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Why you are not too young to think about retirement

Nina Spitzer is a SheKnows.com columnist and a freelance writer living in sunny Cave Creek, Arizona.

Time flies!

Have you started planning for retirement? "Who me?" you may be saying. "I'm too young to be thinking about retirement." Not so! You should have started thinking about it... yesterday!

Woman Managing Finances

It's amazing how quickly time flies. You look into the mirror one day and you're twenty. You go back to the mirror the next day and you're fifty. Where do the years go? In what seems like just a blink, you're looking down the homestretch to your retirement years. If you were wise and started planning for retirement when you were young, your retirement years can become those "Golden Years" for traveling and otherwise enjoying your hard earned money. You may even have saved enough to retire early. If, on the other hand, retirement saving was on the back burner for way too long, then you may find your golden years tarnished by having to work longer and enjoy less.

Why start now?

Both money and years factor into how well your retirement account will do over time. The sooner you start, the more your money will compound or grow, even if you begin by investing only a small amount each month. The interest you earn will continue to compound over time, growing the value of your account substantially as the years add up.

Example

The earlier you start investing, the more time your money has to compound, which earns you a higher reward in the end. Here's an example of consistently investing $100 per month at 5% compounded quarterly until age sixty.
Starting when you're 20.... By age 60.... $152,410
Starting when you're 30.... By age 60.... $83,525
Starting when you're 40.... By age 60.... $41,175

Yes! Starting early DOES make a big difference!

I'm convinced! Now, where do I begin?

First, planning for your retirement means finding yourself a good financial advisor. Get recommendations from friends and relatives whose opinions you value. This financial advisor will be entrusted with the huge responsibility of guiding the investment of your life's savings and so needs to be someone with experience, knowledge and integrity. Next, find a good tax advisor. This person will guide you in wise ways to save tax dollars on your earnings.

What will my financial advisor do?

Your financial advisor will suggest and manage your investment accounts. Your investments will be diversified into low and high-risk companies. High-risk investments can earn you the most money, but are also more apt to lose money in a bad market. Low risk investments won't bring in as great a rate of return, but are a lot more secure. Balancing, or diversifying, these two kinds of investments means you are more likely to ultimately do well, no matter what the market. Typically, a financial advisor will advise younger investors towards a heavier balance of high risk/high earning investments, since a young investor has more years of recovery time. As the investor ages, the balance would swing more toward low risk investments to help secure what has already been earned.

Be committed and consistent!

Once you've developed a plan with your financial advisor, stick to it! Be sure investments into your accounts are made on a consistent basis. Automatic withdrawal from your paycheck into your investment account is the easiest, most painless way to do this. Also, make a commitment to yourself to increase your monthly investment amount with each raise you receive. Remember, the more you invest each month, the more will be compounded towards higher earnings in the end.

Do research!

Planning for retirement is the most important homework of your life. Do research. Read books. Keep up with the economic market. Speak to those "in-the-know." Being a well-informed investor will pay out in dollars when the time comes to tap into your investments.

Dust off the rocking chair!

Remember, time flies! Before you know it, that rocking chair you used for nursing your first baby will become the same rocking chair you'll use to rock your grandchildren to sleep. If you start planning for retirement now, you will enjoy a richer, more comfortable and more enjoyable lifestyle later.

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