This posting really should be sponsored by Nike, because there is ONE key – JUST DO IT!
For those of you who need a little more rationalization, lets look at a couple of examples of the magical mathematical wonder – compound interest.
Market returns greatly vary year to year, but according to a Ibbotson Associates study, from 1926-1999, the average return was 11%. I took a more conservative estimate of 7% annual return to calculate the examples below.
If you are 22, fresh out of college, and you are able to save $150/month and NEVER INCREASE your contribution over $150, you will accrue $550,000 by age 67.
If you start 5 years later at 27, to get the same $550,000, you will have to contribute $230/month.
At 35, it would require $415/month.
And at 50, it would require $1486/month to get to the same $550,000.
You may be thinking, “sure, but if I start at 22, I’m paying in for 45 years, so that is why the monthly payment is so much less”.
But check this out….
At 22: $150 x 12 month per year x 45 years = $81,000 paid in
At 27: $240 x 12 months per year x 40 years = $115,200 paid in
At 35: $415 x 12 months x 32 years = $159,360 paid in
At 50: $1486 x 12 months x 17 years = $303,144 paid in
The end result has less to do with the amount being saved, and more with the amount of time the money can compound. It’s never too late to start, but more importantly, it’s never to early.
So, don’t put off starting your retirement until you have “more money”. The time to start is now. Just do it!!!