How Time Affects the Amount You Save

Besides investment returns, the other factor in determining how much you need to save is your time frame. The concept is simple: The longer your money stays invested, the more opportunity it has to grow. Since we're talking about saving for retirement, your time frame is the number of years before you retire.

So for any given investment return, the time logic goes like this: The sooner you begin to save, the longer your money can stay invested. The longer your money is invested, the more it can grow and the more likely you are to reach your investment goal. The more your money grows, the less you need to save. Time is your friend.

The chart below shows the growth of $10,000 at a 6% return over time. At this rate of return, you roughly double your money every twelve years. Doubling $10,000 after the first twelve years is sweet. But approximately doubling $59,000 from year 30 to year 40 is even sweeter.

The growth of $10,000 at 6% average annual return, all earnings reinvested, no taxes.

Use the Plan Savings Calculator to see how much you can afford to save each paycheck and how that adds up over time.

At this point you need to pick your investments. Here are some of the questions you should ask yourself: What are my investment choices? What about risk? How do I put together a well-balanced and diversified portfolio? For answers, move to Investment Risk Section.