If you want to have a comfortable retirement, it is very important to begin saving early. It’s a point that can’t be reiterated enough.
Here is another example why.
Consider two hypothetical savers — Emily and Dave. Emily puts $US200 per month into a retirement account with an estimated 6% rate of return starting at 25. Dave starts saving $US200 per month at 35 — just ten years after Emily.
Both continue to add $US200 each month until they retire at 65.
By the time they are 65, Emily has contributed $US96,000, while Dave has contributed $US72,000.
Here’s the trajectory of both of to those accounts.
Emily started saving just ten years earlier, and only put in about 33% more money into her account than Dave.
But by the time they are both ready to retire, Emily has almost twice as much as Dave — Emily has $US402,492, and Dave has $US203,118.
That extra ten years of compounding returns has made Emily’s situation far better than Dave’s when they are 65.