Isn’t it funny that we are expected to make the biggest decisions of our lives when we are young? We get married, we pursue a career path, maybe have children. We have to make quite a few decisions that will affect us the rest of our lives and determine our future trajectory. The decisions we make now can lead to heartache and loss, or security and success down the road. Some of us are fortunate to have parents to steer us in a good direction, while others lean on friends, extended family, or (gasp!) blogs. When to start investing for the long-term is also part of this equation.
When to Start Investing? The Answer Could Mean Millions.
Sometimes pure inertia delays our decision-making process. We know we need to save for the future. We know we need to save for retirement. But that is so far away! And if we start off on a bad foot we may choose a bad investment, establish a short-sighted plan, and potentially lose out on hundreds of thousands, if not millions, of dollars of compounded market returns.
Big “Little” Decisions
The most well-informed big decisions in life are nearly always preceded by hundreds of small decisions. The same is true of a good personal financial plan and when to start investing.
You may be some years away from earning the maximum income you were trained for, but you have already made a hundred small, strategic decisions that got you where you are now. Your financial trajectory going forward will depend on the choices you make now and in the immediate future.
Will Your Decision on When to Start Investing Cost You?
We are very busy people. For young professionals in the first half of a potentially lucrative career, working long hours goes with the territory. Working harder (and smarter) is how we get to the next level, both personally and professionally. However, it also means we defer some big decisions into the future. While we may potentially have more available to start investing our 401(k)s or IRAs five years from now, waiting can be very costly.
The Difference Between Investing at 30 Instead of 35
Original Illustration (Published March 2020)
Say you start investing at age 30 and you want to have $2.5 million in your portfolio when you retire at 65. For illustrative purposes, we’ll ignore the eroding effects of inflation on your buying power. We’ll assume that your future returns are the same as what the S&P 500 index did over the previous 35 years as of 2020. These assumptions include the Great Recession, the Tech Bubble, and the rest. That historical period produced about 15% compounded annually. Of course in real life you’re not going to get a steady 15% return each year, but we’ll use that number for illustration.
At age 30, you’ll have to contribute $170.33 per month to reach your $2.5 million goal. If you wait only 5 years and start investing at age 35, you’ll have to contribute $361.10 per month. Waiting 5 years will cost you more than $190/month additional – a more than doubling!
Look at it from the future back to now. If you invested that $170.33/month for 30 years – not 35 – at 15%, your account would be worth $1,179,242. So the cost of waiting those 5 years is $1,320,758 – over a million dollars!
📅 2026 Update: Recalculated with Current Long-Run S&P 500 Return Assumptions
The 15% figure used in the original 2020 illustration reflected the exceptional performance of the S&P 500 from 1985 to 2020, a period that included the extraordinary 1990s bull market. The current well-accepted long-run average annual return of the S&P 500 (with dividends reinvested) is approximately 10% over a 30-year horizon and about 10.4% over the past 30 years through December 2025, per Fidelity. The 40-year average through 2025 is approximately 11.5%.
The core point of the original article – that starting earlier dramatically reduces the monthly contribution required and enormously increases the wealth accumulated – is even stronger at lower assumed returns. With a more modest return assumption, you need to start earlier and contribute more diligently because compounding does less of the heavy lifting. Here are the updated calculations at 10% – the most commonly cited long-run S&P 500 average:
| Return Assumption | Start at 30 (35-yr horizon) | Start at 35 (30-yr horizon) | Extra monthly cost of waiting | Portfolio if start @30 but invest only 30 yrs | Cost of 5-yr delay |
| 15% (original, 1985–2020) | $170/mo | $361/mo | +$191/mo (2.1×) | $1,179,242 | $1,320,758 |
| 11.5% (40-yr avg to 2025) | $444/mo | $799/mo | +$355/mo (1.8×) | $1,390,414 | $1,109,586 |
| 10% (standard long-run avg) | $658/mo | $1,106/mo | +$448/mo (1.7×) | $1,488,480 | $1,011,520 |
💡 Key takeaway: At a 10% assumed return – the realistic long-run average – waiting just five years (from age 30 to 35) more than doubles your required monthly contribution, from $658 to $1,106. And if you start at 30 but invest for only 30 years instead of 35, your portfolio at retirement falls from $2.5 million to $1.49 million – a shortfall of over $1 million. The urgency is real at any reasonable return assumption. If anything, using a more conservative 10% figure makes the case for starting now even stronger than the original example did.
When to Start Investing
The answer to this question is easy: NOW! Just do what you can. Don’t wait to do something else first. If it is only $25/month, it is a start. Increase it as you can.
I don’t recommend a “rule of thumb” percentage to determine how much you should be saving. Your budget, time-horizon, risk-tolerance, and personal goals will dictate a contribution level that is right for you.
“The reward of a thing well done, is to have done it.” – Ralph Waldo Emerson
You will never ever look back in life and see that you saved too much.
Get in Touch!
Check out Glenn’s companion piece on The Time Value of Money for more on the power of compounding. Questions? Feel free to get in touch at info@cameron-downing.com. Also have a look at Your Emergency Fund, How Can I Improve My Credit Score, and Is it a Need? Or Just a Want?
Notes & Disclaimers
This document is an updated version of the original blog post published at cameron-downing.com on March 2, 2020, by Jonathan G. Cameron, CFP®. The original illustrative calculations using 15% have been preserved. A supplementary table using the more standard long-run S&P 500 average of approximately 10% has been added for 2026 context.
All investment return figures are for illustrative purposes only and do not represent a guarantee or prediction of future returns. Past performance is not indicative of future results. The S&P 500 long-run average annual return figures cited (approximately 10–11.5%) reflect historical data through December 2025 as reported by Fidelity and other sources; actual future returns will differ.
This document is for informational purposes only and does not constitute investment, tax, or financial advice. Consult a qualified financial advisor for advice specific to your situation.
