Anna and Ben both plan to retire at age 65, and both earn the same annual return on their investments. Anna contributes a fixed amount every year from age 25 to age 35 (10 years) and then stops adding money, leaving her investments to grow until retirement. Ben starts at age 35 and contributes the same fixed amount every year until age 65 (30 years). Which statements are correct?

Question

Answer

Because Ben contributed three times as much money in total, he is guaranteed to retire with more wealth than Anna.

Answer

Starting to save 10 years earlier has only a marginal effect on the final retirement balance.

Answer

Anna can end up with more retirement wealth than Ben, even though she contributed in total three times less, because her money has many more years to compound.

Answer

The key driver of compounding over time is how long the money stays invested, not only how much is contributed in total.

Crowdly

Anna and Ben both plan to retire at age 65, and both earn the same annual return...

Want instant access to all verified answers on moodle.taltech.ee?