This guide shows you through an example the importance of saving early for retirement.
At 20 years old Abel decides to put £100 per month into a savings plan. Let us assume that this investment appreciates at a regular 8% per year, by no means an unreasonable estimate. At the age of 30, he marries, and because of his additional commitments stops saving.
Meanwhile, twin brother Cain, who has frittered his twenties away in riotous living, starts contributing the same £100 per month to an identical scheme at the age of 30 and continues until the age of 60.
The table below gives you an idea of how the numbers pan out.
|
Abel (£100/month) from age 20-30 |
Cain (£100/month) from age 30-60 |
|
| Total contribution | £12,000 | £36,000 |
| Age 20 | 0 | 0 |
| Age 30 | £ 17,384 | 0 |
| Age 40 | £ 37,530 | £ 17,384 |
| Age 50 | £ 81,025 | £ 54,914 |
| Age 60 | £174,928 | £135,940 |
Amazing, isn't it? By age 60 Abel is still far ahead of Cain and, even if he continues to contribute his £100 every month, he will never catch up. The numbers continue to diverge and are destined never to meet.
Start early.
Regular saving of quite small amounts can build up an astonishing sum of money over time.
Time and patience are rewarded.
If you would like more information about retirement planning please contact us.