Bonds v Stocks

As noted in an earlier post, if you start young and get a return similar to the historical average for the US stock market, the gains can be dramatic.

Stocks
Investing $5,000/year and earning a 10% annual return:
starting at 25 = $2.4 million at 65
starting at 30 = $1.49 million at 65
starting at 35 = $900K at 65
starting at 45 = $315K at 65
starting at 55 = $88K at 65


On the other hand, let's say you get a pretty good bond return of 6%. The difference between investing in stocks and bonds is dramatic:

Bonds
Investing $5,000/year and earning a 6% annual return:
starting at 25 = $820K at 65
starting at 30 = $590K at 65
starting at 35 = $419K at 65
starting at 45 = $195K at 65
starting at 55 = $70K at 65


Starting young still makes a big difference, but compare the $590K you get if you start at 30 and invest in bonds and the $1.49 million you could have if you invest in stocks and get historical returns.