If your retirement is a long way off and you're thinking of delaying saving until later, that decision could prove costly.
Saving money for your retirement now, even in small amounts, can lead to potentially greater savings than waiting and trying to catch-up in later years. The following example will show you how, as well as show you the power of long-term tax-deferred compounding.
Assume both Ashley and Michael are 22 and earn $35,000 a year. Ashley begins contributing $100 a month right away to her employer's retirement plan and continues for 13 years until she stops at age 35. On the other hand, Michael puts off making contributions until he turns 35 and then contributes $100 monthly until he retires at age 67. Both plans include an employer match of 50% of an employee's contributions up to 6% of annual pay.
As the chart shows, Michael accumulates $57,531 less in retirement savings than Ashley ($226,402 vs. $168,871) even though he contributed for 19 more years. Moreover, if Ashley does not stop contributing and continues until age 67, and her savings continue to grow at the same rate, her overall savings would be more than twice as much as Michael's.
The sooner you begin contributing, the more the power of tax-deferred compounding and contributions to your retirement plan (including employer contributions, if any) can help you meet your long-term financial goals. At a minimum, consider increasing your contribution amount annually until you are taking full advantage of any employer match. But don't stop there; go beyond the match and continue to increase over time. Don't delay, start saving for your future today!
This hypothetical example is for illustrative purposes only and does not represent any actual investment performance, price or yield. This illustration assumes a beginning balance of $0 and a monthly retirement plan contribution of $150, $50 of which is an employer matching contribution, for the periods stated. The illustration also uses a constant annual rate of return of 6% compounded monthly. Monthly compounding is for this hypothetical illustration only. Actual compounding can be made on a bimonthly, weekly or daily basis. Investment returns are not guaranteed, and your actual return may vary significantly from that shown.
Before investing, you should carefully consider the investment objectives, risks, charges and expenses of the variable annuity contract and the underlying investment funds. This and other information is contained in the contract prospectus or brochure and underlying funds prospectuses and summary prospectuses. Please read the contract prospectus or brochure and underlying fund prospectuses and summary prospectuses carefully before investing. The contract prospectus or brochure and underlying fund prospectuses and summary prospectuses can be obtained by mail or by calling 1-800-468-3785.
Mutual of America's group and individual retirement products are variable annuity contracts and are suitable for long-term investing, particularly for retirement savings. The value of a variable annuity contract will fluctuate depending on the performance of the Separate Account investment funds you choose. Upon redemption, you could receive more or less than the principal amount invested. A variable annuity contract provides no additional tax-deferred treatment of benefits beyond the treatment provided to any qualified retirement plan or IRA by applicable tax law. You should carefully consider a variable annuity contract's other features before making a decision.