Retirement usually doesn’t start until you’re in your 60’s but there is a good reason to start saving much sooner. The earlier you contribute to your nest egg, the more time your portfolio will have to grow in value.
The image illustrates the ending wealth values and effects of compounding of three investment portfolios. Consider three hypothetical investors who begin investing 10,000 at an average annual rate of return of 12%. Investor A invests 10,000 for a 30-year period, which results in an ending wealth value of 349.49 Lakhs. , Investor B invests 10,000 for a 20-year period, which results in an ending wealth value of 98.92 Lakhs On the other hand, investor C invests 10,000 for a 10-year period, which results in an ending wealth value of 23.00 Lakhs. Investor A invested an additional 12.00 Lakhs compared to Investor B. However, a large difference in the ending wealth value can be attributed to the compounding effect of the 12.00 Lakhs for the additional 10 years. In other words, your money saved now will be worth a lot more than your money saved in retirement.