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Start Saving Early for Retirement

It is very important to start saving for your retirement as early as you can. It is important to start saving when you are in your 20's and 30's instead of waiting until your 40's to start thinking about retirement.

Why should you save early for retirement?

The primary reason is the power of compounding. What it boils down to is that with compounded returns, the majority of your investment earnings occur in the later years of your investment period. This is because you start earning money on the prior year's earnings. As this amount starts to grow, the monetary increase in your investment account(s) will start to snowball in the later years. The last 10 years before retirement, things should really start to snowball!

For example, if you start saving at 20 years of age and put away $3,000 a year and earn an average of 8% a year, you will have just over 2 million dollars when you reach age 70! Your actual contributions would have been $150,000!

If you wait until you are 40 years old and save $3,000 a year and earn the same 8% a year, you will have only $400,000. Your actual contributions would have been $90,000.

A majority of the gains occur in the last years of your investment period. The earlier you save, the more money you will have because of the power of compounding. So you can see it is important to start saving for retirement as early as you possibly can.

I can't emphasize enough how important it is to start thinking about retirement while you are young. Even though retirement seems distant and far off, one day you will be retired. Don't be caught scrambling when you are 40 or 50 years old with retirement around the corner to start thinking about retirement.

Do yourself a big, big favor and start saving for retirement now!

Open an IRA account. Take a look at a regular IRA or a Roth IRA, if you qualify. Find out if your employer has a 401k retirement plan and if they do, contribute to your employers plan. Employer plans can have an added benefit because your employer might help pitch in for your retirement by matching some of your contributions! You can contribute to both accounts every year.

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