1) Person A invests $5,000/yr from age 22 to 32. Then stops (only 10 years)
2) Person B waits until age 32. Invests $5,000/yr for the next 30 years
Person A invested for 10 years, and Person B invested for 30 years. Person A wins. It’s not even close
Scenario
- Neither touches the money until age 62
- both average the same annual return 10%
- the only difference when they started
Person A – ages 22 to 32. 10 years. $5,000/yr and then stops. Total invested $50,000
Person B – ages 32 to 62. 30 years. $5,000/yr and then stops. Total invested $150,000 (invests 3x more money)
Numbers at age 62
Person A: $1,187,388
Person B: $822,470
How is it possible for Person A to come out ahead?
- Simply put compounding
- Person A’s money had a 10-year head start before Person B put in their first dollar.
- Those 1st 10 years multiplied. Repeatedly. For 40 years
- That head start is worth more than 30 years of catching up
Brutal Math of waiting
- Every year you delay costs you more than the contribution itself
- A one-year delay with 10% returns means every dollar you would have invested is worth 10% less at retirement
- But it compounds. Each year of delay multiplies the damage
What is the lesson
- The best time to invest was yesterday—what’s the second best? Today
- The real lesson here isn’t about Person A. It’s about the version of you that starts today vs the version that waits until it “makes more sense”
- The market doesn’t care when it’s convenient. Compounding doesn’t wait for your raise
- Time is the one asset you cannot earn back
- Time in the market is greater than the amount in the market
Sincerely,
Mike Busby (1-Apr-26)
THE COMMENTS CONTAINED HEREIN ARE A GENERAL DISCUSSION OF CERTAIN ISSUES INTENDED AS GENERAL INFORMATION ONLY AND SHOULD NOT BE RELIED UPON AS TAX OR LEGAL ADVICE. PLEASE OBTAIN INDEPENDENT PROFESSIONAL ADVICE, IN THE CONTEXT OF YOUR PARTICULAR CIRCUMSTANCES. THIS ARTICLE WAS WRITTEN, DESIGNED AND PRODUCED BY MIKE BUSBY FOR THE BENEFIT OF MIKE BUSBY WHO IS A FINANACIAL ADVISOR FOR BRANDON LINDSAY INSURANCE AGENCIES, A TRADE NAME REGISTERED WITH INVESTIA FINANCIAL SERVICES INC., AND DOES NOT NECESSARILY REFLECT THE OPINION OF INVESTIA. THE INFORMATION CONTAINED IN THIS ARTICLE COMES FROM SOURCES WE BELIEVE RELIABLE, BUT WE CANNOT GUARANTEE ITS ACCURACY OR RELIABILTY. THE OPINIONS EXPRESSED ARE BASED ON AN ANALYSIS AND INTERPRETATION DATING FROM THE DATE OF PUBLICATION AND ARE SUBJECT TO CHANGE WITHOUT NOTICE. FURTHERMORE, THEY DO NOT CONSTITUTE AN OFFER OR SOLICITATION TO BUY OR SELL ANY SECURITIES. MUTUAL FUNDS OFFERED THROUGH INVESTIA FINANCIAL SERVICES INC.
