Rule 2: Start saving early
Thanks to the power of compounding interest, a little money saved now can go a long way at retirement time. But to get the most benefit, you’ll want to start saving as early as possible.
Let’s say you’re 20 years old and can manage to put away only $100 a month into your retirement fund. Assuming you average 8 percent returns, you’ll have around $500,000 by age 65. Even better, because of compound interest, over that 45-year period you’ll only have invested $54,000 of your money to get all that cash in return.
If you wait until you’re 40 to start saving $100 a month, and get that same rate of return, you’ll put in $30,000 of your money and you’ll have in the ballpark of $100,000 by age 65. Not bad, but wouldn’t you rather have half a million?