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Heres a look at the importance of starting your retirement savings early andhow much it can pay off.
Benefits of Starting Retirement Savings Early
Young people have some distinct savings advantages over older people.
However, over time, you also earn interest on your earned interest, a process called compound interest.
The earlier you start saving, the more time compound interest can grow your money.
Assume a 5.00% APY compounded monthly.
S&P 500 historical data shows that $10,000 would be worth $129,866.
Thats a return of 9.59% per year despite the many market ups and downs during the period.
Starting early also helps you avoid the stress of playing catch-up in your later years.
Suppose you want to save $1 million by age 67.
How Much of Your Income Should You Save for Retirement?
Others recommend saving 15% plus any employer contributions.
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