It's Never Too Early - or Too Late

Today’s June 3, 2019 headline in The Philadelphia Inquirer:

“Acme Pensions at Risk,

The fund for workers and retirees could run out in 8 years.”

The thing is that Acme is not alone. Every day we hear stories about depleted retirement safety nets. Social Security is top of mind. Government and teacher’s pensions too. The Inquirer article cited “…120 plans have shut down and received $1.4 billion in assistance from the Pension Benefit Guaranty Corporation, a federal insurance agency that pays workers a reduced pension should their union plan fail.”

How this happened is probably a combination of poor decision making, bad management, and lack of imagination and foresight. At least those are the causes we can talk about without inviting a lawsuit. Let’s talk about that last cause that I mentioned – lack of foresight.

Having foresight is complicated because foresight involves being able to look into future economic conditions, and also future management decisions and company and fund profitability – all conditions completely out of your control. But what you do have control over is what YOU do with your money today.

The good news is that times have changed and while we should all take advantage of employer plans if they are available, we have many other investment/retirement options readily available to individuals at any age and at any income level. In other words: “Don’t put all of your eggs in one basket – Diversify!”

The thing is that diversification doesn’t have to be fancy or complicated. Take for example, the concept of compounding. Compounding interest is the cornerstone of most investment strategies. Albert Einstein called compound interest “the greatest mathematical discovery of all time”. The concept of compounding is easy to wrap your head around because compounding can be applied to everyday life. The best part of including an account that compounds interest is that it is available to everyone at every imaginable entry point number.

Compounding or compound interest takes your money, no matter how small, and turns it into an income generating tool. It takes your money and turns it into a reinvesting tool – time and money. The longer you hold it, the more money it generates. Compounding is a component of any number of investment vehicles – money markets, mutual funds, 401k plans, and basic saving’s accounts and even pension plans.

Saving for retirement is especially difficult when you earn a small salary or you get a late start. But with the miracle of compounding, even a small monthly deduction from your paycheck can add up to big money!

Check out this graph and explanation from

Both Pam and Sam’s earning rates are demonstrated in the following chart:

The effect of compounding by age of entry

As you can see, both investments start to grow slowly and then accelerate, as reflected in the increase in the curve's steepness. Pam's line becomes steeper as she nears her 50s not simply because she has accumulated more interest, but because this accumulated interest is itself accruing more interest.

Pam's line gets even steeper (her rate of return increases) in another 10 years. At age 60 she would have nearly $100,000 in her bank account, while Sam would only have around $60,000. That is a $40,000 difference!

The effect of compounding when left to age 60

Remember, compounding amplifies the growth of your working money – but only if you leave it alone and let it work for you.

This brief discussion only scratches the surface of accessible vehicles and tools available to help us organize, plan, and invest no matter what the age. There are so many factors to consider when devising your investment strategies that it is important to consult with a qualified financial advisor.

· Student debt

· Mortgage/rent

· Family obligations

· Income

· Goals

· Age of the investor

These are all factors that will influence the kinds of investments that are right for you at YOUR particular place in the life cycle. There are many more influencers to consider.

Please join us on June, 27th as Suzanne Heron of Lovett Advisors, LLC walks us through investing strategies, Apps to make it easier, budgeting musts and investment decision factors.

This is information that we all need to help us create secure futures. People of all ages are welcome! High schoolers – bring them! Young Professionals – this is for you. Gen Xers – It is not too late!

Register today!

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