Let’s say you start investing when you’re 20. You manage to save $5,000 each year and put them into stocks and index funds, which net you 8% in returns per year on average. At 30, you stop putting in money for good, but keep the investments you’ve accumulated so far.
Now, a different scenario. You don’t want to save and invest $5,000 each year in your twenties, because hey, you’re young. You want to have fun, you can do the responsible stuff later. So, you start investing at 30, the same sum each year. However, because you started later, you don’t stop after 10 years. Instead, you put in $5,000 every year until you retire at 65.
Here’s the insane part:
The kid who invested from 20 to 30, then never again, ends up with more money.
$1,156,619, to be exact. The late bloomer, despite his continued efforts, only makes it to $930,510. That’s one nice home for $226,000 less. Or a Ferrari. Or an important surgery. Or five years of living cost in retirement, who knows.
