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The Early Bird Gets the Worm in Personal Finance

When it comes to saving for retirement, find out why time is the most crucial ingredient.

Photo: Shutterstock / The Nest

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Everyone should get started on saving for retirement as early as they can. Because of how quickly time and inflation shrink the value of money, a savings account won’t cut it. Whatever amount you save will be worth much, much less by the time you retire (unless you’re retiring in the next couple of years).

The way you beat that shrinkage factor is to invest your money—and invest it as early as possible. The return in the stock market will, depending on performance, enable your investment to outrun inflation’s tendency to shrink the value of your money.

Because time is the most crucial ingredient for this magic, it’s imperative you start early. You can see just how important it is by using the slider here.

What it shows: how much you would have at age 65 if you contributed $2,000 a year toward your retirement starting at that age and if your investments grew by 8% a year (not adjusted for inflation). As you can see, in the younger ranges, starting even just one year earlier can mean a difference of tens of thousands of dollars by the time you retire.

Link your accounts in the My Money Center, so you can easily watch your retirement contributions add up and appreciate how they boost your net worth.

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-- Learnvest

See More: Money Q&A , Money