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Women and Investing: Concepts Everyone Needs to Know
When it comes to investing, starting early and planning carefully are smart strategies for all of us. But for women this is especially true for two key reasons.
Throw in the fact only 30% of Americans can rely on a traditional pension plan to help fund retirement1, and it is easy to see how personal investments will be critical to filling the gap. That is why it is important to consider the benefits of saving for your retirement as soon as possible.
Compounding Interest – The earlier you start investing for retirement, the longer your money has to grow—due to compounding. For example, if you invest $1,000, and it earns a 5% annual rate of return, the following year the full $1,050 will have the opportunity to grow. Compounding can be effective because each subsequent positive year your account will grow based on your full account balance—not just your original seed money.
Waiting Is Expensive – While you may have good reasons to put off investing for your future, be aware that waiting comes at a cost. Look at the difference in a hypothetical account balance at age 60 given 30-year and 15-year investment horizons. See how being invested for half the period built up only 1/3 of what could be earned over the full time the money had to grow?
Age |
30 |
45 |
Initial Investment |
$500 |
$500 |
Monthly Contribution |
$50 |
$50 |
Annual Rate of Return |
5% |
5% |
Account Balance at Age 60 |
$43,096.05 |
$14,334.70 |
They say that next to 20 years ago, today is the best time to plant a tree. The same can be said for when to start planning for your financial future. For professional help, contact your RBC Wealth Management financial advisor. Or use the advisor locator tool to find one near you.
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