Most of us are busy, and it’s easy to put off thinking about something that seems a long way in the future – like retirement. And many of us are also intimidated by investing – it seems so complicated.
But saving and investing when you’re young or even in middle-age can give you a much better chance of being able to retire comfortably in your 60s (or maybe even earlier). And with things like employer-sponsored 401(k) plans and broad-based index funds (rather than buying individual stocks) investing is easy and doesn’t take much time at all.
Here’s an example of what saving and investing when you’re young can do. Let’s say you estimate you’ll need $1 million at age 65 to be able retire. Assuming you can earn a 10 percent rate of return by investing your savings:
–If you start at age 25, you would need to save and invest only $158 a month.
–If you wait until age 35 to start saving and investing, you’d need $442 a month.
–If you wait until 45, you’d need $1,317 a month.
–If you wait until 55, you’d need nearly $5,000 a month.
If your company offers a 401(k) plan, that is the simplest way to save and invest for retirement. More and more companies are offering simplified and low-fee index funds as part of their 401(k) options. And many companies match what your put into your plan up to a certain dollar amount – free money for you!
If you don’t have a company retirement plan, broad-based index funds, such as those that mirror the S&P 500 index, are a very easy way to invest—simple to set up and requiring very little time to monitor and manage over the years. They are well-diversified and many studies show that they may provide better overall returns than individual stocks or complicated actively-managed mutual funds. There are many low-cost and online companies that can help you get started – Charles Schwab, Vanguard, Fidelity, etc.
So what are you waiting for? Get started now!
As part of national Money Smart Week, the Seattle Public Library is partnering with the Puget Sound Chapter of BetterInvesting to offer a free class:
Investing for Financial Independence: Steps to a great (and maybe early) retirement.
Saturday, April 28, 2-3:30 p.m.
Seattle Central Library, 1000 Fourth Ave., Seattle. WA 98104
Instructor Gary Ball, a volunteer and long-time individual investor, will discuss different ways to invest during your working years. He’ll show you how to set up an investment plan that you can use throughout the different stages of your life – 20-40, 40-50, and after 50. This plan will let you retain most of the investment returns and not pay a broker or financial advisor.
Money Smart Week®, April 21-28, 2018, is a public awareness campaign designed to help consumers better manage their personal finances. Organizations across the country, including many public libraries, are offering free programs to people of all ages and income levels on all facets of personal finance. For more information about events, visit www.moneysmartweek.org.