Waiting Just 10 Years to Invest Costs You $1.1 Million

SPDR S&P 500 ETF (SPY) has produced about 259% over ten years, implying low-teens annualized returns and supporting an 8% long-run assumption for retirement projections. Beginning contributions at age 25 instead of 35 can turn a $225,000 lifetime contribution into $2M+ by age 65, compared with about $931K when starting at 35. The difference comes entirely from an extra decade of compound growth. Delaying savings compounds the cost: a 20-year-old may need about $95 per month to retire as a millionaire, while a 40-year-old may need about $1,052 per month. The gap reflects lost compounding years that must be replaced with larger cash contributions.

"SPDR S&P 500 ETF (SPY) has returned roughly 259% over the past ten years, or low-teens annualized returns, supporting an 8% long-run assumption for retirement savings projections. Starting retirement contributions at age 25 instead of 35 can turn a $225,000 lifetime contribution into $2M+ versus $931K by age 65, with the $1.1M gap driven entirely by compound growth over an extra decade."

"The cost of delaying retirement savings compounds dramatically: a 20-year-old needs just $95 monthly to retire a millionaire, while a 40-year-old needs $1,052 monthly for the same goal, as lost compounding years must be replaced with raw cash contributions."

"They have the exact same amount of money in this, $225,000 each. They even have the same period that they were on the planet. The difference is, is the 10 years. The stakes are blunt. Two people save identical dollars over identical 30-year stretches. One ends with under a million. The other ends with over two million. The gap is roughly $1.1 million, and the only variable is when they started."

"Average Alan waits until age 35, contributes $625 a month for 30 years until age 65, puts in $225,000 of his own money, and finishes with roughly $931,000. Manny the Mutant starts at age 25, contributes the same $625 a month for 30 years, stops entirely at age 55, never adds another dollar, and by age 65 sits on more than $2 million. Both earn 8% annualized."

Read at 247wallst.com