SAN DIEGO (KGTV) — If you're like most San Diegans, you probably find it hard to save for retirement. But did you know if you could just invest a little more than $300 a month you could be a millionaire by the time you retire? It's never too late to save to make it in San Diego, but it's best if you start investing early.
"It's just so hard to beat the power of starting early," says Dennis Brewster.
Brewster of JDH Advisors has been advising his clients about their retirement investments for almost 40 years. What he's referring to is a calculation from NerdWallet on the power of compound interest.
For example, if you start investing just $319 a month, roughly $80 a week towards retirement when you're 20 years old, you'll earn $1,000,000 in retirement savings after 47 years.
How much do you need to save for retirement? Try this interactive pre-retirement calculator
And here's why Dennis emphasizes starting early and the power of compound interest. If you don't start investing until you're 30-years-old, you would need to almost double the previous amount ($613 a month) to reach that goal of retiring with $1,000,000 after 37 years of saving. But...
"Not everyone can start early. For a variety of circumstances so it's really never too late to start saving for your future," adds Brewster.
He's right. If you start at the age of 40, you can still reach $1,000,000. But you'll need to put away $1240 a month for 27 years. Even if you get to the age of 50 and haven't invested a dime for retirement, it's still not too late. But it's going to cost you $2831 a month for the next 17 years to reach that $1,000,000 in retirement savings.
"Your earnings wind up compounding," explains Brewster. "So, your earnings are compounding, your earnings on your earnings. And that's really just what makes such an exponential difference of starting at a young age."
Use this calculator to help compare employee contributions to the new after-tax Roth 401(k) and the current tax-deductible 401(k).
In yet another example to make a point, Brewster points to another calculation from VOYA Financial showing even if you invest $6,000 a year for eight years beginning at age 25 and then just stop investing, you'll still have more money in retirement than if you invested the same amount beginning at age 35 for 30 years.
And finally, don't wait for the perfect time to jump into investing your money.
"The day you start is almost immaterial," says Brewster.
A study conducted by the Capital Group compared the worst possible days to invest versus the best possible days to invest over a 20-year period. In the end, the average total return was only about a 2% difference.
"The key is not starting on that perfect day;" says Brewster. "The key is starting and then consistency and staying with it. And it's easier said than done."