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Time is on your side - The early bird gets the nest egg

Time is on your side – The early bird gets the nest egg

by Arnold Machel, CFP®

“Now the length of time the Israelite people lived in Egypt was 430 years.”

Exodus 12:40 (NIV)

We live in an age where instant gratification doesn’t seem to be quick enough.  Life isn’t really like that though, is it? God isn’t really like that, either.  Some things, like the Israelites’ captivity in Egypt for example, take time (see above – Exodus 12:40). A lot of time.

When investing though, time is on your side… more than you can probably imagine.

Today we’re going to look at two young adults fresh out of university: Pebbles and BamBam. They each went into university at the age of 18 (straight out of high school), graduated with an engineering degree four years later at the age of 22 and got jobs pretty much right away. They started making decent money at age 22, but their first full year of employment started in the year they turned 23.

Pebbles decided it was important to think about the future right away, so she made a point of setting aside $5,000 each year for retirement right off the bat. For the purpose of this illustration it’s immaterial whether she uses a TFSA or an RRSP, so we’re going to just assume she uses a TFSA, so that we don’t have to complicate the calculation with the tax benefits.

BamBam isn’t concerned about retirement. He wants a nice car and nice apartment so he delays setting anything aside for retirement, thinking that he can easily catch up later.

After 10 years of contributions, Pebbles decides that she wants to stop her contributions and spend the money on her young children. BamBam on the other hand, starts to realize that he needs to get saving for retirement so he gets started after the 10 years and contributes starting year 11 (at age 33) and he just keeps adding the same $5,000 each year until he is 65 years old.

We’ll assume that neither are ultra conservative nor aggressive investors, so they invest their savings in a balanced but growth-oriented style that ends up averaging 6.50% per year.  We’ll also assume that each of them adds the contribution at the beginning of each year.

Here’s what happens…

Look a little more closely at the last two rows. In spite of the fact that BamBam has added substantially more (he has invested more than 3 times the $50,000 that Pebbles added earlier on), their total investments are worth almost the same when they retire at age 65.

Looking at it another way, Pebbles added money for 10 years. BamBam added the same annual amount for 33 years, yet at the end of the day, they have about the same amount of money.  The only difference is time.

And we haven’t even accounted for the many additional benefits of saving earlier in life. Adding the money earlier would not only enhance Pebbles’ returns generally, but would also give her a broader array of options to take advantage of other potential tax-savings scenarios.

For example, investing earlier in life allows individuals to accept greater volatility, which generally results in greater returns. Also, Pebbles would have the option of using a TFSA in her earlier low-income years and then switching the investments into RRSPs when/if her income is in a much higher tax bracket.

Ultimately, time is a massive factor in your investment growth. If you haven’t started saving yet, get started now.  Yesterday may have been the best time to invest, but the second-best time is now, so don’t delay.

Pass this on to your children and your children’s children. Get them to save early.  They will thank you for it at the end of the day.

Arnold Machel, CFP(r) lives, works and worships in the White Rock/South Surrey area.  He attends Gracepoint Community Church where he serves on the Leadership Team.  He is a Certified Financial Planner with IPC Investment Corporation and Visionvest Financial Planning & Services.  Questions and comments can be directed to him at or through his website at   Please note that all comments are of a general nature and should not be relied upon as individual advice.  While every attempt is made to ensure accuracy, facts and figures are not guaranteed.

Arnold is now accepting a limited number of invitations to speak for the 2018 calendar year. If you are interested in having him speak to your congregation or other group regarding money matters, please contact us at, or (604) 542-2818, with your preferred date and time.

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