One of the smartest things you can do on the way to retirement is to start saving early.
Starting early means your retirement savings has more time to grow through the power of compounding.
The hypothetical example illustrated above highlights the advantages of starting to save earlier in life.
The illustrated example assumes a $3,000 per year contribution, at equal amounts monthly (that’s $250 per month), every month from the starting age until retirement at age 65 at a 6% annual effective rate of return.
By starting at 25, and then saving over the course of 30 years, you’ll have nearly double what you would have had if you had started 10 years later. Given the assumptions in this example, the decision to delay for 10 years would cost you $233,924.
.Starting at 25 will net you four times more than if you wait 20 years before you start saving and then save over the course of 20 years. Given the assumptions in this example, the decision to delay for 20 years would cost you $364,547.
The difference is even starker if you delay savings until you have just 10 years before you want to retire. Starting at 25 will net you 11 times more than waiting until age 55. Given the assumptions in this example, the decision to delay for 20 years would cost you $437,485.
While your actual returns may vary, there is no doubt starting early results in a huge advantage over time. This example assumes taxes are due when the money is withdrawn from the defined contribution plan (like with the Traditional TSP option).
It couldn’t be easier to open Thrift Savings Plan (TSP) account. You had the opportunity to open a TSP account at when you entered the Marine Corps. If you missed your chance then, the sooner you start, the more time your contributions will have to grow.
Start today! Enroll in TSP:
Log in to myPay and start contributions. Experts recommend you save 10% of your income.
If you are not able to save 10% today, make a budget or a plan to increase your contributions over time. Your installation Personal Financial Management Specialist (PFM) can help. For more personal finance information, check out the Personal Financial Management MarineNet Video channel.
Go to the next article, "Let's Do the Math."