No one ever plans to work for their entire lives. Most people work towards retiring between the ages of 65 and 75 to allow time to enjoy life with their loved ones. However, financially, a plan must be in place to allow for this dream to become a reality. The cost of living is on the rise, and Social Security alone is not enough money to sustain yourself. Because of this, most reputable companies offer retirement savings plans to their employees.  The problem occurs when people begin saving too late in life to have the money needed in those later years. That is why it is essential to begin your retirement savings plans as soon as possible, starting with your first job.

The ABCs of retirement savings

The earlier you start your retirement savings, the better situated you will be when you are ready to enjoy retired life. Start with the concept of compound interest. This is interest added to not only the initial principal, but also the interest and principal applied throughout a specified amount of time. For instance, compound interest can be applied annually, semi-annually, monthly, or even daily.

For example, imagine you have invested $1,000 at the age of 25 and contributed only $25 per payday (twice a month) to your investment account. Calculate that you will earn 5% compound interest semi-annually until retirement at age 65. Just from that $25 per paycheck, you will have over $81,000 saved for retirement.  This is much better than if you did not start saving until you were age 40. Using the same calculations, that would only leave you with just over $32,000. Through compound interest alone, waiting 15 years will cost you close to $50,000.  Now imagine the numbers were much larger, and the cut you would experience if you waited until you have been working for fifteen years before you began your retirement planning.

It is easy to establish the need to begin retirement saving early. However, it is a little more difficult to determine the types of funds to choose. Beginning your portfolio provides you with a better option, as the cost to manage it may not be a deterrent, especially if the potential of return on investment is higher. The issue being discussed is whether it is better to invest with indexed funds or actively managed funds. On the surface, indexed funds are less costly because they require less work on the part of the broker. Indexed funds are typically the common funds in IRA and 401K accounts. They simply require a replication of the performance of the initial index and are passive accounts.  They work well for standard retirement accounts, as brokers typically depend more on the volume of participants than the volume of cash. If you begin investing early in life, this is a great option, as it is typically safer and more cost effective.

However, because you are starting early, you get the added benefit of being able to try a riskier, higher cost/higher reward investment plan, since you have more time to recover. These types of investments are actively managed funds. Actively managed funds are typically riskier funds that require a market analysis on a constant basis to determine when to buy and sell. A well-run actively managed fund can net a higher return on investment. However, it is a riskier option and you could lose everything as well. The key is time and diversification. Many people who begin investment early will have more patience and time to take risks, while still maintaining the safe IRA or 401K that offers larger tax benefits and more stability.


Getting Back on Track

While it is nice to believe that your broker has your best interests at heart, that is not always the case.  Many brokers are qualified to help you save for retirement and are quite skilled at doing so. However, there are many brokers that do not fit this mold, and before you know it, you can lose everything because of a broker’s mistake. The good news is that there are options for loss recovery, including arbitration and litigation. Cold Spring Advisory Group can help you with your loss recovery claim to help you get back on track towards saving your retirement quickly and easily.

One of the first methods that Cold Spring Advisory Group may recommend for your loss recovery is to file a group claim prior to continuing your litigation track. A group claim helps you build a compilation of evidence against the broker or brokerage firm to help show the court and arbitrator that this neglect and malpractice is a habit, rather than just one small mistake that happened to affect you. People are stronger in numbers, which makes a group claim much more successful at attempting loss recovery than an individual claim.

Cold Spring Advisory can easily help you form the group needed to continue with your litigation or arbitration and help get you on your way to saving quickly and effectively. To learn more about saving for retirement after a loss, contact the experts at Cold Spring Recovery at (212) 566-6060.