Thursday, April 8, 2010

Retirement Marathon

Guest blog post at Get Rich Slowly

This is a great analysis of the power of compound interest. Key points - start early, don't be afraid of risk, and you'll reap the rewards.
  • Early Bird Bob contributed $5,000/yr. for 20 years ($100,000 total contribution). His nest egg at age 67 is $5,938,625.
  • Conservative Carrie contributed $5,000/yr. for 48 years ($240,000 total contribution). Her nest egg at age 67 is $940,127.
  • Live it up Larry contributed $10,000/yr. for 38 years ($380,000 total contribution). His nest egg at age 67 is $4,644,805.
  • Late bloomer Bill contributed $20,000/yr. for 28 years ($560,000 total contribution). His nest egg at age 67 is $3,168,398.
  • Mid-life crisis Melissa contributed $40,000/yr. for 18 years ($720,000 total contribution). Her nest egg at age 67 is $2,005,735.
For my age, this statement from a related post at Get Rich Slowly is key:

It’s human nature to procrastinate. “I can start saving next year,” you tell yourself. “I don’t have time to open a Roth IRA — I’ll do it later.” But the costs of delaying are enormous. Even one year makes a difference.