universe.”
Compound interest is when you start to make money on your money. Suppose you’re saving $1200 per annum for retirement – if the annual return rate is 5%, that’s a gain of $60 right off the bat! But here’s where it gets really exciting: if you leave those earnings in their original account, they’ll begin generating more income too. So the following year, your total balance will be at $1260 and will generate an extra 63 bucks just by sitting there! That way, every bit of savings compounds itself into bigger gains over time – pretty awesome huh?
It may appear insignificant at first, yet the savings add up quickly over time. By setting aside just $100 monthly starting at age 23 until you reach 65 years old, you will have more than $170,000 stashed away in your bank account! Imagine the possibilities with that kind of money—you can make it a reality by saving an easily achievable amount of only $1,200 annually.
On the other hand, if you start saving at age 30, you’ll still have a decent $120,000 saved up by 65. While that might sound like an appropriate amount for retirement savings – it’s missing out on a grand sum of $50,000! Furthermore, if one waits until 35 to begin their contribution plan for retirement- they could potentially suffer from having less than ninety thousand dollars when reaching the golden years. The conclusion is simple: waiting until your thirties to save seems illogical in comparison with starting earlier and collecting more interest over time as proven through compound interests which are discussed in detail within this LearnVest article.
Financial Security = Empowerment
Millennial women are fortunate to have all the inspiring resources and female role models around us that our mothers didn’t have. Organizations like Levo League, which had not yet been founded when my mother was of similar age as me, provide an incredibly emotional and professional support system for this generation. I strongly believe it’s now time to complete the puzzle by introducing a strong financial foundation.
When I save for retirement, it means that I won’t ever have to lean on my family members, the government, or anyone else for money. Financial independence is truly one of life’s most rewarding achievements and by investing in myself now, not only do I benefit from financial security later but also from a sense of serenity.
Where To Start?
If you relate, the idea of retirement can be daunting. No worries, I’m here to show there’s no need for apprehension and guide you in making strides towards achieving your future goals. Here are three quick steps to take control:
1. Start Small: If you are dealing with daily budgeting struggles, or if your monthly expenses at Starbucks add up to $200+, it is best to first get a handle on your present financial situation before thinking about saving for retirement. Put together a budget and make sure that there’s room for regular contributions; simply setting aside only an additional fifty dollars per month can quickly turn into quite the nest egg!
2. Educate Yourself: I uncovered a wealth of knowledge on retirement planning after reading Smart Women Finish Rich and You Have More Than You Think. However, if books are not your preferred learning method, you can also explore the internet or take an online course at no cost to gain insight into financial management.
3. Sign Up: Now that you have all the pertinent information, take time to meet with your company’s HR department and fill out any essential documents for opening a retirement account. To make sure your contributions won’t slip through the cracks, set up automatic withdrawals from each paycheck – an added incentive is that contributing to your retirement will lower taxes!
What are you doing to save for the future? Tell us in the comments!
Ask Sallie Krawcheck, Past President at Bank of America Merrill Lynch, a question about personal finance!