How it makes so much money for the retirement?
Thursday, February 19th, 2009 at
7:58 pm
p t asked:
Financial advicer said if you save 3,500 per year for 35 years, and add 8% interest return. After 35 years, you will accuminate 600,000 for retirement. How they count it?
Financial advicer said if you save 3,500 per year for 35 years, and add 8% interest return. After 35 years, you will accuminate 600,000 for retirement. How they count it?
Tagged with: 35 Years • Advicer • Retirement
Filed under: Retirement
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Use an Excel spreadsheet, put the correct compounding formula and add all up, you will end probably around that number.
But again, $600,000 in 35 years probably is not such a big deal. 35 years ago, you probably could buy a bottle of Coca Cola with 5 cent. Now it is $1. That is called inflation. At that rate, $600,000 is like $30,000 right now. Do you believe that is a lot of money?
the easy answer is “compounding.” your first $3500 per year grows to $48,000 over that 35 years!! so start saving early!
The financial planner probable means that if you put $291.67 per month which = about $3500 per year x 8% =
$122,500.00 in deposits by you and the rest is $576,592.90 in interest.
Go here to put the numbers in yourself:
Thats the power of compound interest.Think of a credit card in reverse if you were the card company earning thet 15 percent is how compound interest works,you earn interest on top of interest it is great.Now start saving and stop worrying about spending to keep up with the jonses because in 35 years the jonses will be saying to you hey how did you do it we dont understand.It will be game over you win the jonses lose.The baby boomer showoffs are broke HAHAHAHAHHHA.
Year Start Add Earn End
1 – 3,500.00 280.00 3,780.00
2 3,780.00 3,500.00 582.40 7,862.40
3 7,862.40 3,500.00 908.99 12,271.39
4 12,271.39 3,500.00 1,261.71 17,033.10
5 17,033.10 3,500.00 1,642.65 22,175.75
6 22,175.75 3,500.00 2,054.06 27,729.81
7 27,729.81 3,500.00 2,498.38 33,728.20
8 33,728.20 3,500.00 2,978.26 40,206.45
9 40,206.45 3,500.00 3,496.52 47,202.97
10 47,202.97 3,500.00 4,056.24 54,759.21
11 54,759.21 3,500.00 4,660.74 62,919.94
12 62,919.94 3,500.00 5,313.60 71,733.54
13 71,733.54 3,500.00 6,018.68 81,252.22
14 81,252.22 3,500.00 6,780.18 91,532.40
15 91,532.40 3,500.00 7,602.59 102,634.99
16 102,634.99 3,500.00 8,490.80 114,625.79
17 114,625.79 3,500.00 9,450.06 127,575.85
18 127,575.85 3,500.00 10,486.07 141,561.92
19 141,561.92 3,500.00 11,604.95 156,666.88
20 156,666.88 3,500.00 12,813.35 172,980.23
21 172,980.23 3,500.00 14,118.42 190,598.64
22 190,598.64 3,500.00 15,527.89 209,626.53
23 209,626.53 3,500.00 17,050.12 230,176.66
24 230,176.66 3,500.00 18,694.13 252,370.79
25 252,370.79 3,500.00 20,469.66 276,340.45
26 276,340.45 3,500.00 22,387.24 302,227.69
27 302,227.69 3,500.00 24,458.22 330,185.90
28 330,185.90 3,500.00 26,694.87 360,380.78
29 360,380.78 3,500.00 29,110.46 392,991.24
30 392,991.24 3,500.00 31,719.30 428,210.54
31 428,210.54 3,500.00 34,536.84 466,247.38
32 466,247.38 3,500.00 37,579.79 507,327.17
33 507,327.17 3,500.00 40,866.17 551,693.35
34 551,693.35 3,500.00 44,415.47 599,608.81
35 599,608.81 3,500.00 48,248.71 651,357.52
Actually on the FA’s assumptions, the value of the fund would have been 651,000 but the difference went to the him and the fund manager.
But his assumptions are too good for UK and are obviously designed to attract customers. Be careful, the financial services industry has the biggest sharks in the seas, bar none.
According to FSA recommendations the assumed growth rate should be 6% and typical fund charges in UK are 5% initial and 1.75% annual (TER).
In round figures, after 35 years the fund will become 413,000, but they will take 149,000 (36%) for themselves and only leave you 264,000. And if we assume inflation of 2.5%pa, its value at present prices will only be 111,000. Not much to shout about after 35 years saving, is it. And do not forget, nothing is guaranteed and there is every chance you will get next to nothing.
Me? I am investing directly in shares and avoiding the sharks like hell.