When it comes to investing, time can potentially be money. The key is a process called compounding. For investors who follow a very simple guideline, compounding happens like clockwork.

What is compounding?
Compounding happens when the money you save (either in a savings account, a mutual fund or an employer-sponsored retirement program) earns interest and that interest is kept in the account to earn even more interest. Over time, if your savings grow, you could potentially earn interest on a bigger and bigger pool of money.

How long does it take?
The longer your money is invested, the more chance it has to compound. Given enough time, even small investments can potentially become large investments. Assuming an average annual 8 percent rate of interest, a one-time contribution will double every nine years. At that rate, a $1,000 investment will compound to $16,000 over 36 years.*

Put it to work for you.
Investing in your employer-sponsored retirement program is an ideal way to harness the power of compounding. Interest earned on your investment is automatically plowed back into your account, offering a no-hassle way to potentially build a more secure retirement.

Start saving now.
Regardless of your age, the longer your money is invested, the greater the chance it has to compound. Statistics show that for every 10 years you delay starting to save for retirement, you will need to save three times as much to catch up on the lost potential earnings.

An Example
If you put $1,000 a year into a retirement account every year from age 20 through age 30 and stop—and the account earns eight percent interest annually—your savings will grow and compound to $246,109 by the time you reach age 65. If you didn’t start saving until age 30, however, saving $1,000 annually for 35 years at the same eight percent rate, you would have contributed three times as much money to your account, but only have $186,102 at age 65.* Calculator:The Cost of Waiting.

 *The compounding concept is for illustrative purposes only and is not intended to represent performance of any specific investment, which may fluctuate. No taxes are considered in the calculations. Assumed 8 percent rate of return for a portfolio that includes variable investments. Based on a hypothetical rate of return of 8 percent annual interest compounded monthly. Please keep in mind that it is possible to lose money by investing in securities.