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RETIREMENT PLAN INVESTOR

Use your plan ID (available on your account statement) to determine which employer-sponsored retirement plan website to use:

IF YOUR PLAN ID BEGINS WITH IRK, BRK, 1, 2 OR 754

Visit americanfunds.com/retire

IF YOUR PLAN ID BEGINS WITH 34 OR 135

Visit myretirement.americanfunds.com

Client Conversations
Start saving early for retirement

3 MIN ARTICLE

 


Looking for ways to illustrate the importance of starting to save early for retirement? These talking points can help simplify savings conversations with younger clients. 

When it comes to retirement planning, it’s never too early to start saving. Show your clients how the more you invest and the earlier you start, the more time your retirement savings will have potential to grow. These talking points can help you start the conversation. 


Time matters

  • The key engines that drive the unique opportunity for savings growth within a retirement plan are tax deferral and compound interest.
  • The money you’ll invest is tax-deferred (assuming you are considering enrolling in a tax-deferred, employer-sponsored retirement plan or a deductible individual retirement account), which means taxes are not payable until you withdraw the money from your account.
  • Thanks to compound interest, the money you would have otherwise paid toward income tax remains in your account to earn more money. If you only contribute even a modest amount over time, you may be surprised at how much it could grow.
  • For example, just $50 a month could generate as much as $75,000 over 30 years.

Growth potential of a regular contribution


Monthly
Contribution
Annual
Contribution
5 Years 10 Years 20 Years 30 Years
$50 $600 $3,698 $9,208 $29,647 $75,015
100 1,200 7,397 18,417 59,295 150,030
150 1,800 11,095 27,625 88,942 225,044

Assumes an 8% annual return, compounded monthly.1

The high cost of waiting

  •  Waiting to start your long-term savings program can have a major impact on your retirement saving outcome.
  • Time and the potential for compound earnings matter. For example, here’s a scenario that could make a significant difference in your outcome.1 
    Assume:

o   You earn $30,000 a year, receive 4% annual raises and plan to retire in 30 years.

o   You save 4% of your salary a year and earn an 8% annual return.

  • If you start investing today, you could have more than $220,000 by the time you retire.
  • If you wait five years before starting, you’d have $164,878 (assuming the same retirement date, salary, raises, savings rate and return).
  • Waiting five years could cost you $56,066.


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Client Conversations
Retirement Planning

1Hypothetical results are for illustrative purposes only and in no way represent the actual results of a specific investment.

Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.

Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing.

This material does not constitute legal or tax advice. Investors should consult with their legal or tax advisors.

Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. This information is intended to highlight issues and should not be considered advice, an endorsement or a recommendation.

All Capital Group trademarks mentioned are owned by The Capital Group Companies, Inc., an affiliated company or fund. All other company and product names mentioned are the property of their respective companies.

Use of this website is intended for U.S. residents only. Use of this website and materials is also subject to approval by your home office.

American Funds Distributors, Inc., member FINRA.

This content, developed by Capital Group, home of American Funds, should not be used as a primary basis for investment decisions and is not intended to serve as impartial investment or fiduciary advice.