The importance of getting started early on your path to retirement can’t be underestimated. The time value of money (TMV) is the most important facet of long-term investing. Consider this simple comparison given the current $6,000 maximum someone age 50 or less can contribute to an IRA or Roth IRA.
- Someone beginning to make the annual $6,000 contribution at age 25 who earns an average annual return of 7% will have $1,197,810 at their age 65.
- Someone beginning to make the annual $6,000 contribution at age 35 who earns an average annual return of 7% will have $566,764 at their age 65.
What an amazing difference! The 35 year-old investor ended up with less than half of what the person who began at 25 had. No matter your age, if you haven’t gotten serious about financially planning for your future the time is today…not tomorrow. Certainly, trying to influence those of a younger generation to recognize the power of TMV is a good cause that will pay off big for them in the long-run.
As always, we hope you enjoy this week’s Weekly Market Review.
Trevor N. Coe, CFP