Retirement Planning: The Cost of Waiting

The way to get started is to stop talking and start doing.”  – Walt Disney

The time for planning for your future is now. But in today’s fast paced, hectic world many people put off important decisions until another day. The excuses—”I don’t have time to plan,” “I can’t afford to invest,” and “I really don’t understand what I need to do”—will jeopardize achievement of your financial goals. The truth is, you shouldn’t delay. The earlier you start, the more you can maximize the power of time to help realize your retirement goals.

One big misconception is that you don’t have to start planning until a year or so before you actually retire. And while you may have been saving for your retirement for many years, have you really been planning? Research suggests that people who take the time to plan ahead end up with more resources when they are ready to retire.













Once you know your basic retirement goals—your retirement age, the type of lifestyle you want, and how much income you’ll need—you can create a plan to achieve them. If you wait until the last minute, you won’t have time to make up the potential gap between retirement expenses and retirement income.

Most individuals wait for their employer to initiate the retirement planning process. Unfortunately, your employer is not required by law to provide you with a pension and is under no obligation to educate you about other important retirement aspects.  To develop a complete picture, you need either to spend time reading and informing yourself or to find and work with a retirement solutions provider whom you can trust.

Compound interest examples

Time is definitely an ally when you’re saving and investing for long-term goals. Consider the difference an early start can make:

  1. If you invest $2,000 a year from age 25 to 35, earning a 6% annual return, at age 65, you’ll have more than $200,000.
  2. If you invest $2,000 a year from age 35 to 65, earning the same 6% annual return, at age 65, you’ll have only $150,000.

As you can see, an early start would let you maximize the benefits of compound interest, even if you stopped saving after age 35. So you see that by waiting just 10 years to get started could cost you more than $50,000 in investment returns!

Procrastination can be the difference between financial success and financial failure. Consider another example, assuming you have $50,000 to invest at 7% compound interest, and compare investing immediately or waiting 10 years:

  1. In 20 years, if you start today, your $50,000 will grow to $193,484.
  2. If you wait 10 years, your $50,000 will grow only to $98,358.

In this case, waiting ten years will cost you almost $100,000 of investment returns.

The time to plan is now

When you have a plan and you invest systematically, you can take advantage of compounding interest. The power of compounding interest cannot be overstated. When you save and invest, compounding interest works in your favor, helping you to build the savings you need for future financial goals. But to maximize the benefit of compounding interest, you must get an early start. There is no sooner than today—so the sooner you begin planning and saving, the more your money will grow.

The rate at which your retirement investment is able to grow plays a key role in determining the amount of income you will have when you stop working.  However, when you add the advantage of compounding to the formula, your retirement dollars can grow even faster. Compounding is the growth that is computed, based on the sum of the original investment plus already accrued earnings. Simply put, your investment grows at an accelerated pace as your money makes money.  Moreover, you must invest for the long-term. This keeps your money working—and compounding—for you. With the power of compounding, a relatively small amount could add up to big savings over the long term.

Explore the retirement plans and helpful resources that the AIA Trust offers.

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