If you want to be a multi-millionaire, start putting your money to work today. Ultimately, when you start saving outweighs how much you save, thanks to compound interest.
To show just how advantageous it is to start saving and investing early on, personal finance site NerdWallet created a chart showing the percentage of each twice-a-month paycheck you'd need to set aside to have $2 million saved by the time you're 67, assuming two different starting points: age 22 and age 30.
The chart assumes you start with zero dollars invested. It also assumes a six percent average annual investment return and various annual salaries.
"The 22-year-old has just an eight-year head start on the 30-year-old, but that makes a huge difference in how much is needed to save each paycheck to build $2 million dollars," Arielle O'Shea, investing and retirement specialist at NerdWallet, tells CNBC Make It. "In some cases, a 10 percent or 15 percent difference.
"This is why starting to save early pays off."
Check out the chart for yourself. Scroll over the bars to see the exact numbers:
Here's how much a 22- and 30-year old would have to set aside to have $2 million in the bank if they earn:
$40,000
22-year-old: 21.6 percent of each paycheck
30-year-old: 36.6 percent of each paycheck
$60,000
22-year-old: 14.4 percent of each paycheck
30-year-old: 24.4 percent of each paycheck
$80,000
22-year-old: 10.8 percent of each paycheck
30-year-old: 18.3 percent of each paycheck
$100,000
22-year-old: 8.7 percent of each paycheck
30-year-old: 14.6 percent of each paycheck
$120,000
22-year-old: 7.2 percent of each paycheck
30-year-old: 12.2 percent of each paycheck
"Saving early means compound interest works for you and you can actually save less over time," says O'Shea. "As you can see from these numbers, even a few years makes a substantial difference."
Keep in mind that you may want more or less than $2 million stashed away by the time you're 67 or stop working. For more of a personalized savings target, check out NerdWallet's retirement calculator.
Once you have a specific goal in mind, start building your nest egg. For inspiration, check out:
- How to save for retirement without going broke
- New study says save at least 11% of your income for retirement—here are 5 ways to do that
- 8 things to give up to retire by 40, from real people who have done it
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