Deep Dive
Shownotes Transcript
Did you know that the value of a dollar changes based on how old you are? It's true. If you're in your early 20s, $1 is worth $50. If you're in your 30s, that same dollar is worth $18.
But when you hit your early 40s, it's only worth $6. And by your 50s, that $1 is worth a mere $2. I know, I know, sounds completely crazy. But it's true, it's not a conspiracy theory. And that's because of the power of compound growth. It's where your money makes more money. And then that new money makes even more money. So you're earning returns on the whole balance, not just what you started with. And that's why $1 invested at age 22 with a 10% rate of return and no additional contributions
could grow to $50 by age 62. But you probably want to retire with more than 50 bucks. So how much do you need to invest in order to retire well? Great question. I'm glad you didn't ask. Now, this is going to change based on your age, but let's use this as an example. Let's say you want to retire with $1 million at age 62, regardless of your age. So here we go.
This is your money. This is compound growth. And this is your brain on drugs. Just kidding. This is your retirement account. So we want this to get to a million, which we're going to say is this line right here. Okay? So your money, age 22, you're going to invest $158 a month over 40 years. Now, that's not a lot of money. So we're just going to start putting a few of these little guys in there. Look at that. Look at you contributing. Look at you go.
Oh my goodness. You're on a roll. You're on a roll. Look at that. We're 20 years in, baby. We're 30 years in. Could he go all the way? There we go. That's your contributions. Now, what happens over 40 years as compound growth works its magic? Here's what happens. Oh my goodness. Look at this. We're millionaires, baby.
Look at this. At 22, this is all you put in. That's $76,000 of your own money. The extra $925,000 that got you to a million, that's pure growth, baby. So that's 22 years old. But let's see what happens when you start at 32. Well, here we go. Here's your retirement account starting from zero at 32 years old. This is the million dollar mark right here. You're going to need to invest more than double the amount of that 22-year-old, about $442 a month. So here we go.
440 to a month, over 30 years, because we're going from 32 to 62. Whoa, there we go. That amounts to almost 160 grand of your contributions. And now let's see what compound growth does for us.
Whoa, right on, man. Whoa. We got over a million by accident. So still good news for the 32-year-old. $840,000 of that million was still thanks to compound growth, and only this much was your contribution. Now, you might be saying, George, it must be nice to be a mere 32 years old, but I'm over here and I'm 42 years old starting from zero. What do I need to invest to get to that million by 62? I'm so glad you asked. Let's see.
So here we are, 42 years old, nothing saved in retirement. Here's our empty retirement account. We've got to get to that million and it's going to take 20 years to get there. And we have to invest $1,300 a month this time to hit that same million mark by 62, which is going to take more of your money. $1,300 a month is nothing to sniff at, nothing to shake a fist at. So here we go. All right, there's our contributions. And now we get to the million mark. Thanks, Compound Growth. Look at you go. All right.
There we go. Now, 1,300, that's a big number, but the good news is you're still getting a lot of help from compound growth, about 683,000 worth, which is very, very impressive. Now, last example. Let's say you're a late bloomer. You're not getting started investing until you're 52. What would that look like? I'll tell you what that would look like. 52 years old, you got nothing in retirement. Here's the empty retirement account, and you want
a million dollars in just 10 years. That's 62 years old. Well, you need to contribute a whole lot more to the tune of $4,900 a month for those 10 years. And that adds up to $585,000. So we're going to go a little over halfway to a million with our own money. And that'll do it. And the rest is going to be our compound growth. About $415,000 worth for us to hit that million mark in 10 years. Call it good.
So there you go. Looking at these examples, you will see that starting early makes a big difference. You want time on your side and you also need to be investing consistently. All of these examples, we were investing every single month the same amount without failure. Now, if you saw these last two examples and you feel like you're short on time, don't stress. We're going to dive into what you can do about that in just a minute.
But first, remember, retirement is not an age. It's a financial number. You don't get to retire just because you turn 62. You get to retire when your investment accounts and other assets generate enough income to cover your expenses with room to spare, letting you trade in that nine to five grind for 95 minute midday naps. So start investing as soon as you're ready, because the earlier you start, the more consistent you are, the better off you're going to be. So how much wealth can you build based on where you're at today? Let's figure it out.
An easy way to figure that out is with a good investment calculator. And this one is my favorite if you want to check it out for yourself. All you got to do is plug in your numbers and you'll get a better idea of what steps to take next. And if you're new to investing, a little heads up. Your money is going to fluctuate with the market like a little roller coaster. But do not worry about what the market is doing. Why? Well, if you're only looking at a small portion of time, the market can feel scary and unreliable like a toddler with a Sharpie.
But if you look at the last 75 years of the S&P 500, which is the benchmark for the U.S. stock market, it consistently goes up over time to the tune of 10% to 12% on average. So some years it'll be down, some years way up, some years a little flat. But over time, you're going to see 10% to 12% growth.
So just invest every month and don't worry about whether the market is up or down. No matter what, just keep investing. It's kind of like planting a tree. You don't need to dig it up every week just to check the roots. Just let it grow and do its thing. And you know what else grows your money with time? A high yield savings account like the one offered by Laurel Road, one of the sponsors
So you can rest easy while your money makes you more money.
So go get started. Check them out by going to laurelroad.com slash george, or just use the link in the description below. And while we're talking about resting easy, one of the ways that I rest easy is by using Delete Me, another sponsor of today's episode. Here's what they do. They actively search the internet and wipe you off of these dirty, no-good data broker websites. You know, the ones that have all of your information for some reason, like your email, your address, your phone number, your favorite snack from...
College, which may or may not have been the pizza lunchable, still hits. And they do all of the hard work for you and they send you a detailed report to let you know how many hours they've saved you. And currently, I'm up at 66 hours. Come at me, bro. If you can beat me, let me know in the comments. So if you want to sleep better and know that your info is nowhere to be found, get started by going to joindeleteme.com slash george or by clicking the link
in the description below. Okay, so what if you're older and you're behind the ball on investing? Well, there's no shame in starting late. Life happens. Maybe you spent your 20s chasing dreams, your 30s chasing kids, and your 40s wondering why the kids won't leave. But what does that mean for you? Well, it might mean you need to invest more and or work longer. Now, don't fall for the lie that because you didn't start early, it's not worth saving now. That's just an excuse to justify a lifestyle that isn't serving you.
So drop the shame and guilt and realize that, yes, time may be short, but you still have power to buckle down and do everything you can to get things moving in the right direction. And here's some good news. The IRS gives you something called catch-up contributions when you turn 50. Not catch-up, catch-up.
And this may be the only time I'll be thanking the Internal Revenue Service. Just kidding, I always thank the Internal Revenue. Thank you so much for your service, Internal Revenue Service. - It looks like someone's scared, guys. - I know a lot of people think, "Well, George, where am I supposed to find 20 or 30 grand a year to invest?" Well, that would definitely be a problem if you're not making serious lifestyle changes. So if your habits are still out of whack, then you're right. It's gonna be hard to find that much to invest throughout the year. But a lot of people are still carrying debt into their 50s, which is eating up potential margin to invest.
And in a second, I'm going to show you how to fix that problem. But first, I want to emphasize that you can still retire with dignity as long as you're hyper-focused and willing to make some changes. For example, you may have hoped to retire at 63, but you're not ready and you need to stick it out to 70 because fun fact, your investments will double about every seven years. Rule of 72, if you know, you know.
So if this is so simple and easy, why don't more people do it? I just showed you how to get a million dollars. Well, if people had the margin, I think most would invest, but they don't have margin because they're living paycheck to paycheck. They've got credit cards, car loans, student loans, bad spending habits that are siphoning away thousands of dollars every month. And look, I know a lot of you are already commenting down below, "George must be nice. Where am I supposed to find a thousand dollars?" Listen, if you can't find a thousand bucks to invest,
and yet you're shelling out over a thousand bucks in debt payments, you've got your priorities way out of whack. And I'm telling you, go add up all of your car payments, your credit card bills, your student loans, your HELOC, whatever it is. I guarantee you it's more than a thousand dollars a month. That's money that
could be going to your financial future instead of sending it to a bank. So stop sending your paycheck to Capital One or your auto lender and start sending it to future you. Because if you do a little bit of sacrifice now, it's going to get you investing sooner rather than later, which you saw is very important. And if you still have debt hanging around, get that junk out of your life as soon as possible so that you can start building for that beautiful future. And keep watching this next video to find out the fastest way to get that debt gone for good or click the link in the description to go check it out.
And if you enjoyed this video, be sure to hit that like and subscribe button and share this with a friend who needs to see it. Thanks for watching. We'll see you next time.