# The most important retirement table you’ve ever seen

*“A modest rate of return can accumulate a fortune over time.You don’t have to beat the market, overfish or choosethe best stock to be rich. You just need to earn a living wagerate of return and let your money accumulate over time. »*— Naved Abdali

Financial writer Naved Abdali has understood this well. Becoming financially secure isn’t as difficult as many people think. We just need to learn some basics about growing money, then start saving and investing.

**The most important retirement table you will ever see**

There’s a lot of important retirement-related information, such as the average cost of health care over your later years (hint: it’s high!) or how much you can contribute to a 401(k) each year (also a large quantity — up to $27,000 in 2022). However, I can think of no more important information than a chart showing how much you can accumulate over time.

I credit such a table with giving me my own wake-up call. I saw it in my twenties and it made me stop thinking about buying a fancy stereo system – because I suddenly realized what else I could do with seemingly minimal sums.

Here’s a powerful version of this type of chart, showing how much you could amass over time by regularly investing various amounts, if you were earning an average annual growth rate of 8%:

8% growth for |
$10,000 invested annually |
$15,000 invested annually |
$20,000 invested annually |
---|---|---|---|

5 years |
$63,359 |
$95,039 |
$126,718 |

10 years |
$156,455 |
$234,683 |
$312,910 |

15 years old |
$293,243 |
$439,865 |
$586,486 |

20 years |
$494,229 |
$741,344 |
$988,458 |

25 years |
$789,544 |
$1,184,316 |
$1,579,088 |

30 years |
$1,223,459 |
$1,835,189 |
$2,446,918 |

Arguably the best path to long-term wealth is to invest in the stock market, which has average annual returns of nearly 10% over long periods of time. There is no guaranteed return, however. On *your *investment period, you could average 6% or even 12%. To earn roughly the return of the market, you can invest in simple and inexpensive index funds.

**The magic of composition**

What you see in this chart is the magic of compounding. With compounding, not only does your money grow, but the rate at which it grows also increases.

You can see this in the five-year period between 10 and 15 years in the $10,000 annual investment column. Your balance will increase from $156,455 to $293,243, an increase of $136,788. But in the five-year period between 20 and 25, the increase is $295,315. The amount by which your balance has grown has more than doubled, while still contributing that annual $10,000.

The phenomenal power of compounding can make you very rich, even if you only earn the salary of a teacher or a nurse. It just takes diligence.

**The lessons of the table**

Be sure to study the chart carefully. Take a look at how much you can raise if you save $15,000 a year instead of $10,000 or if you can save $20,000 instead of $15,000.

Not all of us can save and invest such large sums, but you might be able to if you take a side gig or two, even for just a few years. Note that the sooner you do this the better, as your first dollars invested can be your most powerful as they will have the longest time to grow. Asking for a raise regularly can also pay off.

To put the sums in the table into perspective, consider the imperfect but still useful “4% rule” – which suggests that to make your nest egg last for about 30 years, you should withdraw 4% of it in your first year of retirement. then adjust future withdrawals for inflation. Let’s say you saved $15,000 per year (that’s $1,250 per month or about $288 per week). If it increased by 8%, you would end up with $741,344 in 20 years. Applying the 4% rule, you would withdraw $29,653, or about $30,000, in your first year of retirement.

Think about how this would work for you, as well as any other sources of income you expect in retirement, such as Social Security. If that doesn’t seem like enough, consider saving and investing more, or maybe aiming for a higher growth rate.

If you need a wake-up call that it’s time to start saving and investing for your retirement, let the chart above soak in. Know that if you have enough time and can maintain the necessary discipline, you may be able to save $1 million or even $2 million or more for your future. Applying the 4% rule, these amounts would generate $40,000 and $80,000 respectively in the first year of your retirement.

Much of your future financial security and comfort depends on you. Taking a few steps now can make a big difference.