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Make Your Retirement Savings a Priority

Make Your Retirement Savings a Priority

July 18, 2023

The Importance of Saving for Retirement

The importance of saving for retirement isn’t often taught in school. People tend to focus on more tangible goals to save for, like a first car or a house, and put off saving for retirement for as long as possible. What some people don’t realize is that the best time to start saving for your retirement is now! In fact, the sooner, the better. 

There are two big reasons why it’s important to start saving for retirement as early as you can. First, more time allows you to make the most of compound interest. Second, starting early creates good saving habits. 

Make the Most of Compound Interest

Time is your friend with regard to compound interest. The longer you have to compound, the better. Let's look at a real example. Let’s say that you have a Roth IRA that earns compound interest of 7% in average annual returns, and you make the maximum contributions to that account every year (using $6,000 for this example). After ten years of compounding at 7%, you will have $83,095. If you make the same contributions to a regular savings account with no interest, you would have $60,000. Compounding allows you to earn interest not only on your original contributions, but on the growth as well. 

For more help understanding how compound interest works and how it can affect your savings, click here to check out this calculator!

Make Saving a Habit

If you decided to put off saving for retirement, getting into the habit of saving can be a challenge. If, however, you build saving for retirement into your budget from the moment you start earning money, you can continue that habit.

Even if you’re in a position where you can’t make the maximum contributions to a 401(k) or an IRA, save every penny you can. Then, when you can, get serious about maximizing your yearly contributions and take advantage of employer-based retirement accounts. This can add to what you’re already saving and will serve you well in retirement.

The earlier you start saving, the sooner your retirement fund can reach its full potential. If you aren't sure how much you're going to need to support your retirement lifestyle, contact the office. We can work with you to develop a financial plan that can help to answer many of your questions. 

This material was developed and prepared by a third party for use by your Registered Representative. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security. The content is developed from sources believed to be providing accurate information.

The examples are for illustrative purposes only and the return is not indicative of any actual investment.  Actual investment results may differ substantially. Distributions from traditional IRAs and employer sponsored retirement plans are taxed as ordinary income and, if taken prior to reaching age 59½, may be subject to an additional 10% IRS tax penalty. A Roth IRA offers tax free withdrawals on taxable contributions. To qualify for the tax-free and penalty-free withdrawal of earnings, a Roth IRA must be in place for at least five tax years, and the distribution must take place after age 59½ or due to death, disability, or a first time home purchase (up to a $10,000 lifetime maximum). Depending on state law, Roth IRA distributions may be subject to state taxes.