Then I got smarter about my money. Or rather, I read up on saving my money and happened to stumble upon the magic and math behind retirement savings.
As it turned out, the fact I have time on my hands is a major reason why I should start saving for retirement right now rather than wait.
The earlier a person begins to save for retirement, the easier it will be to afford retirement. This is especially true for those who are at a stage in their lives when financial obligations are few and there are no dependents in which resources must be committed to. Sure one's earnings in the early stages of their lives are generally lower than your middle years which means that the amount that one can contribute is also somewhat limited.
But as it turned out, the early years of retirement investing and savings are far more valuable than the dollar value you are able to contribute yearly.
The math might be a bit funky (in that while it looks kind of right to me, the formula I found online may still be off enough that the inflation rate is too high) but the gist of the point is there in addition to a million of similar charts on the internet basically illustrating the same thing, even with different numbers.
It is utterly astounding how two years extra of investing and compounding your money makes a huge difference in how much you will have by retirement. And this is even if you were to deposit extra cash later to hypothetically "make up" for lost time.
In fact, the amount an investor who is 30 years old would need to invest year over year in order to properly catch up to the 28 year old investor is around $1,300 yearly, or $45,500 invested into your retirement in actual cash by the end of it. Which in dollar terms is not a whole lot over 35 years, until you compare the fact that a 28 year old investor basically retired with the same amount of money having only directly contributed $37,000 when it is all said and done.
And don't even ask how much a person in their 40s or 50s will need to catch up to the 28 or 30 year old; it will make most normal people's eyes water.
Ultimately, what won me over on creating a habit of saving for the distant future now is this: don't underestimate the value of time when planning to save or invest, in that a longer timeline given for your money to mature and grow, the greater the returns.
It may be at some cost of this or that nice thing or even accelerating student loans payments right now, but ultimately, it is important to create that base value in which time can then help me build on for a happier and independent retirement.
As it turned out, the fact I have time on my hands is a major reason why I should start saving for retirement right now rather than wait.
The earlier a person begins to save for retirement, the easier it will be to afford retirement. This is especially true for those who are at a stage in their lives when financial obligations are few and there are no dependents in which resources must be committed to. Sure one's earnings in the early stages of their lives are generally lower than your middle years which means that the amount that one can contribute is also somewhat limited.
But as it turned out, the early years of retirement investing and savings are far more valuable than the dollar value you are able to contribute yearly.
 |
| My starting age of 28 is because 28 was when I started investing into my retirement. Also because seeing how much more I could have made if I began a year earlier is a touch too depressing for me to want to calculate it. |
It is utterly astounding how two years extra of investing and compounding your money makes a huge difference in how much you will have by retirement. And this is even if you were to deposit extra cash later to hypothetically "make up" for lost time.
In fact, the amount an investor who is 30 years old would need to invest year over year in order to properly catch up to the 28 year old investor is around $1,300 yearly, or $45,500 invested into your retirement in actual cash by the end of it. Which in dollar terms is not a whole lot over 35 years, until you compare the fact that a 28 year old investor basically retired with the same amount of money having only directly contributed $37,000 when it is all said and done.
And don't even ask how much a person in their 40s or 50s will need to catch up to the 28 or 30 year old; it will make most normal people's eyes water.
Ultimately, what won me over on creating a habit of saving for the distant future now is this: don't underestimate the value of time when planning to save or invest, in that a longer timeline given for your money to mature and grow, the greater the returns.
It may be at some cost of this or that nice thing or even accelerating student loans payments right now, but ultimately, it is important to create that base value in which time can then help me build on for a happier and independent retirement.
No comments:
Post a Comment