Compound interest was regarded by Albert Einstein as “the greatest mathematical discovery of all time”. Stated simply, compound interest can be defined as interest on interest, and is the growth of an investment calculated on the original principal and accumulated interest of an investment, therefore accelerating the growth and maximizing the growth of an initial investment.
Though the lingo can be a little intimidating, it’s easier than it sounds to retire on compound interest. All one truly needs is the ability to allow an asset to sit and accumulate as much interest as absolutely possible before they are accessed. This allows the initial principal to grow faster by growing at higher and higher rate in tandem with the growing dollar value. The interest essentially piles on top of itself, awarding a larger dollar value with every passing year so long as the principal investment grows, causing the investment to grow rapidly and exponentially.
Starting early is key to ensuring success when attempting to retire on compound interest. This is a simple concept, and just states that the earlier that one puts down the initial investment, the longer the compounded interest will grow. Of course, the actual dollar value of the ending amount will depend on the amount originally invested, but regardless, the longer an investment has to grow, the more money one could potentially have in their bank account during retirement.
Compounding your investment is the prime way to make your investment grow to its maximum potential, but if one plans to retire on compound interest, the best way to prepare to do so is to put down a sizable principal investment. In laments terms, the larger the principal, the larger the annual compounded interest. Of course, it is possible to retire on compound interest if you place a smaller investment up front, but it’s important to do so early if that’s the case to create a decent sized profit in the end.
Of course, there are many ways to make a profit off of compound interest. The best way to do so is still subject to debate by leading experts. These are just a few of the agreed upon methods, and if one plans to retire on compound interest, they should consult an expert in regards to a personalized way to make that happen. Albert Einstein praised the idea of compound interest, and stressed the importance of utilizing the potential that it offered. What’s for sure is that compounded interest presents an option to many to raise their earning potential, and even offer a way to retire more comfortably by taking advantage of the system before them and letting their investments grow faster and stronger than they thought they ever would.