Michael Taylor used to sell bonds for Goldman Sachs. Now he’s focused his efforts on making young people understand the importance of investing early.
“If you start in your twenties with a couple of reasonable investments,” Taylor said, “you can’t avoid becoming a millionaire.”
However, many young people today put off investing.
The average millennial doesn’t expect to start saving for retirement until their late thirties, while half the generation isn’t invested in the stock market, according to a new study by TD Ameritrade.
Those findings make Taylor cringe.
He provided an example to illustrate how much can be lost through delaying investing.
Say a 55-year-old person invested $5,500 into an individual retirement account with a 10 percent annual return. By the time they’re 65, that amount will have grown to $14, 265. Not bad, right? (From 1970 to 2016, the S&P 500’s average annual rate of return, including dividends reinvested, was approximately 10.3 percent, according to Bankrate. However, that return is dependent on the market and your investments).
But if a 20-year-old invested $5,500 into an individual retirement account with the same return, that amount would swell to more than $600,000 by the time they’re 70. (Although, of course, that amount will buy less when factoring in inflation).
“We have the wrong perception that getting wealthy is impossible,” Taylor said. “The hurdle to being a guaranteed millionaire is relatively small, provided you start early.”
To be sure, many young people are more worried about paying down their debt than building up their wealth.
The average millennial is $15,000 in arrears, TD Ameritrade found. Student debt is increasingly a problem, with the average borrower paying almost $400 a month for their education.