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The Impact of Saving, Procrastinating & Rate of Return on Your Investment Plan
To understand the impact on your investment plan from consistent and early savings, you must see the "flip side," which is the "cost of waiting."
The chart below contrasts the amounts of weekly investments into retirement plans beginning at different ages in order to reach the same financial "pile." (assuming pre-tax contributions with 8% annual return)
| Savings Start at Age |
Weekly Investment |
Savings goal at age 65 |
| 25 |
$ 33 |
$500,000 |
| 35 |
$ 77 |
$500,000 |
| 45 |
$195 |
$500,000 |
| 55 |
$627 |
$500,000 |
What impact does your rate of return have on your investment goals?
The table and graph below illustrate your wealth accumulation from an annual $46,000 investment (typical amount of annual 401K contribution):
| Years |
8% |
10% |
13% |
| 1 |
$ 49,680 |
$ 50,600 |
$ 51,980 |
| 3 |
$ 161,281 |
$ 167,486 |
$ 177,091 |
| 6 |
$ 364,449 |
$ 390,410 |
$ 432,614 |
| 9 |
$ 620,382 |
$ 687,122 |
$ 801,308 |
| 12 |
$ 942,784 |
$1,082,045 |
$1,333,296 |
| 15 |
$1,348,917 |
$1,607,688 |
$2,100,900 |
| 18 |
$1,860,528 |
$2,307,318 |
$3,208,473 |
| 20 |
$2,273,454 |
$2,898,115 |
$4,207,616 |
| 25 |
$3,631,903 |
$4,976,361 |
$8,089,105 |
Notice what little difference your rate of return matters in the first 6-8 years of investing!
Consistent saving matters more than rate of return in the early years of your lifetime investing plan.
In the worksheet here – See for yourself how fast YOUR money will grow at YOUR rates of return over YOUR investment time horizon. Plug in your figures in the 3 shaded boxes. |
