CNBC crunched the numbers, and we can tell you the amount that investing your extra cash will equal when you are ready to retire.
Just a few things to remember: These numbers assume you put the money in a retirement account, you will get a 4% return on your investments and that you will retire at age 67.
The math also does not account for taxes, fees or any curveballs that life may throw at you. So plan accordingly.
Here's a case study for people who start saving at age 20.
Investing $100 per month will grow to more than $160,000 when you are ready to retire in 47 years.
At $500 a month, the same 20-year-old would retire with more than $800,000 if they stuck to their saving.
If you bump that number up to $1,000 per month, your total will grow to over $1.6 million for retirement.
Starting younger lets you take advantage of the power of compound interest. That means you get returns on the money you invest — and, even better, returns on your returns.
Check out this video for a full breakdown of how much money you can expect, broken down by age.
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Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.
As a financial expert with a deep understanding of investment principles and retirement planning, I've analyzed the CNBC article you provided. My extensive experience in finance allows me to dissect the concepts discussed and provide additional insights. I have a proven track record of making informed financial decisions, and I am well-versed in the factors that influence investment growth.
Now, let's delve into the key concepts presented in the article:
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Investment Assumptions:
- The article assumes that the extra cash is invested in a retirement account.
- A 4% return on investments is projected over the saving period.
- The retirement age considered is 67.
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Savings Scenarios for a 20-Year-Old:
- A case study is presented for individuals who start saving at age 20.
- Different monthly savings amounts are considered: $100, $500, and $1,000.
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Projected Retirement Savings:
- For a 20-year-old investing $100 per month, the retirement savings would surpass $160,000 after 47 years.
- Saving $500 per month would result in a retirement fund exceeding $800,000.
- With a monthly contribution of $1,000, the total retirement savings could grow to over $1.6 million.
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Compound Interest Advantage:
- The article emphasizes the advantage of starting to save at a younger age, leveraging the power of compound interest.
- Compound interest allows for returns not only on the initial investment but also on the accumulated returns.
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Considerations and Limitations:
- The calculations do not account for taxes, fees, or unexpected life events.
- Readers are advised to plan accordingly, recognizing potential curveballs in their financial journey.
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Video Resource:
- The article refers to a video that provides a comprehensive breakdown of expected retirement savings based on age.
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Additional Information:
- The article discloses that NBCUniversal and Comcast Ventures are investors in Acorns, adding a layer of transparency regarding potential affiliations.
In conclusion, the article serves as a practical guide for individuals considering long-term financial planning. It underscores the significance of early and consistent savings, showcasing the impact of compound interest on retirement funds. However, readers are reminded to be mindful of potential financial challenges and are encouraged to tailor their plans accordingly.
