Almost everyone knows that investing has compound benefits. For example, we all intuitively know that investing for 40 years will net much greater results than investing for 20 years. But have you ever visualized it?
Let’s do that. Here are two traditional (to illustrate the point) scenarios:
1) Start investing at age 25 until retiring at 65
2) Start investing at age 45 until retiring at 65
On average, the stock market returns 8-10% over time, so we’ll assume a 9% annual return compounded over these time frames.
Scenario 1 – investing $500 per month for 40 years = $2,340,660
Scenario 2 – investing $500 per month for 20 years = $333,943
With scenario 2, you would have to increase your monthly contributions by 7 TIMES — to $3,500 per month — to come close to scenario 1. And even still, scenario 1 would win by a few thousand dollars: $2,337,604 versus $2,340,660.
So whatever goals you are saving for, be it retirement or anything else. Get started as early as possible. Because compounding is an amazing thing to take advantage of.
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