Saving for retirement may not be of interest to 20 and 30 somethings, but maybe this graphic will make it easier to get excited. Young people may think ‘I’m too young to worry about retirement’ or ‘I’d rather travel and have fun with my money’. Well, maybe you can do both. Here me out as I share the experience of two hypothetical millennials below:
Millennial A saves $2,000 per year from age 19 to age 26 (8 years) for a total invested of $16,000. Assuming a 10% rate of return, by age 65 that $16,000 invested would total over $941,000.
Millennial B saves $2,000 per year from age 26 to age 65 (40 years) for a total invested of $80,000. Assuming a 10% rate of return, by age 65 that $80,000 invested would total over $885,000.
Clearly a lot of money in both cases, nearly $1 million. So, to the millennial who would rather ‘travel and have fun’, which scenario more closely allows for that? The scenario where you start early and save for only 8 years and $16,000 and then let it ride and grow close to $1million, or the scenario where you wait 8 years to start saving, but now need to save 5 times as much for 5 times as many years to get even close to the same amount by retirement age?
Starting early allows you to end earlier and still have a lot by the end date. That is the benefit of compound interest.
Bonus statement. If you combine the two scenarios above, saving $2,000 per year for the entire 48 years you would have more than double the money saved than through either scenario A or B, totaling over $1,920,000! Compound interest just became a lot more interesting!
Proverbial Living 