Broker Check

Does it really matter when you start to save for retirement?

| December 15, 2015
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Let’s look at a sister and brother, Samantha and Sam. Suppose Samantha opened a Roth IRA at age 25 and for ten years she contributed $500 per month, or $6,000 per year.  She earned seven percent annually. After ten years, she never contributed another dime to her account.  She earned seven percent annually until age 65.

Suppose Sam opened a Roth IRA at age 35. Sam contributed $500 per month, or $6,000 per year for the next 30 years. He earned seven percent annually.  Sam used the same financial advisor as Samantha.

Who would have more money put away for retirement, Samantha or Sam?  It would seem that Sam would have more money saved than his sister.  But let’s see.

How much would Samantha have at age 65?  After 40 years, at age 65, Samantha would have $685,783.

How much would Sam have at age 65?  After 30 years, at age 65, Sam would have $609,985.

That’s the magic of compound interest.

If you haven’t started saving for retirement, what are you waiting for?

Call Evan Press at Hornstein Investment Group today.  Waiting may only cost you money.

This is a hypothetical example and is not representative of any specific situation.  Your results will vary.  The hypothetical rates of return used do not reflect the deduction of fees and charges inherent to investing.

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