The Power of Compound Returns

This is an example of the power of compound returns.

Let say Aaron begins saving at age 20, and saves $2,000 a year for 10 years. So overall, he’s saved $20,000 into an investment that earns 8% a year. When he turns 65, that’s worth $500,000. That’s not bad.

Bob begins saving at age 30, 10 years later than Aaron does, and saves $2,000 a year for 35 years. So he’s saved three and a half times (in terms of dollar value) more than Aaron has and he ends up with less than Aaron does at the end of that just by waiting 10 years.

Then we’ve got an example of Carl, who waits another 10 years and puts away $50,000 over 25 years. He ends up with visually what looks like half as much as Bob does.

The idea here is: the earlier you start, the more you end up with, because of compound investing those compound returns.

This is just another example of the exact same concept. You’ve got your age here, your annual savings and your 8% investment return. This forecasts the total value when you turn 65 years old.

So if you start at age 20, you end up with $2,000,000. If you start at age 25 you end up with $1,400,000. So waiting five years to save cost you $700,000. It’s a big difference.

The Learn more in our next Wealth for Life workshop (next year) at https://info.inspire.business/wealthforlife