Just the Tip:
Money you invest at 25 compounds for 10 more years than money you invest at 35, and that head start can outweigh decades of later saving. Start now with an amount you can automate, even if it’s small, and raise it every time your pay goes up instead of waiting until you earn more.
Waiting to invest until you earn more feels responsible. But the years you skip at the start are the ones that compound longest, and no later raise buys them back.
Run the numbers at a hypothetical 7% average annual return, compounded monthly. Invest $300 a month from 25 to 35, then stop, and you’d have about $421,000 at 65 from $36,000 in contributions. A friend who starts at 35 and invests $300 a month until 65 would have about $366,000 from $108,000.
Keep going instead of stopping at 35, and your balance at 65 grows to about $787,000, more than double the late starter’s, for $36,000 more in contributions. That $421,000 difference is what the decade from 25 to 35 was worth.
You don’t need $300 to start. Even $100 a month from 25 grows to about $262,000 by 65 at the same 7%. Open a Roth IRA if your income qualifies, or join your employer’s 401(k) and contribute at least enough to get any match. Choose a low-cost index fund or a target-date fund, and have the contribution come out automatically on payday. Then increase it with every raise, before the bigger paycheck starts to feel normal.
To test your own numbers, enter the years until you retire, a monthly amount, and a conservative return into the SEC’s free compound interest calculator at Investor.gov.
If you’re already past 25, the same math says to start today, because the next 10 years will always compound longer than any 10 that come after them.
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