Several weeks ago I described a conversation I had with a college junior who wanted to learn about how to get started in investing for his future. I challenged him to figure out what kind of investment plan he would need to accumulate $5 million for retirement over the next 43 years.
Here’s the masterpiece he came up with.
Introducing Tyler Calder
In the original post I called him Jim, but he’s okayed me to use his real name, Tyler Calder. Tyler put together a great spreadsheet that should motivate him to invest part of his income each year, through his entire career. Download fully functional spreadsheet.
(Click on image for larger version)
His spreadsheet is beautiful in its simplicity. He boiled the challenge down to five key variables (highlighted in yellow above):
Starting salary: $50,000
Annual raise: 10% for the first 15 years, then no more raises
Annual savings: 10% of salary
Return on investment: 10% annual return
Inflation rate: 2%
With these data elements, the ending portfolio value is $5,039,594 in today’s dollars, even after losing $1.2 million to inflation. It’s interesting and encouraging to note that investing only 10 percent of projected career salary, a total of $885,000, yields such a handsome retirement next egg.
Of course we can’t be sure what inflation, salaries and the investment markets will do in coming years. But the math is clear: compounding is a relentless and wondrous force, one that should be respected and fully utilized. If you download the spreadsheet you can play with the assumptions yourself.
Discipline is rewarded
Like most new investors, I think Tyler was most concerned about what specific stocks or funds to buy. But looking at this spreadsheet it becomes clear that just as important as choosing investments is the long term discipline to put money away every year over one’s entire career.
Feel free to contact Tyler if you have any questions about his template! His email is firstname.lastname@example.org.
I sincerely thank Tyler for his diligence on this project and willingness to share it. And I wish him great success in his chosen career and as an investor.
This article may include forward-looking statements. All statements other than statements of historical fact are forward-looking statements (including words such as “believe,” “estimate,” “anticipate,” “may,” “will,” “should,” and “expect”). Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Various factors could cause actual results or performance to differ materially from those discussed in such forward-looking statements.
Nothing in this article is intended to be or should be construed as individualized investment advice. All content is of a general nature. Individual investors should consult their investment adviser, accountant, and/or attorney for specifically tailored advice.
Any references to third-party data or opinions are listed for informational purposes only and have not been verified for accuracy by the Adviser. Adviser does not endorse the statements, services or performance of any third-party vendor without specifically assessing the suitability of a third-party to a client’s or a prospective client’s needs and objectives.
This communication may include forward-looking statements. All statements other than statements of historical fact are forward-looking statements (including words such as “believe,” “estimate,” “anticipate,” “may,” “will,” “should,” and “expect”). Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Various factors could cause actual results or performance to differ materially from those discussed in such forward-looking statements.”
“Historical performance is not indicative of future results. The investment return will fluctuate with market conditions.
Past performance is not indicative of any specific investment or future results. Views regarding the economy, securities markets or other specialized areas, like all predictors of future events, cannot be guaranteed to be accurate and may result in economic loss to the investor.
Investment strategies, philosophies, allocations and holdings are subject to change without prior notice.
This communication is intended to provide general information only and should not be construed as an offer of specifically tailored individualized advice.
While the Adviser believes the outside data sources cited to be credible, it has not independently verified the correctness of any of their inputs or calculations and, therefore, does not warranty the accuracy of any third-party sources or information.
Adviser does not endorse the statements, services or performance of any third-party vendor.
Unless stated otherwise, any mention of specific securities or investments is for hypothetical and illustrative purposes only. Adviser’s clients may or may not hold the securities discussed in their portfolios. Adviser makes no representations that any of the securities discussed have been or will be profitable.
Any IPO alerts are purely informational and should not be construed as recommendations to invest.
Adviser is not licensed to provide and does not provide legal, tax or accounting advice to clients. Advice of qualified counsel or accountant should be sought to address any specific situation requiring assistance from such licensed individuals.
Any case studies or hypothetical client profiles are for demonstration purposes only. They illustrate the breadth and depth of the many clients we represent at various life stages. Any similarities to actual Adviser’s clients past or present are strictly coincidental. Individual advice and results will vary based on each client’s circumstances, objectives and prevailing economic conditions.