Retirement at X years
This post relates quite heavily to Russian realities, for which I apologize to readers.
It would be great if schools taught financial literacy and other useful life skills, instead of many not-so-useful things. Including telling about investments. If I had known as a child what I'll write below, I would most likely have lived noticeably differently.
Let's try to calculate various investment options. Mathematics will help us, and it personally convinces me much more than loud speeches from info-scammers and other motivators. I won't provide formulas, I made a simple table to help.
Let's take a smoker (well, me for example). He smokes a pack a day, it costs 180 ₽ (far from the most expensive cigarettes). Let's say he's been smoking since age 18, doesn't want to or can't quit, and will smoke until age 60. Simple calculations show that by this age he would have saved 2,721,600 ₽. Not very impressive, doesn't make you want to quit.
Now, let's suppose that instead of just saving money, he invests it at 12%. As far as I understand, such percentages are given by quite conservative methods, and I'll use this number going forward. As a result, he will save the same 5,400 ₽ per month for 42 years, and get 80,811,609 ₽. Already interesting, right?
Now, attention, then the smoker decides not to save anymore, but simply let the accumulated amount work. With the same 12% per year, he will receive 808,116 ₽ per month in passive income. Even more interesting, right?
You can calculate something else. Let's say I graduated and got a job. I'm 22 years old, and my salary is 50k. I can save 10k at the same 12%. As a result, by age 40 my savings will amount to 7,578,606 ₽, and my pension will be 75,786 ₽. Not bad. By age 60, my pension will already be 924,429 ₽. Ever seen such pensioners? And you can save more, as well as earn more, thus increasing passive income or reducing timeframes.
The employer deducts 30% of a Russian's salary for pension provision. Take the same 42 years of work experience, the same 50k take-home, calculate and get a pension of 1,386,644 ₽…
Well, then you can play around differently, let me remind you about the table.
I note that these calculations assume reinvestment of the received profit once a month every month.