This is a great question! The answer is NOT "Once I'm making enough money to afford it!" Why? Because some people never get there! Many workers without a retirement fund intend to contribute soon, or next year, or some other time in the future. They ask themselves, "How much more money do I need to earn in order to contribute?" That’s not the right question. Why? Because for most of us, the more we earn, the more we spend. The proper question to ask is, "How much should I contribute right now?"
Why is 'Now' The Right Answer:
It’s simple: the earlier you start, the better. But let’s break that down a little further, and here’s where things get interesting. Most people think that waiting a few years to save for retirement isn’t a big deal. After all, they’ve got decades ahead of them, right? But because of a financial principle called compounding interest, waiting even a few years could cost you a significant amount of wealth in the long run.
Let’s look at two scenarios—both involving the same person, Jordan—and explore how different choices can affect her retirement savings.
Meet Jordan:
Jordan is 23 and has just started her first full-time job. As part of her onboarding paperwork, she receives 401(k) information and a form asking how much of her paycheck she’d like to contribute to her retirement fund. This is a pivotal moment. She has a decision to make—one that will affect her financial future in ways she might not fully realize yet.
Here are Jordan’s two choices:
Choice #1 Procrastination - Start Later:
Jordan’s first instinct is to wait. She’s new to the workforce and has a lot of adjustments to make. She thinks, “I’ll get established first and then figure out how much I can contribute later.” A year passes. Then another. She gets promotions, raises, and her income grows, but her mindset still holds her back from making that first contribution. After a decade of working without contributing to her retirement fund, Jordan finally decides to start contributing $250 per month to her retirement fund.
Choice #2 Immediate Action - Start Now:
Jordan, while hesitant, understands the importance of saving for her future. She knows that her future self will thank her for making that initial sacrifice. Even though she’s just starting out in her career, she chooses to contribute $250 per month to her retirement fund immediately. That small but powerful decision will set the stage for her future wealth.
Let's Time Travel - Comparing The Two Jordans:
Now let’s fast forward 40 years. Jordan decides to retire at 63, after a successful career. Both versions of Jordan invested in a fund that earned a reasonable 8% average annual return. So, how much is waiting for each Jordan when it’s time to retire?
Jordan #1 - The Procrastinator:
Jordan #1 waited ten years before she began contributing to her retirement fund. She contributed $250 per month for the next 30 years, which adds up to a total of $90,000 of her own money invested. Over time, with the power of compounding interest, Jordan’s retirement fund grew to an impressive $352,148. That’s a great result for her dedication over the final 30 years, and while it’s certainly a win, it’s not as much as it could have been.
Jordan #2 - The Early Bird:
Jordan #2, on the other hand, made the decision to start contributing immediately, and continued contributing $250 per month for 40 years instead of 30. Over this period, she contributed a total of $120,000 of her own money. The result? An amazing $805,292 in her retirement account. That’s more than double the amount Jordan #1 accumulated, all thanks to the power of getting started early.
The Real Magic of Compounding Interest:
But wait—there’s more! Let’s say Jordan #2 worked until she was 73 instead of retiring at 63. This would mean a 50-year career, which, with the power of compounding interest, turns her small monthly contributions into a retirement fund worth $1,783,595. Imagine that—by simply staying invested and giving her money more time to grow, Jordan #2 would become a millionaire, all because she started investing early and consistently.
This is the magic of compounding interest. The earlier you start, the more time your money has to grow exponentially. Each year, your returns earn more returns, and this snowball effect is what allows people to build significant wealth over time.
Why The Right Time to Start is 'NOW':
The truth is, there’s never a “perfect” time to start contributing to your retirement fund. Whether you're just starting your career, or you’ve been in the workforce for a while, the key is to start as soon as possible. Every dollar you invest now has the potential to grow, and even small contributions add up over time.
But I get it—starting may feel daunting. Maybe you’re not sure how to begin or where to put your money. The good news is that you don’t need to figure it all out on your own.
Make it Easy With 'Find Your Hidden Treasure Chest':
If you’re looking for a simple, actionable way to start building wealth today, 'FIND YOUR HIDDEN TREASURE CHEST' offers a clear and straightforward path to investing, even if you’re just getting started. This book provides you with the tools and strategies you need to begin saving and investing without overwhelming your budget or lifestyle. Whether you’re earning a little or a lot, there’s a way for you to begin building wealth, and this book makes it possible to start right now.
So, don’t wait! The best time to start securing your financial future is today. Get your copy of Find Your Hidden Treasure Chest, take action, and begin building your retirement fund—and your future—now! You can buy your copy of 'FIND YOUR HIDDEN TREASURE CHEST' at Barnes and Noble, Amazon, on Amazon Kindle, at your local bookstore, or right here at findyourhiddentreasurechest.com, so you can get started on that wealthier, brighter future that you dream of!
-Matt Simmons
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