Saving Early: The Power of Compound Interest
by Chris Cyndecki on January 27th, 2014

If you own a credit card, then you probably have a fundamental understanding of how compound interest can work against you. The power of compound interest can work in your favor if you have the capacity to save money early in your career.  

The chart below shows the difference between starting to save $2000 per year at age 20 versus starting at age 30 (8% rate of return and end-of-year contribution assumptions).
If you had started saving at age 20, your total assets would be $980,264.33 at age 67. If you had started saving at age 30, your total assets at 67 would equal $440,631.89 (The projection is sensitive to the 8% rate of return assumption, and the discrepancy decreases at lower rates of return).

Taxes and investment costs may have a considerable impact on long term asset growth. Investing within a tax-deferred 401(k) or IRA may make sense. Consult with your financial planner to figure out the best tax and investment strategies for your situation. 

Posted in Investments, Retirement    Tagged with compound interest, investing


Leave a Comment