This may not be typical, but in a recent conversation with a client, I was informed that he was ready to retire as soon as he started his first job. Maybe he’s just a tad lazy, or it could have been the fact that his first job was at the Taco Bell drive through. Whatever the reason, connecting retirement and his first job was smarter than he may have realized at the ripe old age of 16.
The Early Bird Catches the Fattest Worm
Unless you are on good terms with your rich uncle, or you are biding your time until the trust fund kicks in, you need to plan for retirement. Uncle Sam (no… he’s not your rich uncle) may have social security available for you when you decide to punch the clock for the last time, but maybe he won’t. Even if there’s a surplus left in the government coffers when you retire, it’s not likely to go far in the future. Most individuals living solely off of social security can attest to that.
One simple way to ensure a fat nest-egg when you retire is to begin saving as soon as you start your first job. No matter where you work (yes… even Taco Bell), you can always begin to contribute toward retirement. If your company doesn’t provide a means to do so, you can simply open an IRA and start putting money in from every check.
Here is a simple example to show you the strength of starting early. If my client began socking away $200 a month when he started his Taco Bell job, at just 7% interest he would have $973,269 by the age of 65.
By contrast, if he started saving $200 per year just 10 years later, he would only have $476,724 by the age of 65. That 10 years makes a big difference, doesn’t it?
One Swallow Doesn’t Make a Summer
The other key to success is consistency. If my client took a few years off here and there where he contributed nothing, his grand total would be much less.
Consistency also teaches us discipline as investors. If you allow yourself to take time off from putting money aside for retirement, it get’s much easier to stop contributing at all. By contrast, if we always contribute a fixed amount from every check, we will get used to living without that money and never miss it.