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Cost of Waiting

Cost of Waiting 

Everyone knows the importance of building wealth. Unfortunately, not many understand the urgency of starting early.

Here is an illustration for your consideration.

You are thinking of investing $200 a month and plan to retire at 62. Assume that a dividend paying Unit Trust gives an expected return of 5% per annul and that returns are compounded monthly.  Take a look at the following table which demonstrates the power of compounding. The earlier you being saving, the more returns you earn from your investments contributed!

This is because the total value of your investment is compounded over a longer period of time. For example, starting at age 25 allows your investments contributed to be compounded for 10 extra years at 5% per year, as compared to starting at 35.

Begin
saving at age: 

Investments Contributed 

Returns
Earned 

Total Value
at Retirement 

25

$88,800

$167,300

$256,100

26

$86,400

$154,899

$241,299

27

$84,000

$143,218

$227,218

28

$81,600

$132,223

$213,823

29

$79,200

$121,879

$201,079

30

$76,800

$112,156

$188,956

31

$74,400

$103,023

$177,423

32

$72,000

$94,451

$166,451

33

$69,600

$86,414

$156,014

34

$67,200

$78,884

$146,084

35

$64,800

$71,838

$136,638

 

As per the illustration above, starting monthly investments at age 25 can potentially give you a total value of $256,100 at retirement. Starting 5 years later at age 30 will give you $188,956 and starting 10 years later at age 35 will give you even less at $136,638.

It is never too early to start saving or investing. Start today and take full advantage of the power of compounding!

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