How to Lose $247,115: The Price of Procrastination

Don't leave all this money on the table.

Procrastination can be costly. Put off buying the beautiful painting in that gallery window, and one day it might be gone. Put off investigating that "check engine" light, and your car could become a clunker. Procrastination can be financially costly, too, especially when it comes to saving and investing for retirement.

It's easy to understand how it happens. When you're in your 20s and even in your 30s, retirement can feel an eternity away. It can seem like no big deal to put off thinking about retirement issues and retirement savings while you're still relatively young. You'll think about Medicare and Social Security and macular degeneration and senior-citizen discounts later. What's the rush?

Well, there's an excellent reason to think about your retirement as soon as possible and to start socking away money for it immediately, even if you're in your 20s: It can make an enormous difference in how much you end up saving, in how easy it is to save up what you need, and how comfortable your retirement ends up being.

Acorns planted today can grow into big trees you can enjoy later. 

Crunching numbers
Let's run through some examples. Imagine that you start saving and investing money for retirement at age 45. That seems reasonable. If you sock away $10,000 annually for the next 20 years, until you're 65, and it grows at an average annual clip of 8%, you'll end up with $494,229. That's not bad -- but you could have saved much, much more.

Check out the following tables. The first one shows you what you forfeited by not investing just $2,000 annually between age 25 and several different ages.

The cost of delaying investing just $2,000 annually

If you had started earlier, investing just $2,000 per year, you'd have accumulated almost $100,000 if it grew at 8% per year, on average, and more than $125,000 if it had grown at 10%. (The stock market has averaged annual growth of close to 10% over very long periods.)

If you're wincing now, then consider this: If you had managed to sock away $5,000 per year for those 20 years, you would have accumulated at least $247,115 by age 45. In other words, the opportunity cost of delaying your retirement saving would have been about a quarter-million dollars.

If you plan to withdraw the conventional 4% per year from your nest egg in retirement (adjusting the sum for inflation each year), then an extra $247,115 would have delivered annual income of close to $10,000!

You can set yourself up to collect $10,000 annually without entering any sweepstakes. Photo: Flickr user Frankieleon.

A different kind of financial procrastination
Financial procrastination can take different forms. Here's another: delaying moving stockpiled dollars from your savings accounts into the stock market. For long-term money, the stock market is generally our best choice for maximum growth, and investing in stocks can be very easy if you opt for low-cost, broad-market index funds. Three solid contenders are the SPDR S&P 500 ETF, Vanguard Total Stock Market EF, and Vanguard Total World Stock ETF. Respectively, they will distribute your assets across 80% of the U.S. market, the entire U.S. market, or just about all of the world's stock market.

These days, a savings account might be paying you, at most, around 2.5% annually. Over 10 years, a $50,000 investment that grows at 2.5% annually will become $64,000, giving you a gain of $14,000. But if it grew at 8%, it would more than double to $108,000. Putting off moving money can have a costly financial effect. You can avoid that cost by taking action now. Make a habit of socking away money regularly -- and the more the better, especially in the early years, when it will have the longest time to grow. If you're not the most disciplined person, you can make things easier for yourself by having a set amount of money automatically deducted from your paycheck or bank account and sent into a brokerage account. Or you might set up your 401(k) at work to divert a significant sum from your paycheck each period into your 401(k).

Take a little time to assess your financial goals and your plans -- and if you don't have plans, then make them. Start socking money away in diversified investments. Why leave gobs of money on the table when they could enrich your retirement? Heck, start saving early and aggressively, and you may even retire early!

There's only one way to find out.