The impact time has on your ability to retire is so, so dramatic that it is worth restating just one more time. The sooner you start to save and invest, the less burdensome it gets to reach a level of wealth that not only allows you to retire comfortably but lets you not sacrifice your present for the future. And that is the key. The intent of all this planning is not to stop living in the present and only live for the future. But at the same time, it is also important to not just live in the present without any consideration for the future. And an early start to a well-designed savings and investment plan balances both ends of the scale, allowing you to live a balanced, happy and a stress-free life.
Say you are 25 today. The table below shows the amount of money you need to set aside monthly and each year to reach a $3.25 million in liquid net worth goal (excluding your home) by the time you are 65. Why $3.25 million? The present value of that money 40 years out is just a notch over $1 million today. It’s like you are 65 today and have a million bucks. That amount should be able to generate $40,000 in annual income with a high degree of certainty for the rest of your life without you or your family ever running out of money and probably still have some leftover to bequeath it to your heirs. The savings are assumed to be invested in a moderately aggressive portfolio designed to generate an 8% annual return.
So starting early and saving often is the way to go. And it’s never too late to save and invest so if you didn’t do it at 25 or 35, so what. You start when you can and you are still better off than not doing anything.