Start saving for retirement asap, compound interest says so.

So here is the scenario:

Person A is 20 years old and has nothing start off with since he’s fresh out of school. But he has a decent job and he able to invest 100 dollars a week. He does this til the age 60.

  • Starts with $0.00
  • Invest $100.00 a week ($4,800.00 a year)
  • Interest rate going at 10%
  • 40 years to invest

Person B is 40 years old and has waited this long to wait to start saving for his retirement. He has some money saved up and is able to put down 15,000.00 dollars to start off with. Also, since hes much older, he makes more than person A and is able to put 200 a week. He does this til the age 60.

  • Starts with $15,000.00
  • Invests $200.00 a week ($9,600.00 a year)
  • Interest rate going at 10%
  • 20 years to invest

Lets put these numbers in the compound interest calculator I found in MoneyChimp.com and see how we do. 

So here are the charts.

Person A: 20yearoldinterest.JPG

 

 

 

 

 

 

 

 

Person B:40yearoldinterest.JPG

 

 

 

 

 

 

 

 

As you can see, although person B invested 15,000.00 more than person A, he still has no where near as much as person A when it comes time for retirement. The difference comes to a total of $1,631,152.20! This is all because person A decided to start 20 years before person B. Now that’s the power of compound interest baby!

I don’t think there is a “right” age to start saving for retirement but I do know that there’s no such things as starting too early. Most people think to themselves, “Retirement is long ways from now and I can afford to wait another year…”. Well if you keep thinking in that mentality, you’ll find yourself in person B’s shoes and miss out on millions of dollars.

As for myself, I don’t have a retirement savings account yet but if everything goes according to plan, I will by the end of this month. :) We’ll see.

  1. Neat little calculation. There are 52 weeks in a year though. You are thinking 4 weeks a month times 12 months = 48, but the only month that has just four weeks is February.

  2. I go to your website on occasion and I must mention that I like your template!

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