The magic of starting to save for retirement early and compounding returns! An excellent article from Business Insider entitled, “Every 25-Year Old in America Needs to See This Chart Right Now” is not only for 25-year olds, but everyone interested in learning more about above-average retirement savings and age. It demonstrates the miraculous difference on how disciplined investing for the long-haul and earning a reasonable rate of return can have a substantial impact on your future investment portfolio.
Average Retirement Savings and Age
Four individuals are showcased, each at the age of 25 who plan on retiring at age 65. One, Chloe, invests $10,000 per year from age 25 to 65 and earns a 6.5% annual return. Next is Lyla who starts saving 10 years later at age 35, but still earns the same 6.5% rate of return on her $10,000/year investment contribution until the age 65. Quincy who starts saving as well at age 25, but only invests his $10,000 for 10 years (until the age of 35), earning 6.5% until the age of 65. Last is Noah who starts investing $10,000 a year at age 25 but only is only able to earn a meagre 2.25% rate of return over his 40-year period.
The results are astounding………Chloe ends up with $1,900,000, Lyla $920,000, Quincy $950,000 and Noah has $650,000. Mind you, it’s difficult for a 25-year old to save $10,000 per year and inflation will bite into the purchasing power of that final figure, but the proof is in the pudding………starting to save early with disciplined investing and some decent long-term returns (6.5% is not a fantastic long-term rate of return by any standard) and your final tally could really surprise you. To view the entire article, go to “Every 25-Year Old In America Needs to See This Chart Right Now”.
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