Option A: Save $1,380 every month for entire 30 years, non-stop, with interest rate of 4.5% per annum.
Option B: Outlay $10,000 at the beginning and no more contribution for the entire 30 years period, with interest rate of 17% per annum.
In both cases, dividend earned would be reinvested. No withdrawal until the end of 30 years period.
What option will you choose if you are looking for your retirement plan?
Ken who opts for Option A needs to save $496,800 ($1,380*12*30) for 30 years. Put it an example, if his monthly salary is $6,000, he needs to allocate 23% of his salary for this contribution. While for John who opts for Option B needs only lay out $10,000 at the beginning and no single cents need to be contributed after this. This means with same salary, John enjoys whole $6,000 he earned every month for his quality life. At the same time, Ken can only have $4,620 for same purpose.
The outcome?
Ken: $1,055,739.54
John: $1,110,647.00
Technorati Tags: Investment, Retirement Plan, Salary
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