Save EARLY and Save OFTEN

It’s very rare to meet someone who regrets saving early for retirement, but unfortunately the alternative seems all too common in our world today.
TFO Phoenix Chief Operating Officer, Brittany Genzale says that if she could travel back in time, she would encourage her teenage self to start saving in a Roth IRA as soon as she got her first job. She states, “Even if the contribution feels tiny, it teaches you to think about the future and have discipline. Decades later, your account may seem small relative to what you might be able to save and invest at that time, but you will look at your first account with fondness and be proud of your younger self for being so thoughtful.” Developing good saving habits early and taking advantage of the powerful impact of compounding can make for greater financial security in the future.

Take a simple hypothetical case study: When Alexis turned 16, she got her first job earning $10 per hour. Because of school she could only work 8 to 10 hours per week. On average her take home pay was $400 per month. She decided to set aside $50 of her monthly paycheck to invest in a Roth IRA. For the next 10 years, even through college, she invested $600 annually.

Without having made any additional contributions after age 25, earning an annual return of 6%, the $6,000 that she had invested over the 10-year period would grow to over $76,000 when she turned 65.

The secret ingredient is “time” which allows your investment earnings to compound. Morgan Housel, author of “The Psychology of Money”, compares the power of compounding to the effects of the ice age. He states: “…you don’t need tremendous force to create tremendous results.” He illustrates this important concept further by providing some insight on Warren Buffet’s success. While Warren Buffet is skillful at investing, Housel points out that there are other investors that have achieved greater investment returns but have not amassed the fortune of Buffet. While making smart investments is important, a significant portion of Buffet’s wealth can be attributed to the fact that he has been investing for three-quarters of a century, having started investing at the age of 10.

You may not have started at age 10 and setting aside hard-earned money today may feel like a big sacrifice, but the rewards of starting early can be exponential. And as Brittany mentioned, you may feel a sense of pride for being so disciplined.

To sum it up, TFO Phoenix advisor Connor Humphrey says it best, “Yesterday was the best time to start saving and investing. You will always be tempted to put it off as long as possible. Instead of doing that, invest in your future today. ‘Future You’ will be grateful that the ‘Younger You’ did!”


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