Bruce Lorenz shows how timing investment contributions matters more than you'd think. Investing on January 15 instead of December 15 adds $143,000 over 40 years. Starting at 25 and investing for 10 years beats starting at 35 and investing for 30 years, leaving you $175,000 ahead.
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If you invest the same amount of money for the same amount of years, one simple timing choice can be worth over $140,000. Not a different investment, not more risk. Just when you invest. Hey, everybody, I'm Bruce Lorenz, certified financial planner and advisor here at Bolden. We've all heard the early bird gets the worm. Well, today, the early bird gets the best financial results. Let's think about investing and the power of compounding. Albert Einstein is sometimes credited with saying that the power of compounding is the eighth wonder of the world. Well, whether he said that or not, compounding is fantastic. Let's use an example. Investor number one, they're going to contribute $7,500 into their IRA each year starting at ages 25. They do that for 40 years. They contribute on December 15th each year. Well, they're just procrastinating. They simply are waiting. They know they're going to contribute. They just simply wait until the end of the year, December 15th. Let's compare that to investor number two. They also start at age 25, the same $7,500 for 40 years, only they invest every year on January 15th. So a full 11 months earlier at the end, at age 65, you guessed it. Investor number two, starting early on January 15th, has over $143,000 more in their savings account. Same investment, same rate of return, same risk. They started early and have more money. Let's do another example, and this one is even more dramatic. Investor number one, age 25, they contribute $5,000 to their investment account each year for 10 years. So by age 34, they have contributed $50,000 10 years, $5,000 each year. That's it. They stop. No more contributions. Investor number two starts 10 years later at age 35. They also contribute $5,000 each year for 30 years. So they have contributed now $150,000, $5,000 times 30 years at age 65. Comparing the totals, investor number one has over $175,000 more in their account simply because they had 10 more years of compounding. They contributed only $50,000, 1/3 as much as investor number two, who contributed 150,000. Again, nothing changed except the power of compounding. In this case, investor number one actually contributed only a third as much. And they have a better result. And so this is the real time matters more than effort. Starting early, even imperfectly, can beat starting later and doing things perfectly. It's a matter of compounding. And this lesson applies whether you're starting your retirement account, increasing your contributions, or just changing when you invest. So three simple things you can start right now. If you're making annual contributions, make them early in the year. If you're young, start early. Even small amounts can add up to make a big difference over time and three if you're older. Remember, every year you go without saving is another year that compounding cannot work for you. So starting early can be a great help to your financial success and increase your financial outcomes. Compounding isn't flashy, it's quiet, but over time it can make a huge difference in your financial outcomes. If you'd like to hear more, please subscribe to the channel below and you'll get more updates from Bolden. If you have questions or comments, put your ideas in the comments below. And remember, with your money it's great if you can save some, spend some and give some. Thanks everybody. Thanks for watching and we'll see you next time.
