Retiring a Few Years Later Can Make All the Difference

compound interestOne of the most important lessons in investing is to learn about the power of compounding. In many cases, investing early and regularly can make all of the difference in the world.

Let’s take look at a chart that shows the impact of investing $100,000 by age 30 vs. investing $200,000 by age 45 (assuming 8% average return each year). As you can see, even though the second individual invested an additional $100,000, they will have nearly $600,000 less at the age of 65… that’s a breathtaking difference!

the power of compounding

Investing $100,000 at 30 years old vs. investing $200,000 at 45 years old

But what if you haven’t had the luxury of starting to invest early? What do you do then?

Don’t fret, there’s still plenty of ways you can help yourself. By realizing how much of an impact delaying retirement can have by just a few years can help entirely change the outlook of your financial well-being during your retirement years.

As an example, let’s use one of my own investment accounts, if next year I started withdrawing $45,000 annually from my stock market investments, while still earning 8% interest on average each year, I would run out of funds in this account when I’m 50 years old.

Alternately, if I am able to find a way to wait an additional 4 years before starting my first withdrawal, I would only run out of funds when I’m 67 years old.

withdrawing money from stock market account

Withdrawing money from stock market account starting at age 38 vs. starting at age 42

That’s a significant difference for waiting just four years! Of course these charts are using my own age as an example, but if you change the ages to your own in the charts you will get the point.

The only person accountable for your own future financial freedom is yourself. Start thinking about the power of compounding and the importance of not withdrawing too early. Focus on masterful saving and systematic investing. When you’ve got your eye on the ball, you’ll be surprised how quickly you can transform your own financial future.

Brent Mondoux
Founding Partner, Amplified Investments
Investing in real estate

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