Recently there have been several showings of a Prudential TV Commercial touting the power of compound interest savings for retirement. This commercial infers that if you start saving at $45 per week, you will have enough on which to retire.
This depends greatly on what interest rate you can get for your investment.
Currently the highest interest your can get for savings is around 1.0% APY. Most are giving 0.95% APY. Using a $45 initial deposit and $45 per week thereafter for 40 years – this is what the TV commercial suggests. Using a generic savings calculator, you will have $114,364 to retire on.
Any financial planner will tell you that this is a nice amount of spending money, but as a retirement fund in the year 2054, it is no way close to being sufficient to retire on.
I am not a financial planner but it seems to me that Prudential is not “telling it like it is”.
It would be more like this: $450 initial deposit, 2.0% APY, $450 per week thereafter for 40 years. This would give you $1,586,836 for retirement which may or may not be enough in the year of 2054.
Do not believe the commercial by Prudential. Do your own research. Hire your own financial planner.