It's easy to put off saving for retirement. There are so many other things to do with your money. The immediate needs of paying bills, saving for college tuition or caring for an elderly parent always come first -- not to mention buying the newest clothes, your favourite CDs or going to the movies.
But putting off saving for retirement can cost you big bucks down the road. Here's an example:
Neha started contributing Rs 15000 per annum to her plan at age 23. She stopped contributing at age 33, but left the money in the plan until she was 65.
Ajith, at age 35, began contributing Rs 15000 per annum to his plan the same year. He continued to contribute through age 65.
Both earned an annual effective rate of 10%*.
Now, just look at the difference:
| |
Neha |
Ajith |
| Starting age |
23 |
35 |
| Ending age |
33 |
65 |
| Total contribution |
Rs 150,000 |
Rs 450,000 |
| Years contributed |
10 |
30 |
| Value at age 65 |
Rs 5,552,163 |
Rs 2,714,137 |
Even though Ajith contributed for 30 yrs, Neha's plan was worth Rs 2,838,026(Rs Two million eight hundred thirty eight thousand and twenty six) more than Ajith's because she started earlier. In fact Ajith contributed Rs 300,000 more to his plan but the difference is that Neha's money had more time to grow. This is the magic of compounding and starting early in life.
So go ahead and get started and discipline yourself to a long-term commitment to savings but taking money out of this plan will involve stiff penalties and so goes the saying " TIME AND TIDE WAITS FOR NO MAN".
* The rate used is hypothetical and is for illustrative purposes only.
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