Retirement Savings

Albert Einstien once said that the compounding was the 8th wonder of the world.

Many people put off saving for their retirement for various reasons. There are many excuses.

"Perhaps it's too early"

"I'm too young to save! I'm barely even 40"

"I'll save when I can afford to. For now I want a fast car!"


Let me show you guys something interesting...



Assume 2 subjects - Mr A and Mr B

AGE 25: Mr A saves $2000 per annum and gets a return of 10% per annum.
AGE 25: Mr B does not save. He does not think he has to save at such a young age.

Age 35: Mr A has saved and accrued $31,875 worth of savings. Mr A stops saving at 35 and lets the $31,875 grow at 10% per annum.
Age 35: Mr B decides to start saving $2000 and gets a return of 10% per annum.

Age 50: Mr A has saved and accrued $214,439 worth of savings.
Age 50: Mr B has saved and accrued $114,550 worth of savings.

Conclusion:
- The nominal amount that Mr A places into savings is 10 years x $2000 per annum = $20,000.
- The nominal amount that Mr B places into savings in 20 years x 2000 per annum = $40,000.

However, Mr A has $99,889 MORE than Mr B even though he has saved LESS than Mr B. The reason for this is that he started saving EARLIER.

Compounding is a wonderful thing don't you reckon?