What Can $1 a Day Do to Secure Your Future? More Than You’d Think.

For most people under 30, the concept of retirement seems like an abstract and distant notion. Forgive us for getting a little bit morbid about it, but the fact is that barring any unforeseen circumstances, the odds are pretty good that you’re going to hit the age of 65 one day (80% in the United States, to be specific). Some time not long after that, you’ll probably prefer hanging out on a beach somewhere to going to your 9 to 5 job. That crippling fear of the unknown future starts to become real around the age of 25, when your brain begins to fully understand long-term consequences. At that point, knowing that there is some plan for the distant future can be a huge stress relief, which has countless benefits to your mental and physical health.

Just 25 years ago, almost 40% of Americans had a pension. That number has dropped to 13%, which means that the vast majority either have other plans to save, or no plans at all. Unfortunately, with most living paycheck-to-paycheck, there just isn’t enough money left over at the end of the month to set something aside for the future.

Here’s the good news: a little bit goes a long way. When you do the math, even $1 a day can make a huge difference.

Let’s suppose you are 21 years old and opening a Roth IRA for the first time. You contribute $1 every single day into a broad index fund that follows the S&P 500. Then you wait. According to historical rates of return, at age of 65, you’ll have somewhere between $100,000 and $262,000 waiting for you (depending on how you calculate), and you won’t have to pay any taxes when you take it out of your account. What about $5 every day? That comes out to somewhere between $500,000 and $1.3 million. 

You can play with the numbers using a Roth IRA calculator, like this one from Nerdwallet or this one from Vanguard. Opening a free Roth through any of a number of robo-advisors is easy, and the peace of mind that it will bring you is invaluable. Just start saving that spare change and forget about it; your future self will thank you.