Cost of Waiting: 10 Years = $1 MillionSubmitted by AssetGrade, LLC. on November 23rd, 2013
submitted by Patrick Cote on November 23rd, 2013
I was struck by a conversation recently with a twenty-something professional. He explained to me that when he started working, he started saving the maximum amount he could with his 401(k), because one thing he heard really struck home:
He would likely have $1 million less in retirement if he waited to start saving and investing until age 35, compared to starting at age 25.
I checked out the math and it does hold true at 40 years vs. 30 years of accumulation, at 4.2% after-tax annual returns, which seems like a pretty reasonable estimate. By the way, the same principle applies if you are age 35 and have not really started saving and investing – you would be projected to have $700K less in retirement if you waited until age 45. That principle also holds for other areas of saving/investing, particularly with regular monthly contributions: 529s: Traditional/Roth IRAs and brokerage accounts.
The bottom line is that unless you have extreme circumstances, it does not pay to wait to start saving/investing.