The awesome power of Compound Interest
“Compound interest is the eighth wonder of the world.” Albert Einstein
If someone told you that: “You were about to have a million dollars (or more) taken from you!” What would you do? Almost every sane person would move heaven and earth to stop the thief and retain the million dollars.
What if you are the thief who is robbing from yourself? Read on and I will explain why.
Australians are lucky to have incredible superannuation incentives. Super is an excellent vehicle to build long term wealth for you and your loved ones. It provides the 2 essential elements necessary to harness the awesome power of compound interest, being: compounding rate and time:
1) Income and capital gains in super are taxed at between 10 to 15% maximum with nil tax for those aged over 60 (who convert their super to their own private account based pension). This assists you to achieve a better after-tax ‘compounding rate’.
2) Wise people add to their super contributions by compulsory employer contributions or other contributions. Generally contributions cannot be accessed from super until they retire. This gives compounding ‘time’ to grow.
‘Super Riches’ is the result and the term I have coined for those people who make the extra effort to take super seriously. This can easily be over a million dollars more for many people.
Every week I talk with people with their super snoozing away in an industry or retail super fund. Less than 6% of those people can give me a good idea of: what they are invested in; and their plan to make their super work harder. The vast majority of them have been incorrectly indoctrinated to believe that they cannot get better returns elsewhere.
Chapter 1 of my latest book ‘Invest Wisely and Grow Rich’ goes explains compounding in more detail, with practical examples. You can download this for free from my website or on the link below. My book explains- if you compound $100,000 (with no additional contributions for 27 years) at different rates, you will receive at:
8% return- $ 400,000
11% return- $ 800,000
14% return- $1,600,000
The bottom line is if you make your super (or other investments) grow at 14% instead of 8% you will earn over $1.2 million more.
For those who let their super snooze away and do not make the extra effort, they will rob themselves of over $1,000,000 of future retirement savings for them and their loved ones.
Thank you for reading my blog. Over 30,000 people read my first book ‘How to Build Riches’. It has been estimated that well over a Billion dollars was made by those readers who took action in the ASK formulae and ideas from that book.
Commit to find out more and do what it takes to make you super and retirement savings grow while you work and the 20 to 40 years after you stop working and start enjoying the income stream that you have created for yourself and your loved ones.
It has never been easier than it is right now to earn great returns. My latest book also explains: the 1 on a 10,000 year opportunity that is happening right now; how real estate and shares can both be your friends; how to profit from this ‘virtuous cycle’ occurring in the USA now; how to change paradigms for new opportunities and much more.
It is not simple or everyone would be rich. There are challenges ahead, including: the ageing population; Gross Domestic Product will decline in coming decades in Australia and most western economies; there will be at least one more GFC in coming years; shift of power and consumption to China and India, etc.
There are many ways to make the awesome power of compound interest work for you. If you want to read more, download for free ‘Compounding: The Eighth Wonder of the World’ from my book ‘Invest Wisely and Grow Rich’.
In coming blogs I will identify: how the investment world has changed (and is mostly happening outside of Australia); where some of the great investment themes and strategies are; and how compound interest can work to you to make you that extra million that most people will squander.
