There’s no time like the present to begin thinking about the future. Many people starting their careers are certainly not thinking about retirement, however, it’s the perfect time to implement a disciplined investment strategy that you can reap rewards from later in life. Young people just starting out in the workforce have one key differentiator to those nearing retirement: time.
Time allows you to benefit from compounding returns, being the process of generating more return on the investment’s reinvested earnings. This process allows your investment to grow rapidly over time, as returns continue to compound year in, year out.
Let’s take for example, two people, one who begins investing $250 per month from age 25 and one who invests $250 per month from age 35. Each person continues to invest the same amount each year, until age 64. Over the course of this time, the 25-year-old would have invested $120,000 in total, whereas the 35-year-old would have invested $90,000 - a difference of $30,000. However, as per the graph below, the difference over time is considerably more than this.
Starting at age 25 (pink) vs age 35 (blue)
Based on an assumed annual return of 6%, the person who started at age 25 would have $500,612 at age 65 whereas the person who started at age 35 would have $252,634 – a staggering difference. Each person implemented the same strategy, however one simply started doing it 10 years earlier.
Why not start doing something today that your future self will thank you for? Get in touch with a BDO adviser if you would like to discuss your situation and start saving.
The information in this document reflects our understanding of existing legislation, proposed legislation, rulings, etc., as at the date of issue. In some cases, the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. The information is not, nor is it intended to be, comprehensive or a substitute for professional advice on specific circumstances.
The financial product advice or information in this document is of general nature only and has not taken into account the investment objectives, financial situation or particular needs of any particular person. Before making an investment decision on the basis of the advice above, a prospective investor needs to consider, with or without the assistance of a professional adviser, whether the advice is appropriate in the light of their particular investment needs, objectives and financial circumstances.