A resident of New Jersey, Thomas Avellino is an experienced financial professional who has held several managerial positions. To provide the best services to clients, Thomas Avellino advises on a wide range of financial topics, including cash flow planning, hedging, zero risk investing, preparing for retirement and maintaining lifestyle in retirement.
One of the most common questions related to retirement planning centers on timing and when individuals should start saving. The simple answer to this question is that people should start saving as soon as possible.
Saving early means more money for retirement, even if individuals do not necessarily set aside more income. The best way to explain this is to look at an example. Consider a person who sets aside $3,000 annually for retirement at the age of 25. After 10 years, that person stops saving completely. Altogether, the individual placed $30,000 into a retirement account. Assuming an annual return of 7 percent, the person will have $338,000 in the account at the age of 65.
Now, consider another person who started saving when the first individual stopped. From the ages of 35 to 65, the person set aside $3,000 each year. After 30 years, the person has contributed $90,000. At the age of 65, taking the same rate of annual return, that person will have only $303,000 in the account.