The Key to Retirement Planning Success:
Start Young
"I wish someone had told me to start
putting away just RM2,000 a year when I was in my 20s." That's what many
older women chant these days. The reason: Like most women, they didn't
start thinking about their retirement planning until they had suddenly
reached their 30s or 40s and realized how much valuable time they had lost.
Yes, it's difficult to think about
retirement when you're young. For one thing, it's hard to believe you'll
ever be as old as 40, much less 59 or 65. For another, you have plenty
of other financial pressures to contend with: paying down your student
loans, managing your credit card debt, saving for a down payment on a car
or just managing to cover the rent each month.
But while all that may be true, it's
also true that if you start saving for retirement now, you have the best
shot at attaining long-term control over your finances and ending up your
life in comfort.
Watch the Money Grow
Just watch what happens if you open
an individual retirement account now with unit trust
and start contributing to it each year. The first year you open individual
retirement account, you'll invest, say, RM2,000. By the end of the first
year you'll have the original RM2,000 investment, plus any income it has
earned. Now you've got RM2,000 earning interest plus interest earning interest.
And on top of that you'll make another RM2,000 contribution the second
year. The entire sum will earn interest and so on.
By the time you hit retirement age,
all those contributions and interest will be worth much more than the original
amounts you deposited, thanks to the power of compounding.
For example, if you start making
annual RM2,000 contributions at age 25, you'll have contributed RM70,000
by the time you retire. But at a 10 percent rate of return, you should
have more than RM500,000 in your account at retirement age
Your money gets the greatest benefit
from compounding at the end of the time it's in your account, because that's
when there's the most money to build on. And no matter when you start,
the compounding effect will mean your money will multiply into quite a
tidy sum by the time you retire.
Keys to Retirement Success
Start early
The younger you are when you begin
contributing to your retirement fund, the longer your money will have to
compound, making it worth even more when you retire.
Contribute every year
Even if you're tempted, don't skip
your retirement fund contribution. Give your money the best possible chance
to grow by socking away a little bit every year.
Resist the temptation to withdraw
the money early
Money gets the greatest effect from
compounding in the later years, so the longer you can leave it in your
account, the more you'll have when you withdraw it.
Aim for a high rate of return
The more your money earns annually,
the more you'll have at retirement. |
