The Most Important Retirement Table You'll Ever See

"Enjoy the magic of compounding returns. Even modest investments made in one's early 20s are likely to grow to staggering amounts over the course of an investment lifetime." -- John C. Bogle, Vanguard Group founder

The most important retirement table you'll ever see is one that demonstrates the power of compounded growth -- and how it can help you meet your financial goals, such as a comfortable retirement or significant savings for college.

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The magic of compounding

It's common advice to save and invest for your future, but it can be hard to dedicate yourself to such a long-term enterprise without sufficient motivation. So check out the table below, which shows how much money you can amass from a single $10,000 investment that grows at an average annual rate of 8%. (An 8% rate is somewhat conservative, since the long-term average annual return of the S&P 500 is around 10%.)

Data source: Calculations by author at moneychimp.com.

Kind of amazing, right? You can make a single $10,000 investment and in 30 years, have more than $100,000 -- and more than $300,000 after 45 years.

It gets even more amazing if you add to your initial investment regularly. The table below reveals even more impressive results if you do so:

Data source: Calculations by author at moneychimp.com.

Investing meaningful sums regularly can get you to whatever retirement nest egg you need -- faster.

Stocks for the win!

Of course, regularly socking away hefty sums will not produce desired results if you're investing ineffectively, or, worse, badly. For example, dabbling in penny stocks, trading on margin, using options when you don't fully understand them, or not diversifying sufficiently can shrink your portfolio instead of growing it.

One of the surest (but not guaranteed) roads to riches (over a long period) is the stock market. Wharton Business School professor Jeremy Siegel has made that clear by studying different asset classes over long periods. For example, the table below offers his returns of various asset classes between 1802 and 2021:

Data source: Stocks for the Long Run by Jeremy Siegel.

Stocks tend to outperform over shorter periods, too. For example, Professor Siegel found that over the 75 years between 1946 and 2021, stocks grew at an average annual rate of 11.3%, versus 5.8% for long-term government bonds. (These numbers are not inflation-adjusted, by the way. Always assume that inflation will shrink your purchasing power over long stretches -- and look into inflation-resistant investments, too.)

Index funds can get you a comfortable retirement

If you've reasonably decided to park much of your long-term money in stocks, you'll need to decide how to do that. You might put some in growth stocks, for example, but you'll need to choose them carefully and then keep an eye on them.

For most people, simple, low-fee, broad-market index funds can make the most sense. They're really not much of a compromise, since they can grow in value powerfully over time and can really be all you need to build a hefty nest egg for retirement.

So scroll up again to remind yourself how powerfully you can build wealth via the phenomenon of compounded growth -- and then take action so that you can benefit from it. You might need to open a brokerage account, for example, or just study and choose some great index funds.