Building a nice investment account of your retirement is a goal that many people have. Unfortunately, most people don’t really take action in order to have enough money to retire at 55 or 60. They think the government or their pension plan is good enough to guaranty a golden retirement. In fact, I think that the only person you can really trust is yourself. This is why you need to start to think about retirement early in your life.
One of the best ways to accumulate money is the use the “pay yourself first” cliché. Finance is like a hockey game, it is with cliché such as “we must shoot as many times as possible” that you can win!
When we combine the power of compounding interest with the power of systematic investment, we are absolutely sure to become millionaire one day. The problem is that we need to start young in order to become rich faster 😉
I do random calculation all the time since I started as a financial planner. You should see people’s face when they realize that they can get 2M$ in their pocket by the age of 65. This is something they would have never thought to be possible.
So here’s a great example to prove my point. Let’s say that you are 30 and you plan to retire at the age of 60. That leaves you exactly 30 years to get enough money in order to realize your dream.
You would need to put $1,000 aside per month at 6% (so 8% minus a 2% inflation rate) in order to get 1M$ at retirement. So 360K of capital over 30 years will put you in a millionaire’s seat.
Then, if you get lazy and wait 5 years and start putting money aside at 35, you would need to put about $1450 a month to get to the exact same result. Therefore, you would not only increase your monthly payment but also the amount of capital. So at the age of 35, you would need 435K over 25 years to get your million.
I did the calculation for my own situation too. At the age of 26, I must put only $708 a month in order to create my million. As I am putting only $400 a month in my Smith Manoeuvre I am short of $308… Time is surely rough when you have a young family and a full mortgage on your back!!
image source: flickr
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