Re: 401(k) and Investing
I posted this somewhere else, but saving pretty much favors the person which starts first, all things being equal.
Assume you and me, making the same amount. You are 24, I am 34.
You save $1000/yr and earn 10% a year. You save $1000/yr for ages 24-34 (11 years). You set aside $11,000 of your income. 10% return every year, at age 65 you have ~$391,000.
I save $1000/yr from age 34-54 (21 years). $21000 total. I saved twice as much as you (but started 10 years later). 10% return (same as you), ending at age 65 (same as you). I ended up with ~$200,000.
You set aside HALF as much and started only 10 years before me, but ended up with TWICE as much. Investing always favors people which start younger. That is why I use the checkpoints... to see where I am as far as "investing early".
For me to equal your final number, I would need to invest $1950 for the 21 years ($41,000 total). So I need to invest almost 4X as much to catch up. The goal is to "be ahead" and not play catch up.
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