The Power of EARLY Investing
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- čas přidán 21. 02. 2022
- Explore the differences between starting early and waiting just a few years before starting to invest for the long term.
This is the shortened version of a previous video of similar content.
I told my oldest kid when he was 16. Put $20 a week away NOW and when you 18, open an IRA and make a large first deposit.. THEN WHEN YOU are 50, you'll be SET FOR LIFE! and what did he do? the opposite, got a credit card the day he turned 18 and went straight into debt.
I hear you. I have beat the drum for my 2 kids. My son was a "believer" and was putting 20% of his income into his 401K. My daughter kept finding reasons to reduce her contributions. My son is now 27 and he's well on his way, my daughter is now trying to play catch-up, and learning you can't do it. Sometimes they just don't listen...
How about advice for those of us getting a much later start? Like...age 46.
The "math" is the same, the stock market returns would be the same, but the problem you face is that you have fewer years to "snowball" or COMPOUND your earnings. But later in life, you likely have more money to invest, so you can "make up" for some lost time by investing the maximum amounts for a 401K or an IRA. Starting in 2023, the IRA max contribution is rising from $6000 to $6500. When you turn 50 it will rise to $7000.
I ran the math for you starting now and increasing your annual contribution to $7K when you turn 50. At age 65, you'd be looking at an account balance of $394,237, with $138K out of your pocket, and $256K in growth/earnings. You'd be ontrack to hit a million at age 74.
Contribution limits in a 401K are far higher and if you have a 401K account and your budget allows for it, I would contribute as much as you can in a 401K plan. THE GOOD NEWS, is that most of the US Stock Market is in the dump right now. S&P500 is down over 23% and the NASDAQ is down over 30% The investments people buy over the next year or 2 are positioned for explosive growth when the market rebounds (as it historically does). So you may get some help from the fact that you're definitely buying in during a "down market".
Hope that helps :)