The Vital Years For Retirement Planning

The Vital Years For Retirement Planning


If you're in your 30s, serious planning for retirement begins now. Odds are you have never taken a close look at your earning potential and long-term needs, or thought much about all the savings and credit options before you. Now is the time to get real about such things because your life is changing in ways that you may only be beginning to appreciate.

For one thing, you're getting older. You're not old by a long shot but the door is starting to close on the certainty of long-term investment gains. "The most powerful force in the universe is compound interest," Albert Einstein famously declared. But the magic only happens through consistent saving over many, many years. Delay is costly. Consider: Had you started saving $5,000 a year in a Roth IRA at age 20 you would today be on track to accumulate $1.9 million by age 65 (assuming 8% annual returns). But now, at age 30, you need to save more than twice that amount each year ($11,200) to get the same result and if you are 40 you need to sock away $26,400 a year. The earlier you begin the less you need to save. In the example above, lifetime contributions that began at the age of 20 totaled just $225,000; at the age of 30, $392,000; and at 40, a staggering $660,000.

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