After messing around with the retirement savings calculator I built, I started thinking about the cost of waiting just one year to start saving for retirement. The impact is huge! Take a look at the chart below:
I assumed the following:
A person starts saving $2,000 per year at age 22. The account grows at 10% per year. At age 65, they could have $1,184,801.
I then made $1,184,801 the retirement goal and figured how much would have to be saved each year if the person waited one more year to begin saving. So, if they waited until they were 23 to start saving, they would need to save $2,204 PER YEAR in order to reach $1,184,801 by age 65. Pretty amazing isn’t it?
Now let’s look at it another way.
Let’s say everything is the same but this time, they want to save the same amount each year no matter what year they begin saving. What rate of return do they have to get in order to reach their goal?
So, by waiting just ONE year, this person’s required rate of return jumped from 10% to 10.34%!
The point of all this is:
START SAVING FOR RETIREMENT AS SOON AS YOU CAN!