Time value of money

Invest in the Future of Your Children and Grandchildren

Plan Ahead

As someone younger than 50 who started with a small sum and achieved financial independence solely through allocating capital, I am astounded by the lack of financial literacy in our country.

Until recently, I blamed it on our educational system. There is no requirement that students learn the two most-important skills that every American adult will need at some point in their life, regardless of their race, creed, what city they live in or what profession they choose: budgeting and investing your savings in safe, high-yield investments.

Anyone who works 40 years, puts $5,000 per year in an Individual Retirement account paying 6 percent would have $773,810 at retirement and would be earning about $50,000 per year annually on their money. They wouldn’t outlive their money if they lived prudently.

Until two years ago, 6 percent was usually a low-risk rate that most conservative investors could expect. However, if today’s 2 percent rates continue in the future, like many including myself believe, the same person will only have $302,010 and would be only be earning about $6,000 dollars annually on their money, which could eventually deplete their retirement nest egg.

However, if you saved the $5,000 and compounded your money in safe, high-yield investments that earn 12 percent annually, your total would be double the 6 percent, right?

Wrong.

In fact, because of the miracle of compound interest and the reinvestment of dividends, your estate would be worth $3,835,455 ($3.8 million!) and would be earning you more than $450,000 annually without touching your principal.

Now that is preparing for retirement, isn’t it? Just imagine if you were able to save more than that each year or you could compound your money at even a higher rate? Now do you understand why it is crucial to learn how to compound your money at higher rates?

Source: The Franklin Prosperity Report

Time value of money:

Money invested at 10% interest doubles in 7 years.
Money invested at 7%, doubles in 10 years.

Money invested in the US Government will likely be spent by Congress. Remember! Social Security will go broke some time before or after 2020.

Privatize Social Security:

Do you see why Democrats are against you investing a meager 2% of your social security account in the stock market. Democrats want all of your money and are talking in secrecy among themslves about how and when to take all retirement accounts and give back to you 3% IF there is anything left. Unions are exempt.