201) Start Your Retirement Fund Early

201) Why You Should Start Your Retirement Fund Early?

Many people know about the need to start planning for retirement. However, not may have the discipline and means to start as soon as possible.

There are so many things to buy to make our lives more comfortable. Buy a car, apartment, holidays, nice clothes, handphones, etc. Then get married and have children. Once the children starts to grow older, we need to send them for kindergarden, primary school, secondary school, tertiary education.

The job and income also start to grow from a young executive, assistant manager, manager, senior manager, Regional Manager, General Manager, etc.

As the time goes by, our income goes higher. However, so does our expenses. Normally, we will match our expenses to the income we received. More income means can have more expenses.

So, how early should you start to create your retirement fund?

Let's look into this case study to see the effect of starting your retirement fund early. Mr Ali and Mr Baba are 2 good friends. After talking to a Financial Consultant, they agreed to start their retirement funds immediately.

Mr Ali is 30 years old, while Mr Baba is 40 years old.
Both starts to invest at the same time. Both agreed to invest $10,000 per year for the next 20 years.
Let's assume both investors got 8% return per year.

After 20 years, Mr Ali is 50 years old and is still working.
However, Mr Baba is already 60 years old and just retired.

Using the Time Value of Money (TVM) calculator, both will have $494,229.21 after 20 years.

As Mr Ali is only 50 years old, he still has another 10 years to let his investment ($494,229.21) grow without adding any more money. When he reached his retirement at 60 years old, his investment fund will have grown to be $1,067,003.80.

 

Wow, that is more than Double his money. 


Therefore, it is very important for you to start savings and investing early.
For $10,000 per year, it is only $833.33 per month.

You do not need to have a large amount to start investing.  Just a few hundred dollars as a start.
It is more important to be disciplined and start to invest early.

Do remember to invest for the long term and not to worry about the volatile market in the short term.

Time in the market, and not Timing the Market.

Do practice the recommended method where you SAVE first, SPEND the rest.

It is very important for you to Start as early as you can.


Do consult your Financial Consultant and discuss about your Retirement funds.