Here are our assumptions: you make $24,000 a year, and are able to save 10% of that ($2,400 or $200 a month). There is no inflation! You do not make any withdrawals from your savings account, and the taxes on interest are paid from the remaining 90% of your income. You save for 30 years at the same (fixed) rate.
Year 31 assumes no earned income, and shows only the interest on the accumulated balance. If you had no other source of retirement income, and did not wish to reduce the principal amount, this is what your annual income would be at 5%, 7%, and 10% interest rates.
| Cumulative Principal Annual Return And Earnings | |||
| 5% | 7% | 10% | |
| Year 10 | $31,056 | $34,616 | $40,969 |
| Year 20 | $82,206 | $104,185 | $151,873 |
| Year 30 | $166,451 | $243,994 | $452,097 |
| Year 31 (interest only) | $8,332 | $17,079 | $45,209 |
We assume again that you are receiving $24,000 in income; we also assume that this figure will rise adequately to pay for the taxes on the earned income and on the income from your investment and that there is no inflation. You save 30% ($7,200 per year or $600 per month) into a savings account. And, of course, you make no withdrawals.
Save for 30 years at this rate, year 31 is shown as interest income only.
| Cumulative Principal Annual Return And Earnings | |||
| 5% | 7% | 10% | |
| Year 10 | $93,169 | $103,850 | $122,906 |
| Year 20 | $246,620 | $312,556 | $455,621 |
| Year 30 | $499,355 | $731,982 | $1,356,292 |
| Year 31 (interest only) | $24,967 | $51,238 | $135,629 |