How saving $1,000 a year can make you a millionaire (OPINION)
If you’re in your 20s and starting out earning money, I suspect one of your lowest priorities is saving for retirement.
In the early years of a program like this, your own savings will do the heavy lifting of building your wealth. In the later years, that burden falls to the earnings from the portfolio.• The Standard & Poor’s 500 Index SPX, +2.24%• A four-fund portfolio of value stocksTable 1 shows the first 10 years of this program. Your annual contributions went up a little bit each year, reaching $1,305 in 1979. That’s $108.75 a month, or about $25 a week, so it should not have been a major burden.
Now, let’s fast-forward 20 years, assuming you continued to save every month, adjusting upward annually by 3%.*See definitions at bottom of article By the end of 2019, your wealth in the four-fund combo would have been worth $4,170,219, or $37.30 for every dollar of your own money.As the figures from the two most recent decades show, the ups and downs in the market make a huge difference to investors who have saved. But in the early years, the amount of your savings will have the biggest impact on your wealth.
On this page of my website you will find links to tables for each of these strategies, complete with year-by year figures. All the data I’ve used is historical, and the past won’t repeat itself with any precision.
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