- A new grad starts investing $100 per month, beginning at age 21, and continues that monthly investment for the next 20 years, stopping at age 41. The total investment before interest is $24,000.
- Assuming a modest 8 percent annual return, compounded monthly, that $24,000 will become $471,358 by the time the grad retires at age 67.
Likewise, starting late could cost thousands – or even hundreds of thousands – of dollars. Here’s how:
- A new grad waits until age 41 to begin investing $100 per month and continues that monthly investment for the next 20 years, stopping at age 61. The total investment before interest is again $24,000.
- However, assuming the same 8 percent annual return, compounded monthly, the nest egg will only total $59,295 by age 67.
In this case – getting a late start cost the grad more than $412,000.
“The truth is, cutting savings in favor of more spending and more debt could derail retirement for Gen Y, but it doesn’t take much to get back on track,” said Stuart Rubinstein, managing director of online engagement at TD Ameritrade, Inc. (“TD Ameritrade”), a broker-dealer subsidiary of TD Ameritrade Holding Corporation. “Ask yourself whether you would rather invest $100 a month – one gourmet coffee per day – at 21, or $1,000 a month at 41. Simple steps, like investing early can help new grads take advantage of the power of compounding, and ultimately enjoy more freedom and flexibility later in life.”