Very handy. Example: Compare a 0% interest investment scenario, like Social Security, with an IRA / 401K scenario, at various modest interest rates.
A $35.oo / week Social Security paycheck deduction, each week, for 40 years, would yield
$72,995.oo @0% => $145,990.oo w/ employer match
$111,898.oo @2% =>$223,796.oo w/ employer match
$141,229.oo @3% => $282,458.oo w/ employer match
$180,430.oo @4% => $360,860.oo w/ employer match
Honestly! 2% over 40 years is substantially conservative investing!
Yet, even at a compounded interest of merely 2% over 40 years, you can see, it's the difference between ~$146K, and ~$223K. It nearly doubles!
Which of those two would YOU rather retire on?
I'd prefer the ~$Quarter $Mil.! But that's just me.
Wanna know what sort of interest rate a citizen could expect? Just lookit at what interest rate the S&P 500 has averaged over the past 40 years.
If this source is correct:
From 1970 - 2010 (40 years), the S&P 500 AVERAGED over 7% per year.
Let's plug in those numbers:
SS @ $35 / week? ~$146K w/ employer's match.
IRA in S&P 500 @$35 / week? $800K+!
Of course, it wouldn't be prudent to leave it in stocks for the last (4th) decade, immediately before retirement.
So once the citizen reaches their 4th decade of employment, shifting it to a guaranteed investment would be advisable.
So that might cut it down to only ~$Half a $Million.