December 12, 2016

Compound Interest is Critically Important

Sometimes we need a reminder about the power of compound interest, whether in the beginning years of saving or in the retirement withdrawal years. One specific example: "A retirement-saver who cashes out a 401(k) account with a balance of $5,000 at age 30 would lose more than $52,000 in compounded savings value by age 65, assuming the account grows by 7% per year."
A "30-year-old employee who cashes out a $16,000 401(k) account today could lose more than $145,000 during a 26-year retirement — or up to $471 in cash flow per month." If this person cashes out three times during their working life their total retirement savings would be reduced "from over six times pay to 1.25 times pay." 
Spencer Williams explains more about compound interest at

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