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Please Give This to Any 20-something Who is Not Saving for Retirement

Ever heard of the phrase “The lottery is a tax on people who are bad at math?” Well, I would like to propose a new phrase: “People who don’t start saving for retirement prior to age 30 are really, really bad at math!”

Why am I being so hard on the 20-somethings who don’t save, many of whom are cash poor, drowning in debt (student loans, credit cards, etc.), or often both? Because there are very few 20-somethings that truly cannot afford to save for retirement at all. With the assistance, for example, of tracking their spending, budgeting and not paying full price for things, the vast majority can actually afford to save for financial independence and save at least SOMETHING for retirement, even if it is just a small amount. (I prefer to use the term “financial independence”, as opposed to “retirement”, because it is so much more of an accurate and appealing term.) Due to the power of compounding that I will demonstrate below, that little something will become a huge something over time, but only if one starts saving early.

Please pass this along to as many 20-somethings that you can who are not saving for retirement today.

Let’s start off with a simple question. If I could give you $5 million dollars 31 days from now, OR give you a penny today that automatically doubled in value daily over 31 days, which would you choose? If you said the $5 million, you would have, about $5 million dollars LESS at the end of 31 days than if you chose the penny! Don’t believe me? Noted finance blogger J. Money will show you the math.

Of course, in a retirement plan your money does not double every day, but let’s utilize some retirement plan examples to demonstrate the power of compounding. If you are 25 years old, how much do you think you have to save per day to accumulate $1 million dollars at retirement? Would you be surprised if the answer was as little as $5 per day (and even less out of your take-home pay after taxes, if you save to a qualified retirement plan)? Well, don’t be, because that is the answer! It’s not magic—just math. However, if you wait until age 40, it could take up to 35% of your paycheck to save the same $1 million. I think that you can clearly see that delaying saving is truly a disaster for retirement.

And what if you saved more money? If so, it is possible for you to even stop saving after 10 years and have a substantial amount of money for retirement. If you can manage to save $1,000 per month (and remember this isn’t actually $1,000, but significantly less than that after taxes if you save in a defined contribution retirement plan), you could save only from ages 25 to 35, stop saving after that, and have nearly $1.5 million at retirement age! If you tried the same strategy at age 45 (i.e., save $1,000 per month until age 55, then quit saving), you would only have $373,000, or $1.1 million less! Same amount of money saved by both ($120,000) but vastly different results all due to compounding.

So, don’t delay, start saving today; you’ll thank me later!

Do you have any compounding examples to share? Hit me up on Twitter or at

Note: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice. Opinions expressed are those of the author, and do not necessarily represent the opinions of Cammack Retirement Group.

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