Myths Vs. Truths: The Truth About Saving for Retirement

23 Nov Myths Vs. Truths: The Truth About Saving for Retirement


Myth: I can save for retirement when my income increases. There’s always more time to invest.

Truth: Time is running out and waiting to invest guarantees you an undignified retirement.

Let’s use the example of brothers Ben and Arthur. Ben decides to start investing just $2,000 per year when he graduates high school. That’s only $166.67 per month. He does this from age 19 to 26 – only eight years for a total of $16,000 invested, and then he leaves it alone. 

Arthur decides instead to buy a car and a house and live a little before he gets serious about saving for retirement. He waits until age 27 (the year after Ben stopped investing) and then invests exactly the same amount per year as Ben did. The difference is Arthur invests his $2,000 every year from age 27 to 65 – a $78,000 total investment.

Age Ben Invests Balance Arthur Invests Balance
19 $2,000 $2,240 $0 $0
20 $2,000 $4,749 $0 $0
21 $2,000 $7,559 $0 $0
22 $2,000 $10,706 $0 $0
23 $2,000 $14,230 $0 $0
24 $2,000 $18,178 $0 $0
25 $2,000 $22,599 $0 $0
26 $2,000 $27,551 $0 $0
27 $0 $30,857 $2,000 $2,240
28 $0 $34,560 $2,000 $4,749
.  . . . .
.  . . . .
.  . . . .
58 $0 $1,035,426 $2,000 $682,859
59 $0 $1,159,677 $2,000 $767,042
60 $0 $1,298,838 $2,000 $861,327
61 $0 $1,454,699 $2,000 $966,926
62 $0 $1,629,263 $2,000 $1,085,197
63 $0 $1,824,774 $2,000 $1,217,661
64 $0 $2,043,747 $2,000 $1,366,020
65 $0 $2,288,997 $2,000 $1,532,183

Both brothers retired at age 65 with a good nest egg, but look at the difference. Ben invested $16,000 and retired with $2.2 million. Arthur invested $78,000 and only had $1.5 million. He ended up behind his brother by $756,814 even though he invested $62,000 more than Ben did!

So if you think you have plenty of time to get with it, think again. Time is on your side if you use it to invest. But if you wait to invest, time is definitely NOT on your side and making catch up contributions late in life is often a case of too little, too late.

3 Comments
  • Meg
    Posted at 09:54h, 24 November

    I absolutely love this diagram. I find myself wondering what the numbers were, and now I know where I can easily find it!

    I started investing a portion of my paycheck after college at my first “real job” in (2002) and have been investing since. I am still at that original employer so I am fully vested and the company puts money in every year for “profit sharing.” I wasnt investing $2,000/year to start, but it is over that now that my income has increased over the years. It’s nice to know that even if hubby and I decide to start having children and I stay home, that I will have a nice nest egg at retirement even if I contribute nothing else.

    Thanks Matt & Janelle!

    • Matt Wegner
      Posted at 10:11h, 24 November

      You’re quite welcome Megen! Investing is definitely a crockpot approach but if done correctly it’s easy to do!

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