IRA Chart

[Guest rydiep]

Does anybody know where I can find a website where it shows a chart that explains that putting $2000 in per year starting at age 18-25 will get you more money if you started to put $2000 in per year starting at age 26-65?

It looks something like this:

Age Example #1 Example #2

18 2000 0

19 2000 0

20 2000 0

21 2000 0

22 2000 0

23 2000 0

24 2000 0

25 2000 0

26 0 2000

27 0 2000

28 0 2000

..

..

..

65 0 2000

Total $1.5 Mill $1.4 Mill

If anyone could find this website, that would be greatly appretiated. Thanks, Ryan

[Mike Preston]

Don't know of a website, but attached is a spreadsheet where it is easily demonstrated. But you needto have an interest rate of about 7.75% or higher to make it actually work.

[John G]

I have a hardcopy of this example I use with my Junior Achievement high school econ classes. You can do the math on an HP12c or with any spreadsheet. The basic lesson is that the early starter ussually gets far enough ahead that the late starting investor never catches up. (Note, the new max annual has been bumped up to $3,000 for IRAs.)

Just a little off point: I have found that some of the graphics from mutual funds like Washington Mutual are extremely good for explaining overall investment performance including the variations over long time periods in the stock market.

It seems that not many adults understand the power of compounding, and teenagers are just amazed. After an hour of talking about the Roth option, most of my classes understand that they can be millionaires if they have a small amount of discipline and a plan.