Broker Check

The Power of Time & Compound Interest

| October 11, 2021

When it comes to investing, time is one of your greatest allies. Why? When time joins forces with compound interest, your account value grows dramatically. Think of compounding as getting a return on your return.

Here’s an example:
- A 25-year-old wanting to have a $1 million nest egg at age 60 would need to invest $880.21 each month assuming a constant return of 5%.

- If that 25-year-old waits 10 years to start investing, he would need to invest $1,679.23 each month using the same assumptions.

- If he waited 20 years? That 45-year-old would need to invest $3,741.27 each month to accumulate the same $1 million by age 60.

The only difference between these three scenarios is the impact on the investment of combining time and compound interest. It can make a huge difference between retiring in comfort and, well...not.

If there’s anyone you care about that would like to better understand the benefit of compound interest, let’s connect.