Invest & retire Insure Build your knowledge For Businesses Log in Individuals Build Your Knowledge When to start investing: 4 signs you're ready When to start investing: 4 signs you're ready If you clicked on this story, you’re probably ready to put some money away for the future. Should investing be part of your plan? How will you know you’re ready to start investing? Maybe you already are and didn’t even know it. Here are four signals that may help you decide: 1. You're building a well-stocked emergency fund. Life throws curveballs. It’s good to have an emergency fund with at least three months’ worth of expenses to give yourself the stability that investing can require. Your emergency fund will give you a buffer if anything unexpected happens, so you won’t have to tap into investments devoted to longer-term goals. Once you have a good start on your emergency fund, you could balance funneling money to both investing and saving. 2. You end each month with extra money. Your emergency fund is looking good. You pay all the bills and any high-interest debt. You have enough to cover groceries and other expenses. Still some left over? It doesn’t have to be a lot. Investing is all about starting small and growing over time (more on that below). The key is to stick with it so the money invested can work for you. 3. You're ready to commit to long-term financial goals. Investing is a journey that goes better if you know where you’re headed. That’s where long-term goals come in. Goals give you direction and focus for your investing. Maybe your goal is a comfortable retirement. Maybe it’s a great college for your kids. Be detailed and realistic about what you want to accomplish. 4. You have access to a retirement plan. A 401(k). A 403(b). If you can contribute to an employer-sponsored retirement plan like these, you may have already taken a big step toward investing. With most employer-sponsored retirement plans, you can elect to have money invested from each paycheck. That makes it easier to contribute to your retirement goals. Some employers even offer to match employee contributions to a certain level. That’s free money, and these extra contributions can help a lot over time. If you don’t have access to an employer-sponsored retirement plan, look at an individual retirement account (IRA). The signs say you're ready? You can start investing small. Can you invest an extra $25 a week? Even small amounts can add up over time. An acorn is smaller than a mouse and weighs less than a key. But nurture that acorn and you could have an 80-foot-tall oak weighing several tons. Your investments could thrive if you’re able to put away a little more money every week or every paycheck. If that’s possible, the results can add up. In fact, it has the potential to multiply. Stuffing $25 a week in a jar for 30 years would get you $39,000. Invest that same weekly amount at a 6% annual rate of return, and compound earnings could help that investment grow to more than $105,000 in the same time.1 Example: $25 per week with 6% return Let’s say you invest through a retirement account, such as a 401(k) or IRA. You can find investing acorns there, too. If you had a $35,000 annual income and bumped your pre-tax contributions up just 1%, that’s only about $10 off your bi-weekly take-home pay. Later, in retirement, that could add up to another $150 per month to spend.2 Stay disciplined with your investing. Investing an extra $25 a week or contributing another 1% toward your retirement might put your financial goals closer within reach. But it still won’t be easy. You’re always balancing immediate need against an uncertain future. Think of it as taking care of your future self and family. You can stay disciplined by incorporating annual savings increases. Some employers’ retirement plans allow you to increase the amount you put toward your retirement. This helps make you a more aggressive saver slowly over time, so that it’s easier to work into your budget. What if you can’t invest that much? There’s no magic in 1% or $25. Whatever additional money you can put away can help. If it’s $10 extra each week, great! Maybe just a few bucks per paycheck? That’s fine, too. Remember, success doesn't require major cash. Let time and compound earnings work for you to help achieve your goals. What's next? If you want to save more than your 401(k) contribution limits, ask your financial professional about opening an IRA. If your employer-sponsored retirement plan includes services by Principal®, log in at principal.com to enroll or manage your account. Read next Should we retire together? 10 retirement questions for couples Leave a legacy you can be proud of: 5 considerations for choosing retirement beneficiaries How to create a home-buying budget you can live with 1 The retirement balance (potential future value) assumes a 6% annual rate of return on their savings. The assumed rate of return in this chart is hypothetical and does not guarantee any future returns nor represent the returns of any particular investment. Estimated monthly income is based on a 4.5% annual distribution of the retirement balance at age 65 and is discounted to reflect today’s value using a 2.5% inflation assumption (potential future purchasing power in today’s dollars). Amounts do not reflect the impact of taxes on pre-tax distributions. Individual taxpayer circumstances may vary. For illustrative purposes only. 2 Assumes $35,000 annual income with 3% annual wage growth, 30 years to retirement, a 6% annual rate of return, a 25% tax bracket. Estimated monthly income is based on a 4.5% annual distribution of the retirement balance at age 65 and is discounted to reflect today’s value using a 2.5% inflation assumption (potential future purchasing power in today’s dollars). The $10 per-paycheck reduction relates to the first year of contributions. Wage growth would increase this amount over time. The total additional 1% contribution would amount to $16,600 over 30 years, and, with earnings, would increase total account value by $39,800 over that same time period. The subject matter in this communication is educational only and provided with the understanding that Principal® is not rendering legal, accounting, investment advice or tax advice. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, investment or accounting obligations and requirements. Investing involves risk, including possible loss of principal. Asset allocation and diversification does not ensure a profit or protect against a loss. Equity investment options involve greater risk, including heightened volatility, than fixed-income investment options. Insurance products and plan administrative services provided through Principal Life Insurance Co. Principal Funds, Inc. is distributed by Principal Funds Distributor, Inc. Securities offered through Principal Securities, Inc., 800-547-7754, member SIPC and/or independent broker-dealers. Principal Life, Principal Funds Distributor, Inc. and Principal Securities are members of the Principal Financial Group®, Des Moines, IA 50392. Certain investment options and contract riders may not be available in all states or U.S. commonwealths. 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