People spend a lot of time comparing a 6% assumption with a 7% one. The number that moves the result most is usually simpler: how many years the money has.
1. Same deposit, different start
$200 a month at an assumed 6% a year, compounded monthly:
- 10 years: about $32,800 (you deposited $24,000)
- 20 years: about $92,400 (deposited $48,000)
- 30 years: about $200,900 (deposited $72,000)
The last 10 years add more than the first 20 combined.
2. Catching up costs double
Someone who starts 10 years later and wants to reach a similar figure in 20 years needs roughly twice the monthly amount: $400 a month for 20 years at 6% comes to about $184,800, and that still falls short.
3. Rate assumptions are guesses; time is not
Returns vary a lot year to year and aren't guaranteed. You can't control them, but you can control the start date and the monthly amount.
4. Make the first step small and automatic
A standing transfer on payday, even $50, builds the habit. Raise it with each pay rise instead of waiting for a "right" amount.
5. Check fees once
A 1% yearly fee on a 6% return takes a large share of 30-year growth. Low-cost index funds keep more of it working.
Free tools
- Compound interest calculator with a $200/month table: https://smartbudgetsheets.surge.sh/calculators/compound-interest-calculator/?utm_source=mataroa
- Investment calculator: https://smartbudgetsheets.surge.sh/calculators/investment-calculator/?utm_source=mataroa
- Net Worth Tracker spreadsheet (Payhip): https://payhip.com/b/qQg23?utm_source=mataroa
- 42 free budget templates, pay what you want ($0 is fine): https://smartbudgetsheet.gumroad.com/l/ngpkrb?utm_source=mataroa
Figures are illustrations using a fixed assumed return, before taxes and fees. Not investment advice.