Compound Interest

Definition: Interest computed on the sum of the principle and the accrued interest .

Don't ignore the value of investing early. The power of compound interest, coupled with regular contributions and tax-sheltered treatment, means that an early start to investing will put a powerful ally--time--squarely on your side.

For example, let's say, starting at age 35, you invested $3,000 each year with a 14 percent annual return. You'd have an annual retirement income of nearly $60,000 at age 65. But $5,000 invested at the same rate of return beginning at age 45 only results in $30,700 in annual retirement income.