June: Funding Your Future at any Age

Building Wealth in 2018If you have ever attended a financial planning seminar, met with a wealth management advisor, or read any number of books on investing, there is one core understanding most experts agree on and have the data to support: the earlier you start saving for your future, the faster your savings will typically grow over time. While there have been some historical occurrences where this has not been the case, the data does show that factors such as overall economic growth and compounding interest, a person who begins saving even a small amount in their early 20’s in a long-term retirement account, such as a 401k or IRA will, in most cases, outperform another person who saves exactly the same amount of cash, but starts later in life.

According to NerdWallet and CNBC, in order for a 23-year-old to reach $1 million in their retirement account by age 67, they would need to save $415 per month at a 6% annual return. For a 30-year-old, saving at the same 6% annual rate of return and starting five years later, they would need to put away $651 per month to reach the same $1 million. The reason is not just the number of years between the two, it’s the effect of compounding interest that makes money invested grow faster over a longer period of time. Following this concept, a person who begins saving at age 30 is going to do better than someone who starts at 40, and so on. Regardless of your current age, the important thing to keep in mind is that while you can’t go back and start earlier, you are better off beginning today than you are a year from now.

How can saving early grow to a $1 million over time?

Age Monthly Savings Amount Saved Investment Return
23 $415 $219,535 $780,955
30 $651 $289,695 $710,464
35 $912 $351,120 $649,797
40 $1,300 $422,500 $577,934

Source: NerdWallet

The calculations in the above table take into account a few assumptions. The investment return rate is based on a 6% average rate and annual compounding of the returns until retirement at age 67. To calculate your investment return at any age, simply search for a retirement calculator online to obtain a personalized retirement savings goal, or check out this handy tool.

Developing good saving habits at an early age will amount to greater rewards for you in the future, so you can live a comfortable retirement. Even if you only have a little to save initially, it can grow to a much larger amount over time and you can save more as your salary increases. However, the best advice and guidance you can receive is from a wealth management advisor who can discuss the best strategy the meets your needs and goals. The team at Independence Financial Advisors can assist you with creating an investment plan to achieve your goals. Give them a call at 603.934.0400.

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  1. Ed Maloof on

    So does Franklin Savings Bank have a 6% rate of interest on any product? If So I will invest immediately..

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Written by Dawn Beers

Dawn Beers

Dawn heads up our marketing department where she is responsible for the general oversight and management of the Bank’s marketing and public relations initiatives. This involves managing the planning, organizing and directing of our advertising, public relations, product development, sales promotion and research efforts.

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