Assignment #12

Time is on your side – But only if you start early.


As we grow up, graduate from high school, attend and graduate from college, and begin our careers, we should keep retirement planning in mind, especially at the beginning of our careers.  For most college graduates, retirement is probably the last thing on their minds as they enter a new world of opportunities and responsibilities that affect them directly in their everyday lives.

A spreadsheet can show how beginning a retirement plan early in a person’s career can have a dramatic effect on their quality of life.


I will present two scenarios, with two recent college graduates, both with the ability to contribute the same amount each year into an interest bearing retirement plan, both with 30 year careers.

The first graduate immediately begins to save money in his plan, while the second graduate has fun for a few years, and waits for 7 years before he begins to contribute to his retirement.



The spreadsheet above shows the results of both scenarios, with 10% interest.  Notice that the first graduate who began early ends up with more than twice the amount for retirement as the second graduate.  The only difference between the two is the 7 year “head start” that the first graduate had.

So let’s isolate the first graduate’s first 7 years of contribution and compare to the second graduate.



In this scenario, the first graduate contributes for 7 years only and let’s that contribution grow over the remainder of his career.  Notice that he still ends up with more retirement savings than the second graduate.  In fact, the second graduate spends the next 23 years saving consistently, but still never catches up to the results of the first graduates 7 years of contribution. 


This is an example to show that the best way to prepare for retirement is to start early.  Consistency is good, getting a good interest rate is great, but starting early is the key.  Time is on your side, but only if you start early.