Good morning & happy Monday!
“The greatest investment a young person can make is in their own education, in their own mind. Because money comes and goes. Relationships come and go. But what you learn once stays with you forever.”
– Warren Buffett
It seemed like I just flipped my calendar to 2024 and now next week starts March … the year is already over 13% over. Time just seems to fly by.
I remember as a child time seemed to just drag on, now it seems to go faster than ever. I had a client tell me one time that “life is like a roll of toilet paper; it spins faster and faster as you get closer to the end.”
Time. I know I’ve talked about this issue in the past, but I would like to discuss it again here because it is such a critical issue when it comes to investing.
Time can either be our friend or be our enemy when it comes to investing. The younger you are the more of a friend it is.
I’m 44 years old, so let’s assume I save $500/month until I’m 65. With an 8% growth rate (just math here, no product or promise) at age 65 I would have $327,847.24. I would have invested $126,000 ($500/month x 12 years) and the growth would be $201,347.24 to bring the total to that $327,847.24.
Now, what if I was 34 years old, everything else the same ($500/month until I’m 65 with an 8% growth rate) then my value at age 65 is $819,175.73 ($186,000 in contributions, $632,675.93 in growth).
Let’s go 10 years earlier, a 24-year-old who saves $500/month to age 65 with an 8% growth rate … that value @ age 65 is $1,909,748.88! ($246,000 in contributions, growth of $1,663,248.88.
Let’s go just 3 years earlier, to a ripe 21-year-old, saving $500/month (to age 65, 8% growth rate) … the value at age 65 is a staggering $2,446,101.56!!! (Contributions totaled $264,000, growth accounted for $2,181,604.56.
Hold on, hold on, hold one … what just happened here???
If I, as a 44-year-old, saved $500 a month every month from now till age 65 I would have $327,847.24 at age 65 … or
If I started saving $500 a month 20 years earlier (at age 24) I would have $1,663,248.88 at age 65 … over 5 times as much!
If at age 21, I started investing $500 a month investment I would have $2,181,604.56 at 65 years old … 31% more than starting at 24 years old … and 665% more than the 44-year-old!
Put another way … if a 21-year-old, a 24-year-old, and I (age 44) all started saving $500/month to age 65:
- The 24-year-old would have $1,335,401 more than me.
- The 21-year-old would have $518,356 more than the 24-year-old, and $1,853,757 more than me.
One other really important point: it’s not just about the value, it’s about what that value generates for you in income in retirement. A $1,000,000 value with a 5% distribution rate is $50,000/year of income.
You know me … I’ve got to take it a step further … I’ve gotta get a chart in here 😉
$500/month, 8% growth rate
| Starting age | Value at age 65 | Income at age 65 with 5% distribution rate | |
| Annually | Monthly | ||
| 18 | $3,127,396.61 | $156,369 | $13,030 |
| 21 | $2,446,101.56 | $122,305 | $10,192 |
| 25 | $1,757,640.61 | $87,882 | $7,323 |
| 30 | $1,155,087.52 | $57,754 | $4,812 |
| 35 | $750,647.59 | $37,532 | $3,127 |
| 40 | $479,183.29 | $23,959 | $1,996 |
| 45 | $296,973.61 | $14,848 | $1,237 |
| 50 | $174,672.57 | $8,733 | $727 |
| 55 | $92,582.84 | $4,629 | $385 |
| 60 | $37,483.35 | $1,874 | $156 |
My friends, this is mind-blowing!
- If I start saving $500/month at 45 and save for 25 years (to age 65), my annual income distribution is $14,848 in retirement.
- If I start at age 18, I will save for 47 years (roughly twice as long as the 45 year old) but my annual income distribution is $156,369 … over 10 times that of the 45 year old!!!
If this does not convince you of the need to save early, I have no idea how I can ever convince you. This is my best shot 😊
If you are considering saving and investing but just waiting “a little bit longer” … every day you wait your future is paying the price. Procrastination in investing is at best extremely harmful, at worst financial suicide.
I am aware that if you are receiving this message directly from me you have already taken wise steps earlier in your life to be in a strong position for retirement. I tip my hat to you. But I do believe this information in the hands of young people today can be life changing. Please consider forwarding this to your kids, grandchildren, any young person who will listen. Let’s get the word out … save EARLY!!!
Thank you for allowing me to be a part of your journey … I am so honored to serve you!
Make it a great week ahead!