Amy and Amanda may be twins, but they are very different when it comes to saving for retirement. Here’s what they did:
• Starts saving at age 20
• Puts $1,000 a year into her RRSP to age 34
• Total she saved: $15,000
• Starts saving at age 30
• Puts $1,000 a year into her RRSP to age 64
• Total she saved: $35,000
If both sisters made 6% yearly on their investments, before costs, what will they have by their 65th birthday?
• Amy: $141,700
• Amanda: $118,100
Note that Amanda actually contributed $20,000 more than Amy, but Amy winds up ahead by more than $23,000 due to the magic of compounding interest. Clearly, starting to invest early can really pay off. If you wait even 10 years to start saving, you would have to save a lot more money, over many more years, to come out ahead.
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