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The earlier you start, the less youll have to contribute to reach your retirement goals.
This is due to the amazing power of compound interest.
You might be surprised.Take a look at how the numbers play out below.
What Exactly Is Compound Interest?
Before the math really makes sense, it helps to have an understanding of what compound interest really is.
Understand, however, that it takes time for compound interest to work its magic.
Most of your gains will come in the last years of your plan.
Heres how compound interest works versus simple interest.
Simple Interest
Simple interest pays you interest on your principal only.
It is not compounded.
Compound Interest
Compound interest grows your balance faster because interest is paid on interest youve already earned.
The third year, youd earn $43.26 in interest, and so on.
Over the long run, this can really add up.
Thats certainly not a bad start, and a sizable nest egg for many investors.
But adding just five years to your time frame can make all the difference in the world.
Thats an amazing tradeoff thats all due to the power of compound interest.
Understand That Projections Are Just That
The projections above are just that projections.
This variability of returns can affect the exact amount you accumulate.
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