The Benefits of Long-Term Compounding
Updated: Oct 8, 2019
The benefits of compound interest are extremely powerful.
This growth depends on having a guaranteed return with no down years. With loss years like one gets with returns linked to the stock market, the results are completely different.
Ask anyone who had 401K accounts that went through 2008 or 2001.
And the results depend dramatically on how soon you start.
The above chart shows the results of saving $10,000 per year for 25 years at 5% interest.
The same $250,000 total input for each of these four curves.
And looking at the results at the same ending age of 90.
But the results are so different depending on the starting age:
$1.1 million if you start at age 50 when you start panicking about your retirement.
$1.8 million if you start at age 40 when you are at the peak of your career growth.
$2.9 million if you start at age 30 and maybe in some early years you have to get a little help from a parent or grandparent.
And $7.7 million by age 90 if some kind parent or grandparent helps start the account for a 10 year old.
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