Demo Dozen

HOW AND WHEN SHOULD I START SAVING FOR RETIREMENT?

 

 

Everyone is told to "Start saving for your retirement while you're young!"   Typically, the vast majority of us have largely chosen to disregard that advice.  But is there some wisdom to it?  This model provides you with an opportunity to explore that question by testing different strategies to save for your retirement.

 

Here's your challenge: You are 21 years old.  You know you want to retire in 44 years, at age 65.

 

How do you plan to save for that retirement? 

Do you put a little away when you're young and presumably want or need  to spend it? 

Do you wait until you're older, when the kids are grown up, your salary is higher, and the mortgage is paid? 

How much do you need to save each year?

  

In this exercise, you have the opportunity to simulate a multitude of scenarios based on four decisions:

1.  The age at which you will start saving for retirement.

2.  The age at which you will stop making payments.

3.  The number of dollars you will deposit each year.

4.  The (most likely) interest rate your money will earn each year.

 

An illustration of output from the simulation (below) shows the impact of different strategies (differing ages to start saving and different annual amounts to save; annual interest was constant at 8%) on the overall size of that fund at age 65.