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Are you saving for a new car, a home, or some other major purchase within the next year or two? That’s a short-term goal.

Are you planning to provide for a child’s college education? That would be an intermediate-term goal.

Do you want to create an investment plan for a secure retirement? How long do you want to work, and how long will your retirement funds need to last? This is a long-term goal.

When creating an investment plan you should consider your age, overall income, family status, and financial circumstances.

What Are the Obstacles?

Inflation. It is not always easy to keep ahead of inflation. Even in times of relatively low inflation, prices continue to increase. Think about the cost of a new car just five years ago. What is the price today? Consider college costs. How much do you think college will cost in 10 years? Will you enjoy a comfortable lifestyle free of money worries when you retire or will you just get by? Inflation erodes the purchasing power of your dollar. Rising prices mean that your current savings will be worth less and less in inflation-adjusted dollars as the years go by.

For example, if you are spending $3,000 a month now, assuming just 3% annual inflation, in 10 years you will need $4,032 each month just to maintain your present lifestyle! Investing may be one of the better ways to outpace inflation.

When Do I Begin?

It is easy to put off doing something that may not show immediate benefits. You’ve probably heard the addage “Time is money”, and that’s also true of investing because of the potential for earnings growth. It may be to your advantage to start today.

Let’s look at how much more you might be able to accumulate by starting an investment plan today instead of waiting five years to begin. This chart compares an investment plan earning an 8% annual rate of return and saving $300 per month for 20 years beginning today, with an investment plan beginning five years from today.

Chart

Source: Touchstone

This chart is hypothetical in nature and does not reflect the performance of any investment product.

Isn’t it amazing how costly waiting to begin an investment program can be! If you wait five years to begin investing $300 a month, you could miss out on accumulating an extra $72,895. Over $54,000 of that amount is just from additional earnings!

Use our Savings Calculator to see how your savings can build over time.

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Last Updated: 12/14/2017