The impact time has on one’s ability to accumulate wealth is so dramatic that it is worth reiterating just one more time. The sooner one starts to save and invest, the less burdensome it gets to reach a level of wealth to afford a comfortable retirement and along the way be able to enjoy the little and big luxuries in life till one calls it a day. This last statement is crucial. The intent is not to completely abandon current consumption with the required occasional splurging and just continue living for tomorrow. After all, you only live once (oh…so ingenious). But at the same time, it is also important not to over-consume without planning for what lies ahead. An early start to a well-designed savings and investment plan balances both ends of the scale and helps you live a balanced, happy and stress-free life.
The table below shows the monthly and annual dollar amounts required to reach $3.25 million in liquid net worth till one reaches the ripe young age of 65. Why $3.25 million? The present value of that money 40 years out is just a notch above $1 million today. It’s like you are 65 today and you have a million dollars. That amount should be able to generate $50,000 in annual income for the rest of your life without you or your family ever running out of money and still have some leftover to bequeath to your heirs. The savings are assumed to be invested in a moderately conservative portfolio designed to generate an 8% annual return. An aggressive allocation could yield more but conservative assumptions allow for some cushion.
So start early and save often and then go live your life. And remember, you are never too late or are never too old to start.