The benefit of saving and investing early

Daniel Brown |

Do you know, pretty much exactly how much it is going to take for you to be able to retire comfortably and to stay comfortably retired for a very long time?

I can help you calculate that number. However, once you know what that target number is, do you know what it takes to get there? Short of a major windfall like winning the lottery, getting to that number requires time and consistent, uninterrupted savings.

Saving early and consistently over a long time is important to retirement success but that alone is not enough. Investing your savings is essential because of the power of long-term compounding.

The chart below offers an excellent visualization of this concept:




This chart compares different retirement outcomes based on various saving and investing behaviors of four hypothetical people who save the same amount per month ($200) but beginning at different times in their lives (Ages 25 and 35), for different durations (10, 30 and 40 years) and with different investment choices and rates of return (Investing versus Saving).

  • The consistent saver & investor (blue) reaches age 65 with substantially more than the other savers. This person began saving and investing the earliest and was the most consistent over the years.
  • The early saver & investor (dotted gray line) saved only one third of the amount of the late saver & investor, but because of the power of long-term compounding on money invested early helped the early saver to accumulate more savings than the late saver.
  • Consistent saver (green) saves as much and as often as the investor at the top in blue but keeps his savings in cash rather than investing it. As a result, he accumulates about a third of the consistent saver & investor’s final amount.

Two additional items worth pointing out:

  1. The doughnut graphs in blue, black, purple and green illustrate a great point. The dotted/shaded area represents the value of the actual savings. The solid color represent the investment return. Combined, the two figures represent the total portfolio value. Notice how the portfolio with the greatest value (blue) is comprised of over 81% of investment return meaning of the $512,700 accumulated value, only $97,000 was from savings. The rest is investment return/growth/accumulation. That is compounding.
  2. I also think it's worth pointing out that in this hypothetical scenario, the investor only saved $200/month. Think about what you spend $200/month on? $200 is not nothing, but ask yourself if you can find $50 per week to set aside as savings for your eventual retirement. Over time, it will be worth it and you will be glad that you did.

So that's it. Save and invest consistently and early. If you're not sure if you're properly invested, lets setup a time to review things together. If you're not yet saving and investing, let's setup a time to get you on the right path. It is not difficult to begin but inertia and inaction is your enemy. Time is your friend. I am your ally. Let me know what you think. Let me know if you have questions. Text, call, email or schedule a time to talk here

With regards,





Source: J.P. Morgan Asset Management, Long-Term Capital Market Assumptions. Compounding is the increasing value of assets due to investment return earned on both principal and prior investment gains.