Top 5 reasons for becoming a member:
- No more guessing at which funds you should be invested in.
- No more waiting for the market to improve to regain your lost investments
- No more untimely allocation changes
- No more insecurity about your retirement plan
- No need to become a stock market guru to understand investment strategies
How It Works
Our Methodology
The Results
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PS Core Principles
Power of compounding
Risk Verses Reward
Retirement Calculator
Essays and Articles
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FAQ's
The Power of Compounding - when 2% equals twice your retirement
Few people realize the power of compounding and the difference that even 2% can make in their financial life...
We have already talked about how declines make a difference (see
PS Core Principles). Now it's time to understand how making a little
more per year can mean the difference of struggling or thriving at
retirement.
Example A:
Let's take a look at a 25 year old who saves $100 per month until
he or she is age 65. Using the historical average return for the broad
market including dividends, at 10% his or her money would have grown to
$584,222.
Now how much more would it have grown to at 12%? Take a guess first, ... ok... the actual amount is $1,030,971! the slight increase of 2% nearly doubled the return and the difference could mean everything at retirement.
Starting age Starting balance Contributions per
month Annual % return Balance at age 65
25
Zero
$100 per month
10%
$584,222
25
Zero
$100 per month
12%
$1,030,971
25
Zero
$100 per month
15%
$2,455,145
And just for fun...
25
Zero
$100 per month
20%
$10,575,155
Watch out for inflation- If you are one of those people that think that the 10% return of $584,222 is enough in forty years, keep in mind that after adjusting for the affects of 3% annual inflation on that $584,222 -there is actually about $242,000 in the equivalent of today's money. As you can see return is important and the younger you are the more profound the difference.
I'm not that young anymore... now what?
OK, so your not 25 anymore. if you are 40, your time horizon has changed and
it will be harder to get the power of compounding working for you - but not
impossible. I would still assume that you were able to put away $20,000 in a
retirement account and knowing that time is of the essence you are putting
away at least $300 per month. If so, here's how it would look...
Starting age Starting balance Contributions per
month Annual % return Balance at age 65
40
$20,000
$300 per month
10%
$606,148
40
$20,000
$300 per month
12%
$877,603
40
$20,000
$300 per month
15%
$1,539,342
And just for fun...
40
$20,000
$300 per month
20%
$3,946,883
these figures were derived from using our
retirement calculator. Try it yourself.
Can you make my money last longer?!
As the advances in medical sciences continue, people are living longer
and longer. One of the repercussions of living longer is that it is very
easy to outlive your money. This is now one of the biggest concerns
facing Americans nearing retirement. So you have some money either
through inheritance or from your retirement savings, now you want to
make it last your whole life and it would be nice to possibly pass some
of it to your family.
Let's see what a difference 2% return per year can make in the number of years your money lasts...
Example B
Starting age Starting balance Annual % return
Income per month How Long
65
$500,000
6%
$3,000
18 years
65
$500,000
8%
$3,000
23 years
65
$500,000
10%
$3,000
over 40 years
The Solution
Whether you are trying to save money to meet your future goals or trying
to make your money last, the return you can get without additional risk is
vital to your success and PerformanceSignal is the solution.
In the next page "Risk verses reward" see how PerformanceSignal let's you
participate in funds that historically provide better returns but without
taking on the additional risk commonly associated with such investment
vehicles.
Next Step: Risk verses Reward