Most personal finance advice tells you what to do. This one’s different. This is about what happens if you don’t do anything.
Let’s say you’re 35. You earn $80,000 a year. You spend roughly what you earn. You have $5,000 in savings and no retirement account. Your plan is to “start soon”.
Here’s what “soon” costs, by age.
If you start at 35, saving 15% of your income at a 6% average return, you’ll have roughly $520,000 at 65.
If you wait until 40, same 15% rate, same return. You’ll have $340,000. Starting 5 years later costs you $180,000.
If you wait until 45, you’ll have $210,000. Starting 10 years later costs you $310,000.
If you wait until 50, you’ll have $115,000. Starting 15 years later costs you $405,000.
These aren’t projections for the world’s best investor. They’re what anyone saving 15% into a standard index fund would likely end up with. The only variable that moves the numbers is when you start.
Nothing you do financially in your 40s is more powerful than what you did in your 30s. Nothing in your 50s is more powerful than what you did in your 40s. Time is the only force in compounding that can’t be recovered.
Rule
The best time to start was yesterday. The second-best time is today. Every year of delay is a compounding loss.
Action for this week
If you don’t have an automated retirement savings set up, open one this week. Start at 5% if that’s all you can afford. You can increase it later. What you can’t do is recover the years.
Next week
This is the last in our first season of The Money Fix. Thank you for reading. Next week I’ll share what’s coming, what you’ve told me matters, and how to shape what comes next.
Know someone who keeps saying “I’ll start next year”? Forward this.
P.S. I started too late. I know what it costs. Most of the people who taught me about money started too late too. The people who taught us were the ones who’d already paid the price. This is that lesson, passed on.
Decide Your Money
Simple rules for smarter money decisions.
This newsletter is for informational purposes only and does not constitute financial advice. Always consult a licensed professional before making financial decisions.