Don't Delay Your Savings!
Waiting to begin your savings plan can have a huge impact on
your results. A delay of even a few years could cost you thousands
of dollars. This calculator helps show you how much postponing your
savings plan can really cost.
Definitions
- Starting amount
- The starting balance or current amount you have invested or
saved. For this calculator, we assume your current savings is
earning your annual rate of return whether you decide to delay your
new contributions or not. For example, if you have a current
balance of $1000 and never make any new contributions, your delayed
and non-delayed results will be the same.
- Additional contributions
- The amount that you plan on adding to your savings or
investment each period. The options include monthly, quarterly and
annually. This calculator assumes that you make your contributions
at the beginning of each period.
- Years
- The total number of years you are planning to save or
invest.
- Rate of return
- The annual rate of return for this investment or savings
account. The actual rate of return is largely dependent on the type
of investments you select. The S&P 500 for the ten years ending
on December 31st, 2011 had an annual compounded rate of return of
2.92%, including reinvestment of dividends. From January 1970
through the end of 2011, the average annual compounded rate of
return for the S&P 500, including reinvestment of dividends,
was approximately 10.01% (source: www.standardandpoors.com). Since
1970, the highest 12-month return was 61% (June 1982 through June
1983). The lowest 12-month return was -43% (March 2008 to March
2009). Savings accounts at a bank may pay as little as 0.25% or
less but carry significantly lower risk of loss of principal
balances.
It is important to remember that these scenarios are
hypothetical and that future rates of return can't be predicted
with certainty and that investments that pay higher rates of return
are generally subject to higher risk and volatility. The actual
rate of return on investments can vary widely over time, especially
for long-term investments. This includes the potential loss of
principal on your investment. It is not possible to invest directly
in an index and the compounded rate of return noted above does not
reflect sales charges and other fees that funds and/or investment
companies may charge.
- Years to wait
- The number of years you might wait before you begin saving. We
will then delay your new contributions for that number of
years.
- Cost of waiting
- The difference in your savings or investment balance between
your delayed and non-delayed plans.
- Required contribution
- If you wait to start saving, this is the amount you would need
to contribute each period to achieve the same result as starting
your savings plan immediately.
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