Ways To Save And Retire Rich
Most of us think that in order to have sufficient money after retirement, we just need to save money. However, the only way to save and retire rich is to begin investing early in life. This means that your savings will keep getting compounded and will have a large impact on your saving levels. Let us take an example to explain how your wealth can get compounded. Assuming you will retire at the age of 65 and the annual compounded rate of interest is 10 percent, two people Person A and Person B start investing money for retirement. Person A is 40 years old and invests $20,000 a year while Person B is 21 years old and invests $5,000 a year. By the time Person A retires, he would have invested $400,000 while Person B would have invested $220,000. However, because of the compounded interest, Person A would retire with $1.97 million and Person B with $3.26 million. That is why it is important to start investing early so that you can retire rich. You should take advantage of the 401k plan your employer has to offer. Many companies make matching contribution to your 401k account and this is free money which you should take advantage of. If you happen to change your job several times, make sure you do not cash out your retirement plan. Obviously it goes without saying that you will have to pay taxes on the cashed out amount while paying a hefty penalty on early withdrawal. You should rollover over your 401k to your new employer or to an IRA. If you are facing a money crunch think about getting a part time job so that you have additional stream of income to fund your retirement. The only way to retire rich is by starting your investments early and keeping them going until you retire. |
