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Money Matters
This is an example of how rapidly money can compound. The moral of the story is save as quickly and as much as you can, even if it means putting off buying a new toy or two.
I have used $2000 as the annual contribution, but you can use any number you wish. I have used $2000 because it has been the standard IRA deduction for so long. But obviously, you could use $1000 and half the resultant numbers, $4000 and double them, etc.
I have also used a hypothetical 25 year old who starts saving in 2001 (since one could still make a 2001 IRA contribution up to yesterday (4/15/2002) and still have it count for the 2001 tax return). But it could be anyone. If you are only interested in saving for 10 years, then only read the first 10 rows.
There are four sets of data. The first is for the person who contributes $2000 per year at 10% interest, the second is the same at 15% interest, and the third at a very unlikely 20% interest. The fourth set shows what could happen if you only contributed $2000 ONCE and then let it grow by itself at 20% interest per year. Note that after 20 years, that original $2000 is now worth $76,675. After 40 years, it is worth over $2.9 million!
If you are interested in the original Excel file that I used to generate these numbers, then please e-mail me.
It's never too late to start saving. But it's much easier to do so when you are young, even if it feels otherwise.
Narayan Sengupta, April 16, 2002
| Year | Age | Year | Cont. | I | Total | Cont. | I | Total | Cont. | I | Total | Cont. | I | Total | ||||
| 2001 | 25 | 1 | $2,000 | 10% | $2,200 | $2,000 | 15% | $2,300 | $2,000 | 20% | $2,400 | $2,000 | 20% | $2,400 | ||||
| 2002 | 26 | 2 | $2,000 | 10% | $4,620 | $2,000 | 15% | $4,945 | $2,000 | 20% | $5,280 | $0 | 20% | $2,880 | ||||
| 2003 | 27 | 3 | $2,000 | 10% | $7,282 | $2,000 | 15% | $7,987 | $2,000 | 20% | $8,736 | $0 | 20% | $3,456 | ||||
| 2004 | 28 | 4 | $2,000 | 10% | $10,210 | $2,000 | 15% | $11,485 | $2,000 | 20% | $12,883 | $0 | 20% | $4,147 | ||||
| 2005 | 29 | 5 | $2,000 | 10% | $13,431 | $2,000 | 15% | $15,507 | $2,000 | 20% | $17,860 | $0 | 20% | $4,977 | ||||
| 2006 | 30 | 6 | $2,000 | 10% | $16,974 | $2,000 | 15% | $20,134 | $2,000 | 20% | $23,832 | $0 | 20% | $5,972 | ||||
| 2007 | 31 | 7 | $2,000 | 10% | $20,872 | $2,000 | 15% | $25,454 | $2,000 | 20% | $30,998 | $0 | 20% | $7,166 | ||||
| 2008 | 32 | 8 | $2,000 | 10% | $25,159 | $2,000 | 15% | $31,572 | $2,000 | 20% | $39,598 | $0 | 20% | $8,600 | ||||
| 2009 | 33 | 9 | $2,000 | 10% | $29,875 | $2,000 | 15% | $38,607 | $2,000 | 20% | $49,917 | $0 | 20% | $10,320 | ||||
| 2010 | 34 | 10 | $2,000 | 10% | $35,062 | $2,000 | 15% | $46,699 | $2,000 | 20% | $62,301 | $0 | 20% | $12,383 | ||||
| 2011 | 35 | 11 | $2,000 | 10% | $40,769 | $2,000 | 15% | $56,003 | $2,000 | 20% | $77,161 | $0 | 20% | $14,860 | ||||
| 2012 | 36 | 12 | $2,000 | 10% | $47,045 | $2,000 | 15% | $66,704 | $2,000 | 20% | $94,993 | $0 | 20% | $17,832 | ||||
| 2013 | 37 | 13 | $2,000 | 10% | $53,950 | $2,000 | 15% | $79,009 | $2,000 | 20% | $116,392 | $0 | 20% | $21,399 | ||||
| 2014 | 38 | 14 | $2,000 | 10% | $61,545 | $2,000 | 15% | $93,161 | $2,000 | 20% | $142,070 | $0 | 20% | $25,678 | ||||
| 2015 | 39 | 15 | $2,000 | 10% | $69,899 | $2,000 | 15% | $109,435 | $2,000 | 20% | $172,884 | $0 | 20% | $30,814 | ||||
| 2016 | 40 | 16 | $2,000 | 10% | $79,089 | $2,000 | 15% | $128,150 | $2,000 | 20% | $209,861 | $0 | 20% | $36,977 | ||||
| 2017 | 41 | 17 | $2,000 | 10% | $89,198 | $2,000 | 15% | $149,673 | $2,000 | 20% | $254,233 | $0 | 20% | $44,372 | ||||
| 2018 | 42 | 18 | $2,000 | 10% | $100,318 | $2,000 | 15% | $174,424 | $2,000 | 20% | $307,480 | $0 | 20% | $53,247 | ||||
| 2019 | 43 | 19 | $2,000 | 10% | $112,550 | $2,000 | 15% | $202,887 | $2,000 | 20% | $371,376 | $0 | 20% | $63,896 | ||||
| 2020 | 44 | 20 | $2,000 | 10% | $126,005 | $2,000 | 15% | $235,620 | $2,000 | 20% | $448,051 | $0 | 20% | $76,675 | ||||
| 2021 | 45 | 21 | $2,000 | 10% | $140,805 | $2,000 | 15% | $273,263 | $2,000 | 20% | $540,061 | $0 | 20% | $92,010 | ||||
| 2022 | 46 | 22 | $2,000 | 10% | $157,086 | $2,000 | 15% | $316,553 | $2,000 | 20% | $650,474 | $0 | 20% | $110,412 | ||||
| 2023 | 47 | 23 | $2,000 | 10% | $174,995 | $2,000 | 15% | $366,336 | $2,000 | 20% | $782,968 | $0 | 20% | $132,495 | ||||
| 2024 | 48 | 24 | $2,000 | 10% | $194,694 | $2,000 | 15% | $423,586 | $2,000 | 20% | $941,962 | $0 | 20% | $158,994 | ||||
| 2025 | 49 | 25 | $2,000 | 10% | $216,364 | $2,000 | 15% | $489,424 | $2,000 | 20% | $1,132,755 | $0 | 20% | $190,792 | ||||
| 2026 | 50 | 26 | $2,000 | 10% | $240,200 | $2,000 | 15% | $565,138 | $2,000 | 20% | $1,361,706 | $0 | 20% | $228,951 | ||||
| 2027 | 51 | 27 | $2,000 | 10% | $266,420 | $2,000 | 15% | $652,208 | $2,000 | 20% | $1,636,447 | $0 | 20% | $274,741 | ||||
| 2028 | 52 | 28 | $2,000 | 10% | $295,262 | $2,000 | 15% | $752,339 | $2,000 | 20% | $1,966,136 | $0 | 20% | $329,689 | ||||
| 2029 | 53 | 29 | $2,000 | 10% | $326,988 | $2,000 | 15% | $867,490 | $2,000 | 20% | $2,361,763 | $0 | 20% | $395,627 | ||||
| 2030 | 54 | 30 | $2,000 | 10% | $361,887 | $2,000 | 15% | $999,914 | $2,000 | 20% | $2,836,516 | $0 | 20% | $474,753 | ||||
| 2031 | 55 | 31 | $2,000 | 10% | $400,276 | $2,000 | 15% | $1,152,201 | $2,000 | 20% | $3,406,219 | $0 | 20% | $569,703 | ||||
| 2032 | 56 | 32 | $2,000 | 10% | $442,503 | $2,000 | 15% | $1,327,331 | $2,000 | 20% | $4,089,863 | $0 | 20% | $683,644 | ||||
| 2033 | 57 | 33 | $2,000 | 10% | $488,953 | $2,000 | 15% | $1,528,731 | $2,000 | 20% | $4,910,235 | $0 | 20% | $820,373 | ||||
| 2034 | 58 | 34 | $2,000 | 10% | $540,049 | $2,000 | 15% | $1,760,340 | $2,000 | 20% | $5,894,682 | $0 | 20% | $984,447 | ||||
| 2035 | 59 | 35 | $2,000 | 10% | $596,254 | $2,000 | 15% | $2,026,691 | $2,000 | 20% | $7,076,019 | $0 | 20% | $1,181,336 | ||||
| 2036 | 60 | 36 | $2,000 | 10% | $658,079 | $2,000 | 15% | $2,332,995 | $2,000 | 20% | $8,493,622 | $0 | 20% | $1,417,604 | ||||
| 2037 | 61 | 37 | $2,000 | 10% | $726,087 | $2,000 | 15% | $2,685,244 | $2,000 | 20% | $10,194,746 | $0 | 20% | $1,701,124 | ||||
| 2038 | 62 | 38 | $2,000 | 10% | $800,896 | $2,000 | 15% | $3,090,331 | $2,000 | 20% | $12,236,096 | $0 | 20% | $2,041,349 | ||||
| 2039 | 63 | 39 | $2,000 | 10% | $883,185 | $2,000 | 15% | $3,556,181 | $2,000 | 20% | $14,685,715 | $0 | 20% | $2,449,619 | ||||
| 2040 | 64 | 40 | $2,000 | 10% | $973,704 | $2,000 | 15% | $4,091,908 | $2,000 | 20% | $17,625,258 | $0 | 20% | $2,939,543 | ||||
| 2041 | 65 | 41 | $2,000 | 10% | $1,073,274 | $2,000 | 15% | $4,707,994 | $2,000 | 20% | $21,152,710 | $0 | 20% | $3,527,452 | ||||
| 2042 | 66 | 42 | $2,000 | 10% | $1,182,801 | $2,000 | 15% | $5,416,493 | $2,000 | 20% | $25,385,652 | $0 | 20% | $4,232,942 | ||||
| 2043 | 67 | 43 | $2,000 | 10% | $1,303,282 | $2,000 | 15% | $6,231,267 | $2,000 | 20% | $30,465,183 | $0 | 20% | $5,079,531 | ||||
| 2044 | 68 | 44 | $2,000 | 10% | $1,435,810 | $2,000 | 15% | $7,168,257 | $2,000 | 20% | $36,560,619 | $0 | 20% | $6,095,437 | ||||
| 2045 | 69 | 45 | $2,000 | 10% | $1,581,591 | $2,000 | 15% | $8,245,795 | $2,000 | 20% | $43,875,143 | $0 | 20% | $7,314,524 | ||||
| 2046 | 70 | 46 | $2,000 | 10% | $1,741,950 | $2,000 | 15% | $9,484,965 | $2,000 | 20% | $5,265,257 | $0 | 20% | $8,777,429 | ||||
| 2047 | 71 | 47 | $2,000 | 10% | $1,918,345 | $2,000 | 15% | $10,910,009 | $2,000 | 20% | $63,185,487 | $0 | 20% | $10,532,914 | ||||
| 2048 | 72 | 48 | $2,000 | 10% | $2,112,379 | $2,000 | 15% | $12,548,810 | $2,000 | 20% | $75,824,984 | $0 | 20% | $12,639,497 | ||||
| 2049 | 73 | 49 | $2,000 | 10% | $2,325,817 | $2,000 | 15% | $14,433,432 | $2,000 | 20% | $90,992,381 | $0 | 20% | $15,167,396 | ||||
| 2050 | 74 | 50 | $2,000 | 10% | $2,560,599 | $2,000 | 15% | $16600747 | $2,000 | 20% | $109,193,257 | $0 | 20% | $18,200,876 |
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