Wednesday, June 11, 2014

Win big through Compounding Interest

Here is the concept of how compound interest increases over the years(2 min video) as applies to 401K plans.




When I became self employed I learned even small business owners can benefit greatly with a I401K plan and with little restriction.  My best tip on the whole thing?  Start young because 401K plans work off compounding interest and gains momentum over time leading to a big payoff latter down the road.

The short video below explains the many details about the I401K plan and its benefits for business owners.

  “Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it.”
Albert Einstein 



In the link provided below, you can easily use a compound interest calculator to figure out how much money you will have around retirement by using the I401K plan.  Once you open the link, enter all your corresponding numbers for dollars and years till retirement.  In the field marked "Annual Addition" simply enter the amount you can invest annually into the account.

http://www.moneychimp.com/calculator/compound_interest_calculator.htm

Many also set up a Simplified Employee Pension Plan (SEP) IRA, which allows them to contribute up to 25% of their income, up to $51,000 (2013) per year.  



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