Compound interest means that as your investment collects interest it will grow at a faster rate. This is why getting in the habit of investing for your retirement at an early age can have a huge payoff when you reach retirement.
If you invest $1,000 dollars a year starting at 25 and ending at age 35 for your retirement, you’ll have $128,559 at age 65*, and you will have only invested $11,000 of your own money.
If you wait until you are 35, and start investing $1,500 per year, you’ll have $163,827 at age 65*, and you will have invested $46,500 of your own money.
If you invest $1,000 dollars a year starting at 25 for your retirement, you’ll have $229,632 at age 65*, and you will have only invested $41,000 of your own money.
*Assuming 7% annual return on your investment.