When should your prospects start planning and saving for retirement?
Since most clients will have to reach their retirement goals by making small
investments in regular amounts, they must begin saving early to make
compound interest work and to enable their money to grow for the long term.
The importance of investing early also applies to how early in the year they
make their investments. Investing at the start of the year gives money a
full 12 months to grow.

It takes discipline to save regularly. Beginning a savings plan often means
balancing current lifestyle against future needs. Unexpected emergencies
can arise to compete for savings dollars. Moreover, deviating from a regular
saving schedule may cost money. Prospects will lose earnings because they
will miss the full benefit of compounding on the investments they delayed
or skipped.

Cost of Waiting

It is easy to delay starting a plan of savings in favor of current spending
needs. Often, you will find your competition is not with other forms ofinvestments. Rather, it is the prospect's choice of spending today versus
saving for tomorrow. The following example may help you convince prospects
that they lose by waiting to save or by interrupting their savings.

EXAMPLE:

Kim and Chris are both aged 25. Kim decides to start saving $2,000 each year, Chris wants
to wait. After 7 years, Chris finally starts to save $2,000 annually. At the same time, Kim
decides to stop saving and let her account accumulate interest. If both accounts earn 10
percent interest compounded annually, what will their account balances be in years to
come?

At the end of 40 years, Kim's account is just $4,204 less than Chris's, yet Kim's total cash
outlay was $14,000 versus $66,000 for Chris.

Table 4-10
Example 1: Cost of Waiting (Estimated Return: 10%)
End of
Year          Kim's Balance            Chris's Balance
5              $13,432                   $0
7              $20,872                   $0
10            $22,780                   $7,282
15            $44,740                   $25,159
20            $72,055                   $53,950
30            $186,892                 $174,995
40            $484,750                 $488,954

Postponing the start of a savings plan costs money at retirement. One of the greatest
advantages of starting as early as possible is the compounding of the earnings.