Your time is a valuable resource you probably often overlook when it comes to another resource: money. We like to spend as much of both as we can today*.* Doing the math shows how and why it pays to invest as much as possible as early as possible.

What’s our cost tomorrow? Let’s say you want to save $200 per month and you start at age 25. What will you save by age 65?

What you save accumulates future value, or total worth at a specific date years ahead. Using a future value calculator, let’s enter today’s date and then add 40 years to get the end date when we’ll start drawing from the retirement fund.

On your four decades’ uninterrupted monthly deposits of $200, let’s calculate a conservative 4% for returns. Note: Because investing returns change (aka volatility), understate your constant rate of return in calculations.

The result: some $235,000.

Don’t have 40 years left before retirement? Let’s say you have 30 years. We simply change the timeframe on the calculator. The result for 30 years: about $138,000 saved, a difference of $97,000.

That one decade of delay means you now must save about $350 per month to catch up to the total of approximately $235,000. Delay socking away money for 20 years and you need to invest about $650 a month to catch up. The delays keep compounding.

Okay, suppose with less time remaining you just reach for a higher return. With 30 years left and $200 monthly savings, you need 7% consistent returns annually to hit our above target amount.

Relying on returns to make up savings in shorter timeframes means you also increase risk, especially since most of exponential growth comes in the later years. Just before your retirement, at precisely the moment when you relied on big returns to support you, comes the next big market correction. A lot of your value disappears with stocks’ slide.

Better you rely on saving *more* money than risk trying to grow it with decades of consistently great returns. Returns we may not get; volatility in value is certain at some point.

What does this potentially translate to regarding your retirement income? Let’s turn to the concept of present value – future income you extrapolate from current prices of your holdings – and a present value calculator.

Our figures here assume that you’re not yet 65 (an example retirement age), and that you expect to consume over 30 years of retirement what you will have saved when you start your golden years.

On the calculator, set the date for 30 years, the future value at $0 and the rate of return at our original and conservative 4%. How much will $235,000 provide in monthly income when you reach 65?

Inputting different values until the present value reaches about $235,000, we get about $1,125 per month in income. Lowering the present value to, say, $138,000 (from our second example above) fetches you about $650 a month. You get the idea.

Saving for retirement often comes down to a simple clash: your present self wants to spend as much as possible now and your future self wants to reap the rewards of socked-away cash. It’s good bet that your future self will be glad you saved for as long as possible.

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*Larry R. Frank Sr.**, CFP, is a Registered Investment Adviser (California) in Roseville, Calif. He is the author of the book, *Wealth Odyssey*. He has an MBA with a finance concentration and B.S. cum laude in physics with which he views the world of money dynamically. He has peer-reviewed research published in the *Journal of Financial Planning. *http://blog.betterfinancialeducation.com/**.*

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