There are lots of people who dread the idea of retirement planning. The bad news is that it's a must for most people looking to be properly prepared financially for retirement. The good news is that it doesn't have to be as stressful as it may seem. A large part of financial planning for a stress-free(-ish) retirement is understanding how to use your resources to your advantage.

While some resources are more tangible (like retirement accounts), other resources can do a lot of heavy lifting for you. If you're looking for a table to put that into perspective, look no further.

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The most important retirement table you'll ever see

The table shows how $1,000 monthly investments would stack up over a certain amount of time, averaging 10% annual returns.

Years Invested Personal Contributions Total Value Capital Gains
Five $60,000 $73,200 $13,200
10 $120,000 $191,200 $71,200
20 $240,000 $687,300 $447,300
25 $300,000 $1.18 million $880,000
30 $360,000 $1.97 million $1.61 million

Calculations by author. Amounts are rounded to the nearest hundred.

This is not simply the most important retirement table you'll ever see because of its specific numbers. The numbers will likely vary widely based on investment amount and returns.

The reason it's so important is that it shows the true power of compounding. In investing, the compounding effect happens when the interest you earn on investments begins to earn interest on itself. For instance, if you invest $1,000 and earn 10% interest, you'll make $100. If you reinvest the $100 and earn 10% again, you'll make $110 ($1,100 x 10%).

The more time you give yourself, the more lucrative the cycle. In the table, at 20 years invested, the difference between value and personal contributions is roughly $447,300. Add five years, and this difference is around $880,000. Add another 10 years, and the gap jumps to $1.61 million.

Time is one of the greatest assets on your side

You can learn a lot from the table by looking at how the investment values increase with each increment of added years.

Notice that investing for five years versus 10 years is about a $118,000 difference; investing for 20 years versus 10 years results in around a $490,000 difference; investing for 25 years versus 20 years creates around a $492,000 difference; and investing for 30 years versus 25 years results in a $790,000 difference.

The more time you give yourself, the better, because it gives a chance for compound earnings to work their magic. What someone may lack in money to invest, they can make up ground (and even surpass) by giving themselves more time.

Using a Roth IRA could easily save you thousands

Roth IRA is an individual retirement account that can complement compound earnings greatly. Contributions to a Roth IRA are made after tax, so all future compounded growth and withdrawals in retirement are completely tax-free.

If the investments in the previous table were made in a regular brokerage account, you'd owe taxes on the capital gains. Assuming you fall into the 15% or 20% capital gains rate (anybody making more than $41,675 and in 2023 falls into the 15% bracket), here's roughly how much you'd owe in taxes: 

Capital Gains Amount Owed at 15% Amount Owed at 20%
$13,200 $1,980 $2,640
$71,200 $10,680 $14,240
$447,300 $67,095 $89,460
$880,000 $132,000 $176,000
$1.61 million $241,500 $322,000

Calculations by author.

Roth IRAs have a relatively low annual contribution limit -- $6,500 ($7,500 if you're 50 or older) -- so the investment totals may not reach the seven-figure range. Even so, using a Roth IRA could easily save thousands when you make withdrawals in retirement. Every $10,000 in investment value is $1,500 to $2,000 saved on taxes.

Roth IRAs have income limits for eligibility, so it's best to take advantage of them if you're eligible. One day, you may cross the income threshold and become ineligible, but your investments will continue to grow until you take withdrawals.

Every penny counts in retirement. Using your resources can ensure you save as much as possible to use toward what matters most: enjoying a well-earned retirement.