It is Never too early to think retirement.
Your parents may have told you to "
Save your pennies" when you were younger; and they could not have been more right! Admittedly, saving dollars, as opposed to pennies, will have much more 'desirable effects'. This article will illustrate the HUGE potential of these 'desirable effects' ... if left to the punctilious saver.
Check out this link to see how easily saving $100 per month can translate into almost a million dollars in your life time!
Saving your cash pays off!The link assumes that you will invest $100 per month at a rate of 5.5%, compounded monthly.
However,
you can invest in mutual funds or even start an IRA (Individual Retirement Account) if you wish. In the case of an IRA, you could realistically expect to earn 6-8% (this is a conservative return) or more!
Using an excel spreadsheet, you can determine just how much you could make in 40 years using your revised numbers. With excel, you could then determine how much you could start with drawing at age 58 assuming that you no longer are saving the $100 per month after the retirement age of 58.
The formula I used in excel (
assuming 5.5% monthly compounded interest, and saving $100 per month for 40 years is: =FV(0.4583333%,12*40,-100,-100,1).
If you play around with this formula, you can calculate all sorts of cool information.
Examples from the above link, using my conservative numbers, include the following money information:1.
You'll have $175,799 at 58 years old, after adding $100/month for the past 40 yrs at 5.5% (Start at 18yrs old, and stop saving at age 58)
2.
Interest income per month, starting at age 58 is $805.75. I.e. This is the interest/month on the above $175,799 that you saved over the 40 years
3.
From age 55-88yrs old, spending $402 / month (I.e. If you decided to spend half of your Monthly earned interest), and no additional savings between ages 58-88;
you will still have in your savings: $0.543 Million by the time you are 88 years old.
4.
From age 55-88yrs old, if you continue to let your savings grow with compounded interest (with no spending or additional savings between ages 58-88),
you will have saved: $0.912 Million by the time you are 88 years old.
For those of you with stars in your eyes -- the above numbers may seem trivial, if not completely inconsequential! However, you have to keep in mind two pieces of math to understand the true potential of your saving $100 per month:
1.
On the Negative side: Inflation over the years will deflate the meaning of
"I have ONE MILLION DOLLARS SAVED!".2. But,
on the Positive side: If you saved $100 per month for 40 years,
without the power of compounded interest, that would work out to be
$100 X 12months X 40years = $48,000 in total savings.
Clearly,
whether you choose to spend $402/mo of your interest earnings every month starting at age 58 (
leaving you with a half million, i.e. $0.543 million at 88 years old) ...
or not (
leaving you with a cool ONE MILLION DOLLARS, i.e. $0.912 Million at 88 years old) ...
... Either way,
One Million or a Half Million, both are much, much more than $48,ooo!Start saving today!
Your Investing fiG,
- Professor Gary
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Gary Plourde is an independent author. He writes about Traveling, Sailing, Inventions and the Patenting process. Patent your new idea and explore an opportunity to generate revenue for your business, scholarship, study abroad, or sabbatical. 
