Tuesday, May 13, 2014

The Starbucks Retirement Plan

No, I’m not referring to any 401(k) plan or stock option plan.  In fact, I’m not even referring to anyone that even works for Starbucks!  What if I told you that you could fund a significant portion of your retirement fund by simply investing $3.30 per day?  We have more college educated young adults than ever before in the history of our country.  However, how many of them were taught the most powerful force in the history of the universe (according to Albert Einstein).   Probably not too many!  What is this force and how does it affect their retirement portfolio?  Drum roll please…compounding interest!!!

If someone who is 25 years old invests just $3.30 per day then they could save up to $1 million by the time they turn 75!  Now, there is no guarantee with any investment but these numbers are based on what history has shown.  If you were to invest $100 per month beginning at 25 and earn an average return of 9% then you would have approximately $1,166,910 at age 75.  By utilizing the power of compounding interest, it is possible to turn $100 a month today into $1 million tomorrow.  How many young people could find extra funds for retirement if they simply cut back on their daily latte? 
 
Nick S. Wold, CPA, MA

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