Cost of waiting to invest calculator

How to use the calculator

1. Choose a currency. It changes the symbol only.
2. Under What you’d invest, enter the amount you’d put in Each month. Add a Lump sum at the start (optional) if you have one, and use Increase the monthly amount each year if you’d raise it as your pay rises.
3. Under Timing, set Your age now, the Years you wait before starting and the Age you’ll compare at.
4. Under Return, set the Average return per year. Switch on Show in today’s money (subtract 2.5% inflation) to see the answer in today’s prices.

The results give the cost of the wait at your comparison age, split into Money you never put in and Growth on it you miss, and the monthly amount that would catch up. The bar chart and the table below them repeat the sum for every wait from 0 to 10 years.

How the numbers are worked out

The calculator turns the yearly return R into a monthly rate, i = (1 + R)^1/12 − 1, and adds each payment at the end of the month. For a monthly amount P, N months to your comparison age and a wait of D months:

• starting now: FV = P × ((1 + i)^N − 1) ÷ i
• starting later: FV = P × ((1 + i)^{N − D} − 1) ÷ i
• cost of waiting = the first pot minus the second, and growth lost = that cost minus P × D
• catch-up amount = the first pot × i ÷ ((1 + i)^{N − D} − 1)

With the defaults (US$200 a month, 6% a year, age 25, a five-year wait, compared at 65), i is 0.00486755 (0.487% a month), N is 480 and D is 60:

• (1 + i)⁴⁸⁰ = 10.28572, so starting now gives 200 × 9.28572 ÷ 0.00486755 = $381,536
• (1 + i)⁴²⁰ = 7.68609, so starting at 30 gives 200 × 6.68609 ÷ 0.00486755 = $274,721
• the gap is $106,815: $12,000 of payments never made and $94,815 of growth on them
• catching up from 30 takes 381,536 × 0.00486755 ÷ 6.68609 = $277.76 a month

A lump sum L adds L × (1 + i)^N to the first pot and L × (1 + i)^{N − D} to the second, because it goes in on the day that person starts. When payments rise each year, the calculator works month by month instead of using the formula.

Why time does more than the rate

Money paid in first has the longest to grow. At 6% a year, $200 paid in at 25 is worth about $2,050 at 65, the same $200 paid in at 30 about $1,530, and paid in at 35 about $1,140. Waiting five years leaves you at 65 with the pot you’d have had at 60 by starting now, $274,721.

That’s how five skipped years, $12,000 of payments, turn into a $106,815 gap: each dollar not invested between 25 and 30 leaves about $8.90 less at 65. Only a much higher return closes it. To end level with a 25-year-old earning 6%, someone starting at 30 would need about 7.5% a year, and someone starting at 35 about 9.6%.

Waiting for a better moment

The calculator assumes the same return every year, and markets don’t move like that. Share prices can fall in any year, including the first year after you start. Waiting for a fall is a bet that prices will drop by more than the growth you’d give up while you wait, and nobody knows what prices will do next year, us included.

A fall early on costs less money than the same fall later. After one year of US$200 a month at 6%, the pot holds about $2,470, so a 20% fall would take about $490 off it. At 64 the pot would be about $357,600, and the same 20% would take about $71,500. Payments made after a fall also buy in at the lower prices.

Is it too late to start at 40 or 50?

Starting at 40 with US$200 a month at 6% gives about $135,300 at 65, and starting at 50 gives about $57,400. To reach the same $381,536 as someone who started at 25, you’d need about $564 a month from 40 or $1,330 a month from 50.

Each year of waiting still costs something at those ages. At 40, starting a year later costs about $10,000 by 65; at 50, it costs about $5,600.

Two examples outside the US

These people are made up; the numbers come from the calculator.

Aisha is 28 and lives in the UK. She plans to invest £250 a month but is thinking of waiting three years, until her car loan is paid off. Compared at 60 with a 5% return, starting now gives £231,028 and starting at 31 gives £191,215.

The gap is £39,813: £9,000 of payments and £30,813 of growth. Catching up from 31 would take about £302 a month. The other side of her choice is what the loan costs while it runs, which the debt payoff calculator works out.

Lukas is 30 and lives in Ireland. He’d invest €150 a month, raised by 2% a year, and is weighing a two-year wait. Compared at 60 at 5%, the wait costs €20,340, of which €6,330 is payments and €14,010 is growth; catching up would take €173 a month to start, rising 2% a year.

Scroll is education, not advice. Our lessons and calculators explain how money works in general. They don’t know your circumstances, so they can’t tell you what to do with yours. For that, speak to a qualified, regulated adviser in your country.

Today’s money, fees and tax

With Show in today’s money switched on, the return becomes (1.06 ÷ 1.025) − 1 = 3.41% a year. On the defaults the five-year wait then costs about $42,300 in today’s money, and the catch-up is about $253 a month.

Both pots are before fees and tax, and fees shrink each of them; the investment fee calculator shows by how much. For a single pot with any starting amount and payment frequency, the compound interest calculator runs the same growth.