If you want to retire with $1 million in your bank account at 65, it’s best to start saving when you’re young. However, it’s still possible for people who are older — it’s just more expensive each month.
The folks at Business Insider have put together an informative graph showing how much money a person would have to save each month in order to retire a millionaire at 65. The data calculates the different amounts that would be needed to be put away each month, then broken down by different ages.
Obviously, the earlier you start saving, the less you have to put away every month. The graph below shows how much you would need to save every month with a 6 percent annual rate of return:
“Bottom line: It is much better to start saving young. Two things are happening here. First, by starting to save at 20 instead of 40, you have many more individual monthly payments, and can spread out your total principal investment over a longer period of time,” Business Insider’s Andy Kiersz writes.
“Second, and much more importantly, by saving earlier, you can better take advantage of compound interest. If you start saving when you are 20, your first payment of $361.04 will, at 6% return, grow into $5336.16 when you are 65,” he adds.
The site also includes a chart that takes into account varying annual return rates:
As several of our readers have pointed out, you should also consider the impact that future inflation will have on your savings.
Check out the full report here.
This story has been updated.