Why Save Early?
When your grandparents were working, retirement
income depended on three things: Social Security, a company-sponsored
pension, and personal savings. Almost everyone had at least two
of these things. Today, most people can count on one of them.
Company-sponsored pensions get more rare every day. And Social
 Security
is just not as secure as it once was. You can see where this leaves
today’s young workers: more and more, saving for retirement is
left entirely up to you.
Fortunately, there are some very good ways to build up personal savings
for retirement, and the government is offering tax breaks on your savings
to help you.
Compound interest, especially on a tax-free or tax-deferred account,
can give you a huge return on your investment. But it needs time to
work. Look at our chart to see how much of
a difference even ten years can make. Anne contributes $2,000 each year
to a retirement account for 10 years, starting when she’s 25. Bill contributes
$2,000 a year for 30 years, starting when he’s 35. Each invests in a
tax-deferred account and gets an 8% annual return. Bill contributes
over three times as much as Anne, but Anne has a lot more money at age
65.
Anne & Bill
Download
this chart in printable format (.pdf)
| Age |
Years |
Contribution |
Year-end Value |
Age |
Years |
Contribution |
Year-end Value |
| 25 |
1 |
$2,000 |
$2,166 |
25 |
1 |
$0 |
$0 |
| 26 |
2 |
$2,000 |
$4,512 |
26 |
2 |
$0 |
$0 |
| 27 |
3 |
$2,000 |
$7,052 |
27 |
3 |
$0 |
$0 |
| 28 |
4 |
$2,000 |
$9,804 |
28 |
4 |
$0 |
$0 |
| 29 |
5 |
$2,000 |
$12,783 |
29 |
5 |
$0 |
$0 |
| 30 |
6 |
$2,000 |
$16,010 |
30 |
6 |
$0 |
$0 |
| 31 |
7 |
$2,000 |
$19,505 |
31 |
7 |
$0 |
$0 |
| 32 |
8 |
$2,000 |
$23,290 |
32 |
8 |
$0 |
$0 |
| 33 |
9 |
$2,000 |
$27,389 |
33 |
9 |
$0 |
$0 |
| 34 |
10 |
$2,000 |
$31,828 |
34 |
10 |
$0 |
$0 |
| 35 |
11 |
$0 |
$34,470 |
35 |
11 |
$2,000 |
$2,166 |
| 36 |
12 |
$0 |
$37,331 |
36 |
12 |
$2,000 |
$4,512 |
| 37 |
13 |
$0 |
$40,430 |
37 |
13 |
$2,000 |
$7,052 |
| 38 |
14 |
$0 |
$43,785 |
38 |
14 |
$2,000 |
$9,804 |
| 39 |
15 |
$0 |
$47,419 |
39 |
15 |
$2,000 |
$12,783 |
| 40 |
16 |
$0 |
$51,355 |
40 |
16 |
$2,000 |
$16,010 |
| 41 |
17 |
$0 |
$55,618 |
41 |
17 |
$2,000 |
$19,505 |
| 42 |
18 |
$0 |
$60,234 |
42 |
18 |
$2,000 |
$23,290 |
| 43 |
19 |
$0 |
$65,233 |
43 |
19 |
$2,000 |
$27,389 |
| 44 |
20 |
$0 |
$70,648 |
44 |
20 |
$2,000 |
$31,828 |
| 45 |
21 |
$0 |
$76,511 |
45 |
21 |
$2,000 |
$36,636 |
| 46 |
22 |
$0 |
$82,862 |
46 |
22 |
$2,000 |
$41,843 |
| 47 |
23 |
$0 |
$89,739 |
47 |
23 |
$2,000 |
$47,482 |
| 48 |
24 |
$0 |
$97,187 |
48 |
24 |
$2,000 |
$53,589 |
| 49 |
25 |
$0 |
$105,254 |
49 |
25 |
$2,000 |
$60,203 |
| 50 |
26 |
$0 |
$113,990 |
50 |
26 |
$2,000 |
$67,365 |
| 51 |
27 |
$0 |
$123,451 |
51 |
27 |
$2,000 |
$75,123 |
| 52 |
28 |
$0 |
$133,697 |
52 |
28 |
$2,000 |
$83,524 |
| 53 |
29 |
$0 |
$144,794 |
53 |
29 |
$2,000 |
$92,622 |
| 54 |
30 |
$0 |
$156,812 |
54 |
30 |
$2,000 |
$102,476 |
| 55 |
31 |
$0 |
$169,827 |
55 |
31 |
$2,000 |
$113,147 |
| 56 |
32 |
$0 |
$183,923 |
56 |
32 |
$2,000 |
$124,705 |
| 57 |
33 |
$0 |
$199,189 |
57 |
33 |
$2,000 |
$137,221 |
| 58 |
34 |
$0 |
$215,721 |
58 |
34 |
$2,000 |
$150,776 |
| 59 |
35 |
$0 |
$233,626 |
59 |
35 |
$2,000 |
$165,457 |
| 60 |
36 |
$0 |
$253,017 |
60 |
36 |
$2,000 |
$181,355 |
| 61 |
37 |
$0 |
$274,017 |
61 |
37 |
$2,000 |
$198,574 |
| 62 |
38 |
$0 |
$296,760 |
62 |
38 |
$2,000 |
$217,221 |
| 63 |
39 |
$0 |
$321,391 |
63 |
39 |
$2,000 |
$237,417 |
| 64 |
40 |
$0 |
$348,067 |
64 |
40 |
$2,000 |
$259,288 |
| 65 |
41 |
$0 |
$376,956 |
65 |
41 |
$2,000 |
$282,975 |
| At
retirement, Anne has |
$376,956 |
At
retirement, Bill has |
$282,975 |
| Anne
contributed |
$20,000 |
Bill
contributed |
$62,000 |
| Anne
earned |
$356,956 |
Bill
earned |
$220,975 |
|
