Compound interest monthly investment

We recently highlighted the huge benefits of starting to save early for retirement, along with a helpful chart showing how much you should have saved at different stages of your career to ensure a comfortable retirement.

To show how these ideas work, we’ve calculated how much money you should put away monthly, starting at different ages and at different rates of return, ending up with $1,000,000 in savings when you’re ready to take your retirement at age 65.

Here’s how much you would need to save each month at an annual rate of return of 6%, starting at different ages.

So if you’re 20 and want to become a retired millionaire, you should be making $361 a month. If you start at 25, that goes up to $499. You can see that as you get older you need to save much, much more:

new monthly savings chart

Business Insider/Andy Kiersz

In summary: it is better to start saving young. Two things are happening here. First, by starting to save at 20 instead of 40, you have many more individual monthly payments and can spread your total capital investment over a longer period.

Second, and more importantly, by saving earlier, you can take better advantage of

compound interest

. If you start saving when you’re 20, your first payment of $361.04 will grow, at a 6% return, to $5,336.16 when you’re 65.

The amount you need to save also depends on the rate of return. This chart shows how much you should put into your savings account each month for a variety of annual rates of return:

good monthly savings chart

Business Insider/Andy Kiersz

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