…(read more)
LEARN MORE ABOUT: IRA Accounts
TRANSFER IRA TO GOLD: Gold IRA Account
TRANSFER IRA TO SILVER: Silver IRA Account
REVEALED: Best Gold Backed IRA
$6500 invested at 21 vs. $10,000 invested at 45: A Comparison of Early and Late Investing
When it comes to personal finance, investing early can make a significant difference in the long run. The power of compound interest, time, and growth potential can turn a relatively small investment into a substantial sum over several decades. To illustrate this, let’s compare two different scenarios: investing $6500 at 21 years old versus investing $10,000 at 45 years old.
The first scenario involves a 21-year-old individual starting their investment journey with $6500. Assuming they invest this money in a Roth IRA, a tax-advantaged retirement account, and achieve an average annual return of 7% over a 40-year period until retirement. By the time they reach retirement age, their investment would have grown to approximately $143,348.
On the other hand, a 45-year-old individual starting with $10,000, investing it in the same manner and achieving the same average annual return of 7%, will have a significantly smaller amount by the time they reach retirement age. In fact, their investment would only grow to around $38,061 over the same 20-year period.
The stark difference between these two scenarios demonstrates that investing early can have a profound impact on your financial future. Time acts as a catalyst for growth and provides the opportunity for compounding to work its magic. The longer your money is invested, the more it can benefit from compound interest, which is the interest earned on both the original investment and the accumulated interest over time.
Additionally, starting early allows you to take advantage of market fluctuations. Investing at 21 gives you plenty of time to ride out market highs and lows, smoothing out the impacts of short-term market volatility. By contrast, starting at 45 means you have less time to recover from market downturns, which can have a significant impact on your investments.
Investing early also enables you to adopt a more aggressive investment strategy. With a longer time horizon, you can afford to take on higher-risk investments that potentially offer higher returns. Conversely, investing later in life may require more conservative investment choices to protect the hard-earned savings accumulated over the years.
While this comparison highlights the importance of starting early, it’s essential to remember that it’s never too late to invest. Starting at any age can still bring positive results, but it may require more substantial contributions or more aggressive investment strategies to make the same impact as an early investment.
Ultimately, investing early can be a game-changer for your financial well-being. The power of compound interest and the ability to withstand short-term market fluctuations can significantly impact the growth potential of your investments. So, whether you’re 21 or 45, it’s crucial to prioritize saving and investing for your future.
Ira 401 k is a waste of money
i dont believe in 40 years a ROTH is even gonna have the same laws. I dont believe the economy will function the same. I dont even think the world will be how we see it now. Lets look at 1980 compared to today: Computers were barely a thing and the internet wasnt. Now we have a global network of connected countries. Problems are solved differently. Im not saying dont invest, im just saying invest with caution. Nothing stays the same in life, and if it does something went wrong.
Making money is not the same as keeping it there is a reason why investments aren't well taught in schools, the examples you gave are well stationed, the market crisis gave me my first millions, people shy away from hard times, I embrace them.. well at least my advisor does lol.
If your complaining about you dont make enough money to invest in your future when your to old to work…its about sacrificing things you "need" now vs things you NEED later.
10k after the government takes its cut of 45%?
Time is the most valuable asset.
Gen z'ers with $10,000… yeah that's not going into retirement. Let's take out generations here and just use 21 year olds in general and the statement still holds true for 95% of them.
The sad part is most of us will not get to enjoy retirement that is a fact so enjoy life while it lasts for you.
Can u tell something without … interest?
A $10,000 bonus means you take about $6,000 home after taxes.
What job is giving out 10K bonuses?
That’s 8% annual compound at 43 years accounting for inflation and such. It’s more like 10-12% where maybe that 6,500 could turn into 400-900k but 43 years is a long ass time.
Wow retirement savings in the US is so backwards. In Australia when you first start working your money is already automatically invested in a fund each paycheck and it’s compulsory so you invest during your entire career. I already have 100k in retirement savings at 38
Great video. We are all seeking for financial independence and a better way of life. This is not difficult to achieve with savvy investing, a frugal lifestyle, and cautious budgeting. I'm glad I learned early on to work hard for financial independence. As Warren Buffet said, he has seen this happen many times in his life. Not an investor, My husband and i never earned more than a middle class salary. We plan to get retired at 58 with a stock portfolio worth $4M. We have never sold so much as one share of stock.
This is generally correct, but the compounding calculations usely forget to consider "down years" in the market, which reduce some of the compounding power.
What the hell is that job? Highly paid only fans “model”?
Lol… $10,000 bonus would be nice…
$500 a year lmao
It's too bad that many administrators of IRA s and 401ks charge such exorbitant fees.
If ONLY there was an alternative! Like one that was able to grow TAX FREE at 8-12% and able to be accessed TAX FREE at ANY age. And one that can be passed on to heirs but avoid probate. IF ONLY!
But there is.
It’s not tax free. It’s tax deferred until you take it out.
ah yes. the magic of compound interest.
software engineers with talent OFTEN get offered sign on bonus.
You might argue the person who took the vacation early was stupid, but consider this: A lot of people die within a year of retiring, so all that saved up money goes to naught. You have to have plans, hobbies and stay physically active to avoid dying shortly after retiring. So, there is a ton of people who save for retirement, but then die at 60, or 61, when they had planned to live to their 80s on their retirement fund, and when they die, usually have 50% of it immediately goes to the government.
So, really, who was the dumb one in this situation?
Also, 178k will not last long when you are older. My mother has saved up over 1.5 million, but with potentially expensive medical bills and caretaking needed, that money could be gone in a couple years.
lol i got a $10,000 bonus and after taxes only got $6,500
Where are we supposed to invest? I don't invest because I don't know where to invest
The core idea that if you have money you should invest in retirement early is fine, but advice that amounts to "be given an extra 10k" is useless.
If you have a 401k cash it out, before the economy crashes
Right up until there's a recession, like what's coming up, and your 401k becomes worthless, like what happened to so many back in 2008.
Find a job that you can do comfortably and want to do for the rest of your life. Save a little bit here and there but focus on yourself first. Don't be stupid with your money but don't be so determined to save when you don't know what could happen in decades. Just my opinion, you may think I'm stupid but that's ok. I've already come to grips ill be working for the rest of my life.
What inflation?
Your bank/banking system is more likely to collapse tomorrow than you dying. Spend your dough and fuck the suits that are making more out our money than we are.
They should’ve invested *earlier
I put 6k in at 18 and 200 every month since I'm now 22
The real question is do you want to be rich at 65 or do you want to be happy at 21
Fuck the Roth's scam ya it works but it also fuels the bs we all hate .
Time in the market beats timing the market. That all I gotta say.