Recently, a friend was talking to me about his outlook on life, and how he wasn’t going to put his money into a retirement account because he wanted to live his life now and not worry about when he was old – after all, who knows if he’ll still be around?

When you’re in your twenties, that’s sadly the prevalent attitude a lot of times.  I’m 27 now and have been saving consistently towards retirement for about four years now, but I wish I had started back in college (or earlier!).  The beauty of investing for your retirement while you are still young is compound interest.

Many people discount the effect of a few years on the amount of money you’ll have at retirement, but as with most things, nothing is as effective as the hard numbers.

Rick, a 22 year old, just got out of college with his first job at an investment firm at $45,000 a year.  He has been saving what he can for retirement since he was 18.  Currently, at 22, he has $15,000 in a Roth IRA and is putting away the max into his Roth and $10,000 a year into a 401(k) that his company offers.

Total investment: $660,000

Assumed annual gain: 9%

Nest egg at 65: $7,817,968.27

Rick is putting the least towards his retirement, but starts young and ends up with twice Cheryl’s investment and almost four times Randy’s!

Cheryl, a 35 year old real estate agent, lived for the moment for the first 14 years of her professional life with new cars every year or two to impress her clients, and lived well above her means for the majority of her life, and only has $50,000 in her 401(k) currently.  In order to make up for lost time, she maxes out her IRA ($5,000 per year) and her 401(k) ($15,500 per year).

Total investment: $665,000

Assumed annual gain: 9%

Nest egg at 65: $3,709,175.87

Cheryl has at least realized in time that she needs to start contributing towards her retirement, and is at least in a place at this point in her life where she can fully fund her future while living near her expected standard of living.

Randy, currently 50 and at the top of his earning potential, knows he is behind the game from supporting his three kids through growing up and college, and currently has $350,000 in his 401(k).  He also is maxing out his IRA at $5,000 per year and is using the 401(k) catch-up contribution of $20,500 per year.

Total investment: $732,500

Assumed annual gain: 9%

Nest egg at 65: $2,090,955.53

It goes without saying that it’s essential to make the sacrifice necessary to invest in your future at a young age, because after a certain point it’s nearly impossible to catch up.  Don’t make the mistake many of us have!