Talk:Importance of saving early

Graphs
Should we flip the x axis around on some of the graphs (show age 20 on the right side)? --Quebec 17:37, 7 February 2015 (MST)
 * No, as it is easier to conceptualize time moving from left to right. --LadyGeek 10:12, 8 February 2015 (MST)

Time value of money
I think there is an extra time period in the calculations. The crux of the discrepancy is that contributions are made every year until one reaches the age of 65. There is no contribution in the year 65. Quebec used 'N+1', but I used 'N' and changed the page with the revised calculations. I also showed the calculation details as a tutorial example. I could be off by one, so feel free to revert the changes. --LadyGeek 10:12, 8 February 2015 (MST)
 * I knew something was off, yes I was adding another $6k at age 65, but that's when retirement starts. I'll fix the graphs. --Quebec 10:39, 8 February 2015 (MST)
 * Hum, still don't get the same numbers. Trying to understand how the Excel functions work makes my head hurt so I'm doing it manually. This the 4% interest example:




 * align="center" style="background:#f0f0f0;"|Year
 * align="center" style="background:#f0f0f0;"|Initial balance
 * align="center" style="background:#f0f0f0;"|Balance at year end
 * align="center" style="background:#f0f0f0;"|Age at beginning of year
 * align="center" style="background:#f0f0f0;"|Age at year-end
 * 1||6000||$6 240||55||56
 * 2||$12 240||$12 730||56||57
 * 3||$18 730||$19 479||57||58
 * 4||$25 479||$26 498||58||59
 * 5||$32 498||$33 798||59||60
 * 6||$39 798||$41 390||60||61
 * 7||$47 390||$49 285||61||62
 * 8||$55 285||$57 497||62||63
 * 9||$63 497||$66 037||63||64
 * 10||$72 037||$74 918||64||65
 * }
 * I can reproduce your table exactly in Excel. We are off again, this time it's the definition of payment 'Type'. I utilized 'Type = 0', meaning that payments are due at the end of the period. This is the most common form of usage and 'Type' is usually ignored. In this case, we are interested in the value at the end of a period with payments due at the beginning of a period ('Type = 1'). For example:
 * 39,796.85 = FV(4%, 6, -6000,0,0) for the Initial Balance of year 6
 * 41,389.77 = FV(4%, 6, -6000,0,1) for the Balance at the end of year 6
 * --LadyGeek 13:00, 8 February 2015 (MST)
 * I revised the example calculation on the page to reflect 'Type = 1' so you can see the details.--LadyGeek 13:22, 8 February 2015 (MST)
 * $592 959 is the balance at age 65 if you start at age 25, no? If starting at age 40 you end up with $259 870? (still using the table-type calculations, as shown above). Also, in your PMT formula (in note 2) you are using payment type = 0 (implicitely), is this correct?
 * Yes and yes. My mistake, I did not enter the "optional" Type parameter. Since the parameter is "optional" in Excel; Excel did not tell me it was missing. Stick with your table-type calculations so you do not have Excel driving you crazy. Also, yes, I had PMT type = 0 implicitly. I have updated the PMT formula to include type = 1 explicitly. --LadyGeek 18:47, 8 February 2015 (MST)
 * I've reimported the graphs with the correct numbers. --Quebec 07:03, 9 February 2015 (MST)
 * 10||$72 037||$74 918||64||65
 * }
 * I can reproduce your table exactly in Excel. We are off again, this time it's the definition of payment 'Type'. I utilized 'Type = 0', meaning that payments are due at the end of the period. This is the most common form of usage and 'Type' is usually ignored. In this case, we are interested in the value at the end of a period with payments due at the beginning of a period ('Type = 1'). For example:
 * 39,796.85 = FV(4%, 6, -6000,0,0) for the Initial Balance of year 6
 * 41,389.77 = FV(4%, 6, -6000,0,1) for the Balance at the end of year 6
 * --LadyGeek 13:00, 8 February 2015 (MST)
 * I revised the example calculation on the page to reflect 'Type = 1' so you can see the details.--LadyGeek 13:22, 8 February 2015 (MST)
 * $592 959 is the balance at age 65 if you start at age 25, no? If starting at age 40 you end up with $259 870? (still using the table-type calculations, as shown above). Also, in your PMT formula (in note 2) you are using payment type = 0 (implicitely), is this correct?
 * Yes and yes. My mistake, I did not enter the "optional" Type parameter. Since the parameter is "optional" in Excel; Excel did not tell me it was missing. Stick with your table-type calculations so you do not have Excel driving you crazy. Also, yes, I had PMT type = 0 implicitly. I have updated the PMT formula to include type = 1 explicitly. --LadyGeek 18:47, 8 February 2015 (MST)
 * I've reimported the graphs with the correct numbers. --Quebec 07:03, 9 February 2015 (MST)

What does it take to catch up if you start late?
I've created two new graphs (#4 and #5) to show how much you need to save every year, or in total, to have $100k at age 65. I think this is a better way to frame things then graph #3 which starts from saving $1 a year at age 20 to get $125.87 at age 65. It's easier to relate to "I want $100k" then to relate to "I want $125.87". I suggest we delete graph #3 and the related text. --Quebec 16:08, 9 February 2015 (MST)
 * I agree and have deleted graph #3 and the related text. I have also added a detailed explanation of graph #2. (Please check your forum PMs.) --LadyGeek 18:48, 9 February 2015 (MST)

Ready to go live?
I can't find anything else to do here, development seems complete. Can this page be moved to the main namespace? I suggest starting a forum thread to announce the new page.

This page will replace the current content in the Bogleheads wiki page Bogleheads:User:LadyGeek/Importance of saving early; with a corresponding forum announcement thread.--LadyGeek 15:09, 10 February 2015 (MST)
 * The Bogleheads thread is here: Wiki - For new investors: The Importance of Saving Early
 * I removed display of the Table of Contents because it was distracting attention from the quote. This is a short article, the TOC isn't really needed. --LadyGeek 18:15, 11 February 2015 (MST)
 * Based on a suggestion in the Bogleheads forum, I replaced the first graph with a column chart showing only the 4% interest case. This version is easier to understand and allows the reader to see the connection with the next graph (contribution and interest components). I wasn't sure if the Wikipedia link should be converted to a footnote in finiki and left it alone. Compare to bogleheads:Importance of saving early. --LadyGeek 19:55, 11 February 2015 (MST)