Question 1135960
if you retire at 55, plan 1 wins.


if you retire at 65, plan 2 wins.


the following graph shows why.


<img src = "http://theo.x10hosting.com/2019/030401.jpg" alt="$$$" >


plan 1 is straight line growth.


16000 * 30 = 480,000 and 16000 * 40 = 640,000.


plan 2 is exponential.


2500 * 1.18^30 = 358,426.596 rounded to 3 decimal places and 2500 * 1.18^40 = 1,875,945.862 rounded to 3 decimal places.


the growth in plan 1 stays at 16000 a year.


the growth in plan 2 increases each year because it's the balance in the previous year + 18% time the balance in the previous year.


as the balance gets bigger, the growth each year gets bigger.


after 30 years, it really starts taking off.