Save Early, Save Often

By Steve Tepper, CFP®, MBA


You’re 25 years old. If you’re actually anywhere near my age, you probably want to pause for a minute and enjoy that thought. Okay….

Maybe another minute…

All right, snap out of it. You just got your first decent paying gig and you’ve (wisely) decided to start saving for retirement, which you’ve already got marked on the calendar for mid-2054, thirty-five years from now.

You start out modest, putting $100 into a brokerage account, and buying a moderately aggressive portfolio of stocks and bonds, which you expect to return 8% per year on average. You plan to increase your deposit each year by 3%. You’ve accounted for taxes, which you expect to be 15% of your gains, payable once a year. You won’t trade much, so you only figure on about $50 in transaction fees a year.

Whew, a lot of assumptions just to get to the question: How much money will you have in the account in 2054? Answer: You will have deposited $72,555, which will grow to $239,017. That money can supplement other sources of retirement income (social security, money you’ve invested in your employer’s 401(k) plan through payroll deduction, etc.) to fund a comfortable retirement.

The fun part of the exercise (okay, maybe just fun for math and money geeks like me) is to play with the assumptions and see how it impacts the end-result:

  • Maybe you want to play it more aggressive and try to get a 10% annual return. Hey, you’re young! Why not? Now you’re looking at $348,156.

  • Or maybe you deposit more to start ($150) and increase your deposits a little more each year (4%). That gets you to $413,980.

  • Or maybe you want to see what happens if you add a few more working years and retire in 2059. That would get you to $357,022.

  • And don’t forget to consider the “all of the above” option: $957,037! Find yourself an equally savvy and disciplined partner in life who does the same and you’ve got close to $2 million.

[Please keep in mind this is just a math exercise. I believe these are reasonable assumptions based on historical returns and tax law, but actual results will vary and of course all investments carry the risk of loss.]

The most important factor in this exercise isn’t the rate of return or the tax rate or the deposit amount. It’s getting started!  Pass this thought along to your favorite millennial: Save early, save often. It doesn’t have to be a huge amount. Just start saving and establish the lifelong discipline of saving.

And you know there’s an advisor just a phone call or email away to help them get started.