Retirement Savings & Compound Interest

So, I want to discuss something that is dear to me.  Compound interest and retiring.

Did you know that if you can get a 10% return on your investments, your initial investment will double every 7 years?

Or flip it around, if you get 7% interest; your money doubles every 10 years.

If you are 25 years old and saved $10,000 by that age, by 65 that initial savings at:

  • 7% interest rates = $160,000 (doubled 4 times)
  • 10% interest rates = $400,000+ (doubled over 5 times!)

Of course, few of us have $10,000 at 25.  So let’s say 35.  If you can get the above rates from 35 to 65; you’d have with that initial $10,000 investment:

  • 7% interest rate = $80,000
  • 10% interest rate = $160,000+

Note, I’m not discussing interest rates here and the numbers given are rough estimates.  They aren’t actuals at all; the actual compounded amounts are slightly smaller.

Still; not bad eh? But those are just numbers.  What would you need to live on? Well, assuming you could live on $28,000 a year including OAS & CPP; at 65 you would need about $128,000.

So, why aren’t you saving yet?