Many older workers share a common regret, according to a recent study from the Insured Retirement Institute. Those who are younger should take heed of it, so they can avoid making the same mistake that could affect their future financial security.
So, what is the regret so many older workers have expressed -- and how can younger employees make sure they aren't left with the same lament?
Older workers wish they'd made a different decision about retirement planning
According to the IRI data, a whopping 67% of older workers indicate they wish they had started saving money for retirement earlier than they actually did. And this is an understandable regret for a few reasons.
First and foremost, the longer you wait to start saving for retirement, the harder it is to hit your investment goals and the more you must save each month to build the nest egg necessary to support yourself.
There's a few reasons for this. First, if you have less time to invest, you won't be making as many monthly or annual contributions to your account. As a result, each one must be higher to amass the same amount of money. And, second and most importantly, the longer you wait to invest, the less time you have for compound growth to work for you.
See, when you put your money into assets that produce returns, your invested dollars begin earning additional money. This grows your nest egg without any additional effort on your part. If you invest $100 and earn a 10% return and end up with $110 invested next year, then you have an extra $10 that will earn returns in year two. If you make another 10% in the second year, you'd make an $11 profit, not a $10 one.
The effects of this can snowball over time. And if you invest early enough, compound growth can leave you with a far larger portfolio than you'd end up with even if you made larger contributions later on. For example, a $300 monthly investment made over 30 years would leave you with around $592,178, assuming a 10% average annual return. But a $600 investment made over 15 years would net you just $228,761. In both scenarios, you'd have invested $108,000, but compound growth would have given you an extra $363,417 if you started investing sooner.
It can also become more difficult to make large contributions to your nest egg as you get older and take on more responsibilities, such as a college education for children or a mortgage for a family home.
When looking at these numbers, it's easy to see why older workers wish they'd began saving sooner. If you're still young, don't fall into this trap of assuming you can wait. Get started today. And if you're older and are facing this regret, take heart in the fact that there are options -- such as catch-up contributions -- that can still help you build a secure retirement even if you're a bit behind where you'd prefer to be.