Classic Financial Solutions SA/NV

Old fashioned ethics in a modern context

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Click here for a printer-friendly versionThe Classic guide to saving early for retirement

This guide shows you, through an example, the importance of saving early for retirement.

The early bird …

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.

The moral

  • 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.

  

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