Hundreds of thousands of school students are graduating from college this month and can soon enter the full-time workforce, in the event that they haven’t already. Thus, this will not be only an exciting time for these graduates but in addition one potentially marked by anxiety.

It could be somewhat overwhelming to seek out a job and housing and leave the nest. While there are plenty of hard decisions to make, one which’s a no brainer is to start out investing for retirement now.

The concept of serious about retirement whenever you haven’t began working full time yet or even when you’ve just began may sound crazy to some. Nevertheless, starting early is the one, most-important option to retire wealthy and cozy — irrespective of how much money you make.

Time is your best ally

Far too often, people don’t get serious about investing for retirement until they’re of their 30s or 40s. Even though it’s higher to start out late than never, whenever you delay planning for retirement, you’re just playing catch-up.

When it’s good to play catch-up on saving for retirement, you’ll have to take a position greater than you may afford. Moreover, it’s possible you’ll even find yourself taking over more investing risk than you must.

However, whenever you start saving and investing right out of school, you’ve the 2 biggest allies in your side: time and the facility of compounding. With more time and the facility of compounding, investing becomes quite a bit easier, less dangerous and quite a bit cheaper.

In actual fact, the more time you’ve, the less you’ve to take a position per 30 days. In case you start early enough, it’s possible you’ll only have to put aside $50 per 30 days to have the ability to retire as a millionaire.

Retire as a millionaire

If that feels like hyperbole, just do the maths. Let’s take a look at two scenarios: one where you begin investing at age 22 and one where you begin at 32.

In case you are 22 years old and fresh out of school, the perfect decision you may make is to take a position in an exchange-traded fund. An ETF is a basket of stocks, and lots of of them track major indexes.

Thus, as a substitute of trying to choose a handful of winning stocks yourself, you’re buying shares in a single investment that owns shares of all the stocks in a significant index just like the S&P 500 or Nasdaq 100, for instance.

At age 22, I might pick a Nasdaq ETF, namely, the Invesco QQQ (NASDAQ:QQQ) ETF, which tracks the tech-stock-heavy Nasdaq 100. While the Nasdaq 100 could also be more volatile within the short term, it has the perfect returns of any major index over the long run.

In actual fact, for the reason that Nasdaq 100 launched in 1985, it has a median annualized return of 13.5% over the course of its 39-year track record.

In case you went to Robinhood or another online brokerage and invested $50 per 30 days within the Invesco QQQ at age 22, and kept doing it for the subsequent 43 years until you retire at 65, you’ll have $1.1 million from that one fund alone.

This total relies on the typical annualized return of 13.5% put up by the Nasdaq 100 during the last 39 years. It also assumes you’re investing just $50 per 30 days. It’s also possible to do the maths yourself on one among the assorted free investment calculators that might be found online.

The facility of compounding

To show the awesome power of compounding returns — which is basically your money creating wealth — let’s use the identical inputs to see how much you’ll accumulate for those who began at age 32.

After 33 years of investing $50 per 30 days within the Invesco QQQ at the identical annualized return of 13.5%, you’ll have just $306,000. Thus, by waiting 10 years to start out investing, you’ll have almost $800,000 less by age 65.

In case you waited to take a position on this ETF until age 42, you’ll only have about $83,000 at age 65. That type of says all of it.

Consider that that is just from a single ETF that you simply put money into outside of any 401(k) or IRA. In case you work at an organization with a 401(k), one other no-brainer move is to take a position in it immediately and get the complete company match. In case you do, you can easily be a multi-millionaire by age 65.

Thus, the most-important decision any recent college grad could make for his or her future right away is to start out investing.