Time and Growth
Time is a vital factor in accumulating wealth.
The following tables illustrate the effect of time and
after-tax interest in accumulating funds.
GROWTH OF A SINGLE LUMP SUM INVESTMENT
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º Years of ³ $10,000 Comdollared at º
º Growth ³ 6% ³ 10% º
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º 5 ³ $ 13,382 ³ $ 16,110 º
º 10 ³ 17,908 ³ 25,940 º
º 15 ³ 23,966 ³ 41,770 º
º 20 ³ 32,071 ³ 67,270 º
º 25 ³ 42,919 ³ 108,350 º
º 30 ³ 57,435 ³ 174,490 º
º 35 ³ 76,861 ³ 281,020 º
º 40 ³ 102,857 ³ 452,590 º
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In other words, in a period 8 times longer - (40
years rather than 5 years) the investment result at 10%
is 28 times greater growth ($452,590 divided by
$16,110).
GROWTH OF A FUND TO WHICH $2,000 IS ADDED
AT THE BEGINNING OF EACH YEAR
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º $2,000 ³ ³ ³ ³ º
º Per Year³ Total ³ Will ³ ³ Percent º
º at 6% ³Contributed³ Grow to ³ Growth ³Increase º
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º 5 ³ $ 10,000 ³ $ 11,951 ³$ 1,951 ³ 20% º
º 10 ³ 20,000 ³ 27,943 ³ 7,943 ³ 40% º
º 15 ³ 30,000 ³ 49,345 ³ 19,345 ³ 64% º
º 20 ³ 40,000 ³ 77,985 ³ 37,985 ³ 95% º
º 25 ³ 50,000 ³ 116,313 ³ 66,313 ³ 133% º
º 30 ³ 60,000 ³ 167,603 ³ 107,603 ³ 179% º
º 35 ³ 70,000 ³ 236,242 ³ 166,242 ³ 237% º
º 40 ³ 80,000 ³ 328,095 ³ 248,095 ³ 310% º
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These tables assume a 6% rate of return after
taxes and that the earnings are reinvested.
How the Dollar Value of Time Helps Disciplined
Investors
Below are two individuals who have different
attitudes toward investing. The early investor chooses
to begin investing $5,000 annually for retirement. The
late investor waits ten years before beginning a
program.
Early Investor Late Investor
Age Amount Value Amount Value
35 $5,000 $5,524 0 0
36 5,000 11,626 0 0
37 5,000 18,366 0 0
38 5,000 25,813 0 0
39 5,000 34,040 0 0
40 5,000 43,128 0 0
41 5,000 53,168 0 0
42 5,000 64,258 0 0
43 5,000 76,511 0 0
44 5,000 90,046 0 0
45 0 99,475 7,500 8,285
46 0 109,891 7,500 17,438
47 0 121,398 7,500 27,549
48 0 134,111 7,500 38,719
49 0 148,154 7,500 51,059
50 0 163,667 7,500 64,691
51 0 180,806 7,500 79,751
52 0 199,738 7,500 96,387
53 0 220,653 7,500 114,765
54 0 243,759 7,500 135,068
55 0 269,284 7,500 157,496
56 0 297,481 7,500 182,274
57 0 328,631 7,500 209,645
58 0 363,043 7,500 239,883
59 0 401,059 7,500 273,287
60 0 443,055 7,500 310,190
61 0 489,448 7,500 350,956
62 0 540,700 7,500 395,991
63 0 597,318 7,500 445,742
64 0 659,865 7,500 500,702
65 0 728,962 7,500 561,417
The early investor contributed $107,500 less than the late
investor, but outperformed the late investor by over $167,000.
Let time work to your benefit!
There is also an insurance aspect here that is not shown by
the pure numbers. The early investor is protected should he
become disabled or a bad economy limit his earning potential. He
already has his money doing the work for him.
