Small investing: How much can your money grow?
Can you invest an extra Rp.250.000 a week? Even small amounts can add up over time.
An acorn is smaller than a mouse and weighs less than a key. But give that acorn just the right conditions and time and you could have an 80-foot-tall oak tree that weighs several tons. Small beginnings. The possibility of big results. Your investments could do similar if you’re able to put away a little more money every week or every paycheck. If that’s possible for you, the results can add up.
In fact, they have the potential to multiply. Putting Rp. 250.000 a week in a jar for 30 years would get you Rp. 390 Million. Invest that same weekly amount at a 6% annual rate of return, and compound earnings could help that investment grow to more than Rp. 1Billion over those 3 decades.1
You can find investing acorns there, too. If you had a Rp. 490 Billion annual income and bumped your pre-tax contributions up just 1%, that’s only about Rp. 280.000 off your bi-weekly take-home pay. But every month in retirement, you could have another Rp. 2.000.000 to spend.2
Retirement made easier, not easy
Investing an extra Rp. 250.000 a week or contributing an extra 1% toward your retirement might make getting to your financial goals easier. But it still won’t be easy. You’re always balancing current need against future goals.
It may help to think of it as taking care of your future self and family. You can stay disciplined about saving by incorporating annual savings increases. Some employers’ retirement plans allow you to increase the amount you put toward your retirement. This helps make those increases slowly over time, so that it’s easier for you to work into your budget.
What if you can’t do that much?
There’s no magic in 1% or in Rp. 250.000. Whatever additional money you can put away can help. If it’s Rp. 100.000 extra a week, great! Maybe just a few bucks per paycheck? That’s fine, too.
Remember, success doesn't require major cash
.
Let time and compound earnings work for you to help achieve your goals.
1 The retirement balance (potential future value) assumes a 6% annual rate of return on their savings. The assumed rate of return in this chart is hypothetical and does not guarantee any future returns nor represent the returns of any particular investment. Estimated monthly income is based on a 4.5% annual distribution of the retirement balance at age 65 and is discounted to reflect today’s value using a 2.5% inflation assumption (potential future purchasing power in today’s dollars). Amounts do not reflect the impact of taxes on pre-tax distributions. Individual taxpayer circumstances may vary. For illustrative purposes only.
2 Assumes Rp. 490 Million annual income with 3% annual wage growth, 30 years to retirement, a 6% annual rate of return, a 25% tax bracket. Estimated monthly income is based on a 4.5% annual distribution of the retirement balance at age 65 and is discounted to reflect today’s value using a 2.5% inflation assumption (potential future purchasing power in today’s dollars). The Rp. 140.000 per-paycheck reduction relates to the first year of contributions. Wage growth would increase this amount over time. The total additional 1% contribution would amount to Rp. 232 Million over 30 years, and, with earnings, would increase total account value by Rp. 557 million over that same time period.
Important information
Investing involves risk, including possible loss of principal. Equity investment options involve greater risk, including heightened volatility, than fixed-income investment options. Asset allocation and diversification do not ensure a profit or protect against a loss.
The subject matter in this communication is educational only and provided with the understanding that Principal® is not rendering legal, accounting, investment advice or tax advice. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, investment or accounting obligations and requirements.
Insurance products and plan administrative services provided through Principal Life Insurance Co., a member of the Principal Financial Group®, Des Moines, IA 50392.
