Cost of Investing Delay Calculator

Procrastination ranks high on the list of reasons why people do not achieve their financial goals. Whether through lack of information, fear of making a wrong decision, or waiting for the time to be right, procrastination wastes valuable time in which your money could be working to achieve financial success. In short, procrastination costs. Every year of delay dramatically reduces the size of your retirement savings, or makes your goals increasingly difficult to reach. This calculator will show you the dramatic impact of starting an investment program now versus delaying the decision to start one.

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Calculator Legend

Single Deposit Amount: Enter an amount of money you might invest this year, but that you are considering using for something else instead.
Annual Deposit Amount: Enter the amount of money you will add to your investment each year.
Rate of Return: Enter the annual "rate of return" on your investment; that is, the percentage at which your investment will grow each year. You can find out about average annual rates of return on potential investments by checking out the investment's website or prospectus.
Years of Growth: Enter the number of years until you stop investing and withdraw your money. In reality, you are probably not going to withdraw your investment all at once. Instead, you are more likely to take it out in bits and pieces, or at a steady rate each year. However, for the sake of seeing the effect of delaying investing over time, just pick a number of years until you will have stopped adding to your investment. For most people, this will be the number of years until retirement.
Years Delayed: Enter the number of years from now when you think you will finally start investing.

Investing and Interest: The "Time Value" of Investments Explained

If you study finance, one of the first phrases you are likely to encounter is "the time value of money." In short, money can grow just given the passage of time. If you have a bank account that generates interest, you know about this. If you have a credit card, you also know how the balances grow if you don't pay them off--even if you don't purchase anything more--thanks to interest.

Each extra year you invest money means a much greater return. That's because as time goes by you are getting interest on more than just your initial investment. You are getting interest on the interest on your initial investment, plus interest on the interest on the interest and so on. For the same reasons, an investment is likely to seem like it's not doing well at first. That's because for the first few years, not only will you not have had enough time to put money in your investment, but your investment will have had less time to accumulate interest. At those times it can feel like you don't really have to worry about putting money in your investment right away. After all, if you wait a year, you'll only have made a little interest in that first year. The problem is that any year you wait now is one less year off the highly valuable end-time of your investment, when it will be accumulating all that interest on interest on interest.

Let's say you are 40 and are hoping to retire at 70. If you start investing now, with an initial investment of $3,000 and $3,000/year for every year thereafter, you will have $370,038 when you retire (assuming an average 8% annual return, which is actually somewhat conservative). If you wait even one year to start investing, you will have lost over $30,000 at retirement age. That could easily mean a year or two of retirement (or money to leave your survivors when you pass on).