Maximize Your Retirement Investments Page: 1
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Saving today will improve retirement tomorrow
As American employers continue to abandon tradi-
tional pension plans in favor of more-flexible 401(k)s,
individual workers are becoming increasingly responsi-
ble for their own retirement security. Although the gov-
ernment's Social Security program will provide you
with some income, the quality of your retirement will
depend largely on how you save and invest your
money today.
When you're just starting to save for retirement, the
bulk of your nest egg will come from your contribu-
tions, so it's important to make saving a habit. As time
goes by and your nest egg grows, investment returns
will represent a larger slice of your retirement savings.
That's why it's so important to select the right invest-
ments to maximize your savings. Whether or not you
have a retirement plan at work, you can save on your
own in an individual retirement account (IRA).
three e :ues
To put your retirement plan on track and keep it there,
you need to master a few basic financial rules.
Rule #1: Time is on your side. Retirement is a long-
term goal. Whether you're just starting your career or
counting down your final years until retirement, one of
your key investment allies is the "magic of compound-
ing"-your interest earns interest and profits build on
profits automatically. For example, let's say you invest
$10,000 in an investment that pays an 8% annualreturn. You'll have $10,800 at the end of year one.
After five years, your $10,000 will have grown to
$14,700, $31,700 after 15 years and $68,500 after 25
years, even if you never add another dime to the pot.
But don't stop there. Your nest egg will grow more
quickly if you continue to add to it year after year.
Ideally, you want to save enough to replace 80% or
more of your preretirement income through a combi-
nation of Social Security benefits, personal savings
and other sources of retirement income, such as a
pension or a part-time job. To achieve that goal, you
should start saving for retirement with your first job
and ultimately aim to contribute 15% of your gross
income-including any employer contributions. In theThink of compounding as a snow-
ball growing as it rolls down a hill.
The longer the hill, the bigger the
snowball. This graphic shows how
a $10,000 investment that earns
8% per year grows to $14,700
after five years, $31,700 after 15
years and $68,500 after 25 years,
even if you never add another
dime to the pot.$68,500
$14,700
$10,000 AT 80/
AFTER 5 YEARS$10,000 AT 80/
AFTER 15 YEARS$10,000 AT 8%
AFTER 25 YEARSW
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Kiplinger's Personal Finance. Maximize Your Retirement Investments, pamphlet, 2010; Austin, Texas. (https://texashistory.unt.edu/ark:/67531/metapth639278/m1/3/: accessed April 26, 2024), University of North Texas Libraries, The Portal to Texas History, https://texashistory.unt.edu; crediting UNT Libraries Government Documents Department.