Why you should start saving for retirement at 25

March 21, 2014

JP Morgan reminds the world this morning that compound interest is a beautiful thing. The bank recently released its 2014 guide to retirement. One of the slides shows the benefits of starting saving early:

Sam Ro at Business Insider explains:

Intuitively, it makes sense that Chris would end up with the most money. But the amount he has saved is astronomically largely than the amounts saved by Susan or Bill.

Interestingly, Susan, who saved for just 10 years, has more wealth than Bill, who saved for 30 years.

That discrepancy is explained by compound interest.

You see, all of the investment returns that Susan earned in her 10 years of saving is snowballing — big time. It’s to the point that Bill can’t catch up, even if he saves for an additional 20 years.

Of course, if Susan saved like Chris … well, if you haven’t noticed, Chris’ savings are just the savings of Bill and Susan combined.

The longer you wait to start saving for retirement, the more you miss out on the benefits of the incredible power of compound interest.

 

Comments

smoke and mirrors from Wall Street; assumes a ROI of 7% in a perfect world….these days your lucky to get a real return
on savings of 3%.

Posted by pungentwords | Report as abusive
 

This is true, but the real issue is that few will save with a pension when the charges are so high – the industry has severely damaged its reputation with hidden high charges and inflexible products shows no sign of learning from its mistakes yet.

Posted by dominico | Report as abusive
 

Post Your Comment

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
  • # Editors & Key Contributors