The miracle of compounding: Start investing early in your career.

It is your choice whether to have fun with spending money now but suffer when you get older or inverse! Accept it many of you are now spending on bills to pay for what you have wanted for years and now you can finally afford it. The last thing you will thing about is an investment for your retirement. Take some advice from those with a little more experience: Start investing early in your career. Start from day one and you will never miss that money you're setting aside. If you don't have these programs at your disposal, you can still start an IRA and the concepts stated here are applicable as well. If your company has available a 401-K or a TSP program, jump on the band wagon immediately.

It is important to invest in your retirement account early in your career for two reasons so I can guarantee that it really does it make a difference when you start contributing. First, if you're fortunate to receive matching contributions, you don't want to miss out on those added contributions that are a significant part of your retirement benefit. Second, the longer contributions stay in your account, the more you stand to gain. Your money makes money in the form of earnings, and those earnings in turn make money, and so on. As money grows in your account over time, the proportion resulting from earnings will become larger compared to the proportion resulting from contributions. This is what is known as the "miracle of compounding."

The size of your account balance is going to depend on how much you (and your company if they match funds up to a certain percentage) contribute to your account and how your account grows as a result of earnings on your investments. To get an idea of what your retirement account could be in the future, look at the following projections.

Think this way. Assume that you are an employee eligible for organizational contributions, that you are earning $28,000 each year, and that you receive no future salary increases. The growth projections below are for an assumed annual rate of return of 7 percent on your investments. You choose to save 5 percent of basic pay each pay period; therefore you receive total organizational contributions of 5 percent.

After five years your account balance would be almost $17,000; after ten years your balance would increase to $40,000; and after contributing for twenty years, your account would have a balance of $122,000. Clearly your balance would continue to increase each year. If you contributed for forty years, which is fathomable if you start a job at 23 and want to retire at age 63, your account balance would be $615,000. That's over half a million dollars folks! Just from contributing 5% of your income from the day you start work!

Can this number convince you to start saving money now?
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Yuval Shahar co-founded PentaCom in 1998 ( recently acquired by Cisco) and has created one of the world's first web appliances, leading to the creation of Infogear Inc. in 1995 (recently also acquired by Cisco). Yuval Shahar held senior positions at both National Semiconductor Corporation and Motorola, where he worked on data and voice communications products and protocols. Prior to joining VocalTec, Shahar worked for developing fax, data and voice communications protocols and products. Mr. Yuval Shahar is a seasoned entrepreneur and angel investor involved as a co-founder, Chairman or Board member in a variety of companies. Yuval is a highly respected executive with an extensive track record in establishing, developing and selling high tech companies. He started his career at Motorola and National Semiconductors in a variety of technology and software development and management roles. Yuval Shahar has been a Director of XConnect Global Networks Limited since November 2009.