Compound interest is one of the most powerful concepts in finance. Albert Einstein has been quoted as saying, "The most powerful force on earth is compound interest." When it comes to finance, I have to say, I agree with him.
Let's take for example, Jamie, she begins her retirement savings at age 25. Jamie puts $2,000 a year into a tax-deferred annuity for ten years. Another person, Tate, he waits until he is 35 before putting money away for retirement. Tate puts $2,000 per year into a tax-deferred annuity for thirty years.
Both people earn 7% year in and year out. When we check in on them at age 65 , Jami has accumulated $193,294 with her $20,000 and Tate has accumulated $189,970 with his $60,000.
The lesson to be learned is not to put away $2,000 every year as soon as possible. The lesson is, to put any amount that is affordable away on a regular basis starting as soon as possible.
We have started a new campaign - Build your retirement on $1.67 per day. People say they can't afford to save for retirement. I reply, can you afford $1.67 a day? You might say what can that accomplish? Tax deferred growth, Income Tax Savings, Compound Interest and at the end a retirement fund that has really added up.
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