The Magic of Investing Early - Compounding
Start Early
The key to building wealth is starting early and investing regularly. With the power of compounding, the earlier you start, the more you can generate in the ending years. Regular investments, no matter how small, can grow into a very sizable amount over the long term.
Let’s consider an average example. John decides to start investing for retirement when he turns 45. He is financially stable at that point, and can afford to contribute sizeable amounts on a regular period. Lets say he can afford $10,000* per year. At an average annual return of 10%, his retirement plan grows to over $600,000 by the time he reaches 65, or retirement age.
But what if he had started earlier? As soon as John graduated college, when he was 22 years old, he decided to put away $3,000 every year until he reached 65. That’s just below $60 a week. The total amount he put in over 43 years would be about $130,000. How much would he have at retirement? Well, at a 10%* return, over 43 years, John would have almost two million dollars!
*As based on annualized total return of the S&P 500 from 1926 through 2004.
(via SogoTrade)
