"Compounding is simple, but incredibly powerful if given enough time. Basically, all it means is that you get interest on your interest."
-- Ken Kurson in his Tripod column.
MAKE $1,000,000 WITH A MEASLY HUNDRED BUCKS A MONTH! Sound like a scratch and win lottery commercial? Actually, it's a retirement plan. It may seem strange that twentysomethings should be thinking about retirement, but these are precisely the people who should start putting a few shekels aside each month.
There's this wacky little deal called compound interest that makes such astronomical returns possible. The earlier you start, the bigger your mound of cash at retirement time. Waiting even a few years can have a huge impact on your savings at age 65.
This nifty interactive calculator will show you how much you'll have for retirement if you
start investing now -- and how much less you'll have if you delay. It will even draw you a pretty graph to illustrate the point! Prepare to be amazed!
Enter Your Current Age:
How much risk are you willing to take?
This determines how much you'll make on your investment (average).
Agressive Mix - 12% Annual Return (55% big company stock, 25% small company
stock, 20% international company stock)
Moderate Mix - 10% Annual
Return (50% big company stock, 15% small company stock, 15% international
company stock, 20% intermediate bond funds)
Low Risk - 8% Annual Return
(40 % big company stock, 10% small company stock, 10% international company
stock, 40% intermediate bond funds)
You have to be honest about how much risk you're willing to take. With the
most aggressive fund, pay-offs can be bigger but you can also lose 30% of your investment in a single bad year. Your tolerance for risk means that you have to stand by and watch
that loss occur without pulling your money out of the market -- or pulling your hair out of your head.
How much you and your company can invest in your
retirement.
You can play around with entering different figures to see what level of savings works best for you. Go nuts!
How much per month can you invest?
How much does your company invest
in your 401(k) plan or retirement fund
for each dollar that you put in?
There is a maximum amount that you can put into a retirement fund each year:
depending on the type of fund you have, it's somewhere around $7500, or
$625 a month. Why can't you put as much aside for your Golden Years as you see fit? This is essentially because the government isn't keen on the idea of seeing you get out of paying taxes on any larger a portion of your income than that.
