Insights & Ideas

Starting Early

Retirement may seem far away, but early planning is crucial. It's true that some of your expenses may decrease when you retire, but others, like health care, travel, and leisure activities, may rise. And with life expectancies increasing and the power of inflation, you want to make sure you don't outlive your assets.

According to the 2010 Retirement Confidence Survey, 68% of retirees said that Social Security was a major source of their income retirement income.1 With the future of Social Security in jeopardy, it's extremely important to save and invest on your own. The earlier you start, the more money you can accumulate and the greater chance you'll have of reaching your goals.

By starting early and saving moderate, even small amounts each year, you'll be better prepared to live comfortably in retirement. If you wait, you'll have to save much higher amounts each year in order to save the same amount and you run a greater risk of not having enough money to retire at the age you'd like. It's never too late, though. Even if retirement is in your near future, you can still take steps now to save and invest.

The Power of Staring Early

This chart is for illustrative purposes only and assumes a $3,000 contribution made each year and an 8% annual compounded return (with dividends reinvested). Returns do not reflect fees and expenses of acutal investments. Actual returns will vary and may be greater or less than any assumed rate. There can be no guarantee that any particular return will be achieved. Regular investing does not guarantee a profit or protect against loss in declining markets. Withdrawals and distributions from a Traditional IRA (other than nondeductible contributions) will generally be subject to taxation at then current federal and state income tax rates, which will reduce accumulated amounts. Withdrawals made from a Traditional IRA prior to age 59½ may be subject to an additional 10% penalty tax if not made for qualified purposes and to a 20% withholding. Withdrawals from a Roth IRA may also be subject to an additional penalty. Please see the IRA section for more details.

1Source: 2010 Retirement Confidence Survey, Employee Benefit Research Institute.