I hear it time and time again from my coworkers. They say, “I am only a few years away from retirement and have never saved a thing. It is too late for me to start.” I’m here to tell you that it is never too late to start investing for retirement. What else do you have to do? Okay, I got it….you waited too long. There is nothing that we can do to go back and fix that mistake, but now there is no time to lose! Now is the time to start investing. If you have never invested for retirement before, no matter what your age is, what are you waiting for?
Don’t Expect Help. Unless you are in your 60’s right now, it is almost safe to assume that the US Social Security system will not be available for you when you retire. Of course the program will be around, but it will not look like it does right now. The program cannot survive in its current form. It pays out more money than it takes in every year and has a huge unfunded liability. So, what does this mean for you and me? We can expect to see either a reduction in the amount of Social Security benefits we will receive in retirement, or we will see an increase in the age where we can claim those benefits. Or, we will see both of these things happen at the same time. So, the morale of the story is that we must save for our own retirement. We cannot only hope that the government will take care of us in our Golden Years.
The Depressing News. If you had saved $5,000 a year since you entered the work force when you were 22 years old, you would have saved approximately $1.8 million by the time you reached retirement age of 65 (assuming an 8% average annual rate of return). You can see the detailed math in the blog’s Resource Page where there are several MS Excel spreadsheets with interactive calculators for you to use. But, if you wait until you are 40 years of age before you ever start investing for your retirement (using the same scenario above), you will only have saved $365,000 over the last 25 years of your working life. You will have missed out on a lot of compounding interest by waiting so long. But, having $365,000 saved for retirement is a lot better than having nothing and depending on the government for help.
Start Investing Now! So, where do we go from here? Time is the most precious commodity that we have. The power of compounding interest is incredible! We have to use it in our favor. There is nothing that we can do to go back and correct the mistakes of our past with respect to waiting. All we can do now is move forward. What else do you have to do? Now is the time to start investing if you have not already. It is never too late to start investing for your retirement.