The Importance of Investing Early & Consistently

07/07/24

The following examples use a 10% per year rate of return.

Investing Early

Nicholas is 25 years old and contributes $200/month to a Roth IRA. At age 35 he stops investing and doesn’t touch the money until he is age 60. He ends up with $493,949.00.

Edward is 35 years old and contributes $300/month to a Roth IRA. He does this until age 60. He ends up with $398,049.00.

Nicholas contributed $24k total.

Edward contributed $90k total.

Nicholas still ends with more because of how early he started + the power of time combined with compound interest.

The Lesson: Don’t procrastinate! Your future self will thank you!

Investing Consistently

Jacob is 50 years old and wants to retire at age 60. He contributes $200/month from age 25-50 but then stops investing and coasts toward retirement. At age 50 he has $265,366.00. At age 60 he retires with $718,356.00.

Dylan is also 50 years old and wants to retire at the age of 60. He contributes $200/month from age 25-50 but knows that investing consistently until retirement is important, so he continues to contribute $200/month. At age 50 he also has $265,366.00. At age 60, though, he retires with $759,325.00.

Dylan contributed $24k more than Jacob but ends up with $40,969.00 more.

If neither Jacob nor Dylan contribute or touch these funds for another 10 years, Jacob would end up with $1,944,619. Dylan, though, would end up with $2,055,524.00.

This means that because Dylan contributed an extra $24k over 10 years ($2,400 per year), he ends up with $110,905.00 more than Jacob.

The Lesson: Even if you have a big nest egg, don’t let any amount of money you contribute seem miniscule. It all adds up.

* This is not a guarantee of performance and is only an example. Please talk with me about your specific situation. I never charge for meetings or advice; I only get paid directly from accounts that I manage.