Investing in your 20s is essential; a whopping 45% of millennials are waiting for regular times to invest for retirement. Waiting, in this case, is not a good thing because today, the Dow YTD is down -10% from a year ago (2021).
Which is saying everything is on sale
- 10% car sale, you’ll buy the car
- 10% clothing sale, you’ll buy the clothes
- 10% sale on the iPhone, and you’ll buy the iPhone
All that to say, invest now.
Why should you invest in your 20s?
It’s essential to invest in your 20s because your future self will thank you. The earlier you invest, the better the compound interest will work for you.
Compound interest = the interest you earn on interest
Ex. If you have $100,000, it makes 8% each year. You’ll have $108,299 by the end of the year, and by the 20th year, you will have $492,680.
Now don’t you see why how important investing is?
Investing in your 20s can help you start pursuing your passion without needing money.
Investing allows you to eventually quit that nagging job and spend more time with your family.
Investing early can allow you to have FU money and do anything you want with your family.
The only thing you must do is start! Here is Why!
BECAUSE TIME IS ON YOUR SIDE
Your 20s is the youngest you will ever be, and you have at least 50 years ahead of you.
This allows you the opportunity for your money to compound to extraordinary amounts.
Even better, investing in your 20s will enable you to start with a modest amount of money vs. if you were in your 40s.
If you start investing $500 a month beginning at 25, you can have 1.7 million by 65.
If you start at 35, you will have $745K, which is a lot of money but not nearly how much you could have had beginning at 25.
So, get started now, even if it’s $100. Start with that, then build; how do you build?
Take a percentage of your pay raise or bonus, and invest a portion of it.
You can get a side hustle and invest all that money, especially if your primary job already pays for your current lifestyle.
Just find a way to invest now.
RETIRE EARLY
The average savings for those 55 – 65 is only $197,322, and the average for those over 65 is only $216,720.
That is a little money for someone in their 60s, who could live at least until their late 70s, 10+ years.
In 2021, the employment rate of the workforce of 55 years and older increased to 36.7%
Furthermore, the U.S Bureau of Labor statics projects that in 2024 – just two years from now – 13 million people aged 65 and older will still be working.
Now because you are reading this, there is a higher chance that you will not be retiring in your 60s but possibly a bit earlier.
Investing in your 20s will keep you from having to work to the retirement age of 65 and beyond. You’ll be able to set your retirement, which won’t be defined by age.
Your retirement will be determined by investing and living off the next 25 years+ of your life or depending on your lifestyle. You can implement the 4% rule.
Ex. Your lifestyle is good, around $50k a year, then
$50k * 25 = $1.2 Million.
With this, you can pull out $50k a year for the next 25 years while still having the remainder of your money compounding. That’s just with index funds.
You could get there faster with real estate, or you have both. (Get rents from real estate and have your index funds compound while only pulling out a small 4% or less).
The main point is that you want to invest early in your 20s to retire earlier. So, your retirement won’t be an age but a number in your account that you can live off.
The earlier you save, the faster you can get to that number.
That way, you won’t be forced to work until you are 65 or more when you are supposed to be in your golden years and enjoying life.
ALLOWED TO TAKE RISKS AND MAKE MISTAKES
When you invest in your 20s, whatever mistakes you make are more forgiving, and plus you are allowed to be a little bit riskier. For instance, you can invest in real estate, crypto, or induvial stocks.
Being in your 20s, you have less to lose vs. someone in their 40s who has a home and a family. They are less likely to take risks depending on your repopulates and age.
You can take the calculated risk because you will have a long runway of earning potential.
Keyword CALCULATED
Having the advantage of being young and investing allows you to put a small percentage of your cash and take on some investments that have more volatility but may produce more gains.
Even if you take the less risky route (index funds that track the S&P 500), you risk losing 35 – 50% of your investments. Do not let that scare you because you will be able to bounce back because of your runway and because you chose to start early.
You will be able to withstand those falls.
Just because you can take a higher risk does not mean you must take them.
You can invest in an index fund that tracks the S&P 500 if you do not have a high-risk tolerance.
CONCLUSION
You have three reasons to invest early in your 20s.
- Time is On Your Side
- You Can Retire Ealier
- You Can Take On More Risk
At the end of the day, you should be investing and multiplying your money at ANY age, especially if you are in your 20s.
You will give yourself the benefit of having time on your side and allowing it to work for you, doing so in your 20s before you have responsibilities and have too many excuses not to.
So START
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