compound investing

How I’ll Retire Rich After Only 3 Years of Saving

“That can’t be right…” I said to myself. I plugged in the numbers again. Sure enough, my investment was going to grow by 750% and I was going to retire rich after only 3 years of savings.

It’s no secret how I managed to pull this off. But I’m still in shock.

A Short Road to Retire Rich: My First (and Only) 3 Years of Saving for Retirement

After deciding to go debt free this year and funnel all of my money toward paying down my student loans, I stopped adding to my retirement accounts. It was a tough decision, and I initially felt guilty about it, but I knew I had to make debt a priority.

And I felt like I’d done enough for a 25-year-old 🙂

I’d spent the first 3 years of my young professional life putting away 15% of my paycheck into my 403(b) and Roth 403(b) (the nonprofit equivalent of a 401(k)). At the time, I didn’t really miss the money that was coming out of my paycheck each month – it was probably only a few hundred dollars, and I didn’t notice it (ah, the beauty of automatic contributions).

But that few hundred added up – and thanks to a generous 5% employer match, I’d amassed almost $40,000 in my retirement account after only 3 years of savings.

I’m pretty proud of that number (and proud of my younger self who had the foresight and desire to start stashing money away). $40,000 in by age 25 is downright impressive.

But my priorities changed, and I soon realized that I had to sacrifice my retirement contributions to focus on my loans.

How I’ll Still Retire Rich Even Though I Stopped Investing

As of October 2012, I haven’t added a single penny to my retirement account. And I probably won’t add anything else until I’m completely debt free.

And while I’m happy that I’m making progress on my loans, I wonder if I’m making a mistake by taking a year off of my investments. I know that $40,000 in the bank isn’t enough to let me retire rich, if at all (maybe I could retire for a year on that – but I plan on living a lot longer than 61-years-old!).

So I did some quick calculations to figure out what my retirement would look like if I stopped today.

And I was shocked.

Thanks to compound investing, I could stop contributing for the rest of my life and retire rich.

Here’s the quick math that I did using an Online Investment Calculator:

  • Present value: I have $41,500 is in my account today
  • Number of years to invest: I won’t touch it for 34 years (until I retire at age 60)
  • Interest rate: Let’s say my investments (and anything I earn on those investments) compound with an average annual return of 6%
  • Contributions: None. I’m done contributing.

Plug in those numbers and…

My retirement stash: $300,917.55

Wow. That’s a 750% of my original investment!

compound investing

Now this doesn’t account for inflation, my math may be slightly off and in reality, $300,000 isn’t really rich 🙂 I’m also not going to stop contributing for the rest of my life (because hell, I want to be a millionaire when I’m old!).

But it’s powerful stuff to know how compound investing and starting early can help me retire rich.

The Secret: Start Today, Retire Rich Tomorrow

So my secret really isn’t a secret. It’s just an awesome combination of time and compounding working it’s magic.

I’m sure you’ve heard it before “start investing or contributing to a retirement plan early.” But for me, this quick math is concrete proof that time can actually help you retire rich.

Compound interest

So if you’ve hesitated to invest because you’re an investing virgin or you think you’ll just wait and start sometime later, just do it – now. Start today, start tomorrow – start as soon as possible. Because just a little bit of money can set you up for life (and your future self will be super thankful).

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8 thoughts on “How I’ll Retire Rich After Only 3 Years of Saving

  1. Mandy

    But Oct 2013 hasn’t happened yet. Unless of course you do have a time machine 🙂 Did you mean Oct 2012 you stopped contributing?

  2. Andrew Ghezzi

    Love your enthusiasm for this and thanks for pointing it out. A serious amount of the middle class nationwide would benefit from taking the time like you did to do some math and see what’s cooking inside their portfolio.

    And hey if you are having fun with it try this: Assume that you will need to replace about 80% of your pre-retirement income once you retire in order to remain comfortable.

    Using that figure out how many years would you have to spend it down until it hits zero?

    Good stuff !

    1. Stephanie Halligan Post author

      Thanks Andrew – I totally think that crunching the numbers would convince a lot more people to contribute today.

  3. NC

    As you realize, $300,000 by the time you reach age 60 won’t go as far as it will today (and it’s not enough to retire on, even today).

    I’m going to be a contrarian and suggest that you resume contributing enough to your 403(b) to get the maximum match from your employer. I know it will be a great feeling for you to be completely out of debt, but the match is free, tax-deferred money with every paycheck. If you have extra money after getting the maximum employer match, by all means, make additional payments on your student loans.

    1. Stephanie Halligan Post author

      Thanks for the note. I totally agree – $300,000 won’t get me where I want to be! I plan on contributing again, but for me it was worth taking just a year off to re-double my efforts on my loans. I don’t have an employer match, but I will still start investing again in a few months!

      1. NC

        Great, that makes more sense! I was under the impression from your post above that you got a 5% match. At any rate, you’re way ahead of most people your age!


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