Newspaper article Tweed Daily News (Tweed Heads, Australia)

Pension Rate Slowdown Cause for Concern

Newspaper article Tweed Daily News (Tweed Heads, Australia)

Pension Rate Slowdown Cause for Concern

Article excerpt

THE journey to retirement has just got a lot longer if you're going to depend on the age pension.

Above all, you need to understand how compound interest works.

To put it simply, how much you will have at the end of a given period depends on the amount invested, the earning rate, and the length of time of the investment.

If the time is short, the rate matters little - the increase in the final benefit grows exponentially.

If you invest $1000 a month at 3% for two years, you will end up with $25,000. Increase the rate of return to 8% and the final balance is just $26,000. Because the term is short, the rate doesn't really matter.

However, if we extend the term to 30years, $1000 a month at 3% would grow to $600,000, and at 8% $1.5 million. Take the term to 40years and the numbers become $926,000 and $3.5million. …

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