Start Saving Early and Time Becomes an Investment Tool
Let's take two people, Sue and Bob. They are the same age.
Sue starts an IRA at age 18. She contributes $2000 per year at the beginning of each year for four years. She earns eight percent a year, but never contributes another cent. Her total contribution is 4 X $2000 = $8000.
At age 35, Bob decides to get serious about saving. He starts an IRA and contributes $2000 per year until he is age 65. Bob also earns eight per cent. He contributes 30 X $2000 = $60,000.
Can you guess who has more money in their IRA at age 65? Click on the image below to see the answer.
The column "Sue IRA" shows her contributions. The adjacent column "Value" shows the year end value of her account. Similarly, the column "Bob IRA" shows his contributions and his adjacent "Value" column shows the year end value of his account. Read across at age 65 to compare the two "Value" columns.
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