We often hear the advice to start saving as soon as possible for our retirement goals, ideally when we first enter the work force. The reason this is such sound advice is that over the long term, time and compounding of earnings can dramatically impact the results of your investment program.

Yet that advice can be difficult to follow during the early years of your investment program, when your savings don't seem to be growing much and you could really use the money for many other things. During those periods, remind yourself that a substantial portion of your portfolio's growth is likely to occur during the last few years you are investing.

For example, assume you start a retirement investment program at age 25, saving $250 per month and earning a tax-deferred 8 percent annually. When you turn 65, your investment could potentially equal $872,752, before paying any income taxes that may be due. The following chart shows your progress during that 40-year period:

 Period

 Contributions

 Balance

 % of Ending Balance

 5 years

 $15,000

 $18,369

 2%

 10 years

 30,000

 45,737

 5

 15 years

 45,000

 86,510

 10

 20 years

 60,000

 147,255

 17

 25 years

 75,000

 237,757

 27

 30 years

 90,000

 372,590

 43

 35 years

 105,000

 573,471

 66

 40 years

 120,000

 872,752

 100


(This example is provided for illustrative purposes only and is not intended to project a specific investment's performance.)

As the table indicates, one-third of the ultimate value of the investment balance occurred in the last five years of that 40-year period.

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