The Magic Penny

Powering Your Retirement Radio

If you could choose between $1,000,000 today or a penny that would double every day which, would you choose? As you might guess the Magic Penny is a better deal.

So, what does that have to do with your 401(k)? It is an example of compound interest. Little things you do early in your working career have a big impact on your savings when you are ready to retire. I ran an example of someone who started saving at the age of 25 through age 65. If they invest $10,000 each year and get a 6% return over the 40 years you would have a portfolio valued at $1,547,619.66. That would be from a total investment of $400,000.00 over the 40 years.

If you look at what each decade of investing would be worth it is clear the earlier you start the better off you would be. Each decade you would invest $100,000.00 every 10 years. After 40 years the money you saved between 25 and 34 would be worth $757,037.79 which equals 48.9% of your account. The money saved from 35 to 44 would be worth $422,725.95 which equals 27.3% of your account. The money saved from 45 to 54 would be worth $236,047.96 which equals 15.3% of your account. The money saved from 55 to 64 would be worth $131,807.95 which equals 8.5% of your account.

Never underestimate the value of time and consistency. I’d never tell you to not try to save more or take advantage of the Catch Options, but as you can see in the tables below if you get to keep doing the right thing the magic of compounding will do it thing.

The Magic Penny

Days

Value

1

$0.01

2

$0.02

3

$0.04

4

$0.08

5

$0.16

6

$0.32

7

$0.64

8

$1.28

9

$2.56

10

$5.12

11

$10.24

12

$20.48

13

$40.96

14

$81.92

15

$163.84

16

$327.68

17

$655.36

18

$1,310.72

19

$2,621.44

20

$5,242.88

21

$10,485.76

22

$20,971.52

23

$41,493.04

24

$83,886.08

25

$167,772.16

26

$335,544.32

27

$671,088.64

28

$1,342,177.28

29

$2,684,354.56

30

$5,368,709.12

Growth of $10,000 at 6% over 40 years

Years to go / invested

Deposit

Value of Deposit after 6% return

Years to go / invested

Deposit

Value of Deposit after 6% return

40 / 1

$10,000.00

$10,000.00

20 / 21

$10,000.00

$32,071.35

39 / 2

$10,000.00

$10,600.00

19 / 22

$10,000.00

$33,995.64

38 / 3

$10,000.00

$11,236.00

18 / 23

$10,000.00

$36,035.37

37 / 4

$10,000.00

$11,910.16

17 / 24

$10,000.00

$38,197.50

36 / 5

$10,000.00

$12,624.77

16 / 25

$10,000.00

$40,489.35

35 / 6

$10,000.00

$13,382.26

15 / 26

$10,000.00

$42,918.71

34 / 7

$10,000.00

$14,185.19

14 / 27

$10,000.00

$45,493.83

33 / 8

$10,000.00

$15,036.30

13 / 28

$10,000.00

$48,223.46

32 / 9

$10,000.00

$15,938.48

12 / 29

$10,000.00

$51,116.87

31 / 10

$10,000.00

$16,894.79

11 / 30

$10,000.00

$54,183.88

30 / 11

$10,000.00

$17,908.48

10 / 31

$10,000.00

$57,434.91

29 / 12

$10,000.00

$18,982.99

9 / 32

$10,000.00

$60,881.01

28 / 13

$10,000.00

$20,121.96

8 / 33

$10,000.00

$64,533.87

27 / 14

$10,000.00

$21,329.28

7 / 34

$10,000.00

$68,405.90

26 / 15

$10,000.00

$22,609.04

6 / 35

$10,000.00

$72,510.25

25 / 16

$10,000.00

$23,965.58

5 / 36

$10,000.00

$76,860.87

24 / 17

$10,000.00

$25,403.52

4 / 37

$10,000.00

$81,472.52

23 / 18

$10,000.00

$26,927.73

3 / 38

$10,000.00

$86,360.87

22 / 19

$10,000.00

$28,543.39

2 / 39

$10,000.00

$91,542.52

21 / 20

$10,000.00

$30,256.00

1 / 40

$10,000.00

$97,035.07

Year Invested

Deposits

Total Value

Growth

Years 1 – 10

$100,000.00

$757,037.79

$657,037.79

Years 11 – 20

$100,000.00

$422,725.95

$322,725.95

Years 21 – 30

$100,000.00

$236,047.96

$136,047.95

Years 31 – 40

$100,000.00

$131,807.95

$31,807.95

Totals

$400,000.00

$1,547,619.66

$1,147,619.66