VIDEO ON MSN MONEY
The arcticle was merely using a nominal value to show the importance of compound interest. While some people can't save as much as others, the best advice anyone can give young adults is to pay yourself first (at least 10%) . If you made 4K in one whole year than you should have saved at least $400. I know what your thinking, "How do I save $400 when I have to pay for fast food, entertainment, beer, etc"? It's called living on a budget!
I'm 23, working on my PhD in EE and already maxing out my TSP contribution (Govnt equivalent to 401k) + some in a Roth IRA as well. It is definetly doable. However, most people would rather pay for the 1000 channel TV packages, expensive cell phone data plans, and a flashy car even though they all take you from point A to point B. People need to sit down and understand the differences between wants and needs!
I'm sure a lot of these younger people don't have enough education about saving, have no game plans and no coaches. No one taught me about it in school or college/university. I learned from a good friend (who is a multi-millionaire) a few important concepts that has help us out a ton! One of them being the Rule of 72...
Rule of 72: Take 72divide it by your ROR%, and than = # years it takes for your $$ to double(x2)
@3% (72/3=24) = in 24 years, $10,000 doubles to $20,000
@6% (72/6=12) = in 12 years, doubles to $20k, in 24 total, it doubles again to $40k.
@12% (72/12=6) = in 6 yrs $20k, in 12 yrs $40k, in 18 yrs $80k, in 24 yrs $160k.
This is also known as the "banker's rule", because the bank might give 3%, loan it out at 12%, make $160k, pay back $20, and keep $140k!
I'm 28 and I have a 401(k) at work (maxed out the match), and both my wife and I each have a Roth IRA. We currently save right around $500/month and have just over $40,000 in our retirement accounts. We have no debt (probably will end up with a mortgage soon though when we purchase a home, but no credit cards, no car loans, no student loans, etc.).
In our accounts, we have funds such as Fidelity Growth Fund, Invesco Van Kampen Equity & Income, American Funds Growth Fund of America, etc. All these funds since inception have 10%+ rates of return per year. All of these funds are great for me!
(This is not a solicitation and I am not suggesting these funds to anyone, I'm simply stating what I have personally. Please reach out to a licensed investment professional for a prospectus for all the information needed to make an educated decision)
<a href="http://www.afmanagement.co.uk/services/investment-planning">Investment Advice in East Sussex</a>
Someone who puts $4,000 a year into retirement accounts starting at 22 can have $1 million by age 62, assuming 8% average annual returns.
Please tell me what 22 year old has and extra $333 lying around to throw into a retirement fund... ha you're kidding right? I made maybe $4000 the whole year back in my 20s when attending college... oh and please inform me of a retirement fund that gives 8% annual returns... I swear MSN just pulls this stuff out of their **** for sh!ts and giggles. I know this is supposed to be informative....be realistic about it....
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