Compound interest is a beautiful thing. My husband and I were going to pay off our home in the next two years, but we decided to slow that down (4-5 years instead) and invest more money in the meantime. The interest on our mortgage is much less than what we stand to gain on the additional investments over the next 30+ years.
Trey Caldwell - Well, hopefully it doesn’t last the 30+ years my husband and I have left until retirement and we can just ride it out. Our interest rate and loan balance are so low that we only stand to save about $800 by paying off our mortgage in 2 years versus 4-5 years, so we’re willing to take the gamble.
@@treycaldwell4118 what are the experts saying now ? Oh wait ... the same thing you posted over a year ago. Still waiting . Plus markets will always crash , but bounce back as usual.
It’s amazing to look at the graph of my 401k balance over the years - it seems as if the balance just languished for the longest time and it was very frustrating! But boy, when the miracle of compound interest started to kick in it was REALLY something to watch! Don’t give up hope and just keep plunking your contributions in - over the course of time good things will happen to you……!!!!
Whoa, this is crazy timing. Not sure if this is still accurate nearly four years later, but I'm 52 and am about to build an index fund using a good-sized (for me) initial deposit, then 20% of my take-home as monthly contributions. If I retire at 65 that's almost exactly 13.4 years. Thank you for the information!
Love the video. I recently opened a roth ira, I have a little under 100 k in a 401k and still contribute up to the max match. Will my overall performance and the magic number of 13.4 be effected by switching gears to the roth even if I contribute the same amount. I'm concerned that I was well on my way to see more return then contribution and feel like I'm starting over with a small roth ira
The next level of awareness with this is you start realizing you really don't need as much (house, car, stuff) to enjoy life as you previously believed...YOU REACH A POINT WHERE YOU DON'T SEE SAVING 10% OF YOUR INCOME (OR EVEN MORE) AS A SACRIFICE--AT ALL. In fact, you start to think THE REAL SACRIFICE is wasting your time commuting to a job that you don't really like all that much instead of spending your time with family, friends, or doing things you love without worrying about whether you're getting paid for it or not.
mysticaltyger2009 I completely agree. There is definitely a fine line between living like a hermit and having a high and healthy savings rate. I have been maintaining a high savings rate for the past few years and the money I pay myself first with doesn’t register mentally as money that is “mine”.
mysticaltyger2009 it’s a blessing to have adopted this world view from a young age, because what this video talks about is really only achievable if you adopt these habits early.
It's great if you can theoretically contribute all of your 2% raise ( if you get one) to investments, but that means you will have less every year to spend due to inflation.
And then you start putting the excess into a normal brokerage account (or into a 401(k) plan at work). Or you help a spouse fund their Roth. Keep accumulating!
Not in my investment acct. I’ve been put money in there for almost 18 years, pretty much, nothing. It’s basically just the the money I have contributed. I’ve earned about $4k.
Hello Dustin! First of all great videos! Been lurking around watching every video that you have but felt the need to finally come out. So in this video, you basically say, "Save money for 13.4 years, get more money". What I am confused here is, is this really the only catch? So if I manage to not spend the money, I will have more than what I put in? I get that this is how investing works, but I feel like it is SO SIMPLE that it can't be true. Is there any downside? Can you somehow lose at the end of 13.4 years? I am 20 years old and about to graduate from nursing school without debts. My expected salary is 50-60k and plan to live with parents to save even more money. My plan is to invest a big chunk of that salary into my retirement, unsure as to what exactly. If I invest more than the 10% mentioned in the video, does the 13.4 years lower or is it always fixed? I apologize for my message being so long and packed, I realize it might be best if I contact you directly. Anyways, any response is truly appreciated and thank you for helping me through your videos (I am subscribed :))!
Oh yes this is just a general view of how it works. You can certainly see that number go down depending on how the markets treat ya. Good for you for starting early. You will not regret it!
Ayee congrats on graduating nursing school at 20! That’s insane lol. Nursing is great since we only work 3 days for “full time” and have plenty of overtime opportunities. Are you thinking of going back to school for NP or CRNA? I don’t want to go into debt and stop investing for school but then again, the salary would increase by at least $20,000 starting out...too hard to decide haha
Congratulations on graduation with decent income. I'm at that 100k mark In my retirement account. It's funny I never got any marching so it was all my nickels and dimes it took forever to make that first 10k. This year I lost 20k and over the year I'm now up 30k. For what took years the account itself can make that 3 times just this year. Best thing I did was start investing I did make lots of mistakes but some way I stumbled through
so that 13 year mark where it picks up, is that due to the length of time, or the amount of money in the account, or both? Say what if someone late to the game comes with the same amount in their bank account the year before, would they get the same interest rate?
Music, if they had the same balance at the same point in time then their gains over the next year would be identical, regardless of time the difference between when the two people started saving. It doesn't matter what the one person was doing within the 13 years prior to his buddy investing an equal size chunk all at once. The point of this exercise is to show that relative to their contributions the growth made off interest starts to outweigh their own contributions. If they continue to contribute the same amounts into their own accounts then their balance stays the same through time even though the one person in your question started 13 years ago.
So...say I get a 3.5% annual raise...do I still need to increase my contributions my 2% annually, or did that theoretically just happen when I got a raise...hope that makes sense. Keep up the videos, they are extremely informative and I enjoy the specific examples.
If it is a 401k you wouldn't need to do anything. Your contribution is based on your wage that has been increased. If it is an after tax account you contribute to yourself, you would likely need to make adjustments.
The problem is I wanted to retire before I started working. I can't even imagine 30 more years of this bullshit. I hate all jobs I've had. I make a LOT of money. Regardless of the money/job-type... A job is a job: I hate it. I just want to travel and do drugs.
Good overall message but the phrasing in the video contributes to misunderstanding. A better way to say it is: for this scenario after 13.4 years the investment starts earning more than the “historical” monthly contributions. Calling it a match as if a future much higher contribution would magically change the immediate return is wrong.
This video is somewhat misleading. The amount your portfolio grows per year is not dependent on how much you put in last month. If you're at the 13 year mark where things start doubling as you say, and the market takes a downturn, you're not doubling anymore. Somewhat misleading video...
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Wish they'd teach this in middle school through high school. Thanks for sharing this.
I wish you showed a graph. Where each point is... 2x, 3x, 4x. How much was put in, how much it's worth, etc.
Look how young Dustin was back then!! Thanks again for all the great content. You illustrate complicated concepts in easy to understand content.
Compound interest is a beautiful thing. My husband and I were going to pay off our home in the next two years, but we decided to slow that down (4-5 years instead) and invest more money in the meantime. The interest on our mortgage is much less than what we stand to gain on the additional investments over the next 30+ years.
Live it! Thanks for watching!
Many experts are predicting a huge crash in stocks, bonds and real estate to happen very soon.
Trey Caldwell - Well, hopefully it doesn’t last the 30+ years my husband and I have left until retirement and we can just ride it out. Our interest rate and loan balance are so low that we only stand to save about $800 by paying off our mortgage in 2 years versus 4-5 years, so we’re willing to take the gamble.
If I remember right, didn't Albert Einstein say that compound interest is the most powerful force in the universe?
@@treycaldwell4118 what are the experts saying now ? Oh wait ... the same thing you posted over a year ago. Still waiting . Plus markets will always crash , but bounce back as usual.
It’s amazing to look at the graph of my 401k balance over the years - it seems as if the balance just languished for the longest time and it was very frustrating! But boy, when the miracle of compound interest started to kick in it was REALLY something to watch! Don’t give up hope and just keep plunking your contributions in - over the course of time good things will happen to you……!!!!
I will up my percent each year. Thank you so much. Can't wait to see it grow
Whoa, this is crazy timing. Not sure if this is still accurate nearly four years later, but I'm 52 and am about to build an index fund using a good-sized (for me) initial deposit, then 20% of my take-home as monthly contributions. If I retire at 65 that's almost exactly 13.4 years. Thank you for the information!
I have been investing since 1993 and YTD return for me in 2023 is at $11.68 to $1.00 that I put in.
Love the video. I recently opened a roth ira, I have a little under 100 k in a 401k and still contribute up to the max match. Will my overall performance and the magic number of 13.4 be effected by switching gears to the roth even if I contribute the same amount. I'm concerned that I was well on my way to see more return then contribution and feel like I'm starting over with a small roth ira
This is so motivating to hear. This definitely helps with the "is the sacrafice worth it" questioning mentality.
It does right?!? Thanks for watching!
The next level of awareness with this is you start realizing you really don't need as much (house, car, stuff) to enjoy life as you previously believed...YOU REACH A POINT WHERE YOU DON'T SEE SAVING 10% OF YOUR INCOME (OR EVEN MORE) AS A SACRIFICE--AT ALL.
In fact, you start to think THE REAL SACRIFICE is wasting your time commuting to a job that you don't really like all that much instead of spending your time with family, friends, or doing things you love without worrying about whether you're getting paid for it or not.
mysticaltyger2009 I completely agree. There is definitely a fine line between living like a hermit and having a high and healthy savings rate. I have been maintaining a high savings rate for the past few years and the money I pay myself first with doesn’t register mentally as money that is “mine”.
mysticaltyger2009 it’s a blessing to have adopted this world view from a young age, because what this video talks about is really only achievable if you adopt these habits early.
Very informative, and extremely easy to understand. Thanks!
Great Educational Video. Thank you
Great explanation of compounding interest!
Thanks Dustin great info and motivation
I know I'm late, is that black trumpet painted or plastic?
This video should be illustrated with numbers.
It's great if you can theoretically contribute all of your 2% raise ( if you get one) to investments, but that means you will have less every year to spend due to inflation.
by year 5 you would be at the limit($5500) for a roth IRA??? love the videos keep um coming
The limit goes up every few years. Next year it could be 6000 and will likely be $6500 in the next 5 years.
And then you start putting the excess into a normal brokerage account (or into a 401(k) plan at work). Or you help a spouse fund their Roth. Keep accumulating!
If you DD on SPACs /stocks, you’d grow a lot faster then 7%.
Love the intro, great advice also.
It doesn’t matter if changes a job?? As long you transfer the 401
To the new job
So instead of putting 15% you put 55% of salary in a month when could you retire ??
This info is so good but you need a visual, like a whiteboard video. I recommend you redo this info with charts and graphs.
Love the channel the style and the content.
Not in my investment acct. I’ve been put money in there for almost 18 years, pretty much, nothing. It’s basically just the the money I have contributed. I’ve earned about $4k.
What are you invested in? Because the S&P 500 over the last 18 years has returned just under 10%?
Something is seriously wrong in your senecio?
Hello Dustin! First of all great videos! Been lurking around watching every video that you have but felt the need to finally come out. So in this video, you basically say, "Save money for 13.4 years, get more money". What I am confused here is, is this really the only catch? So if I manage to not spend the money, I will have more than what I put in? I get that this is how investing works, but I feel like it is SO SIMPLE that it can't be true. Is there any downside? Can you somehow lose at the end of 13.4 years? I am 20 years old and about to graduate from nursing school without debts. My expected salary is 50-60k and plan to live with parents to save even more money. My plan is to invest a big chunk of that salary into my retirement, unsure as to what exactly. If I invest more than the 10% mentioned in the video, does the 13.4 years lower or is it always fixed? I apologize for my message being so long and packed, I realize it might be best if I contact you directly. Anyways, any response is truly appreciated and thank you for helping me through your videos (I am subscribed :))!
Oh yes this is just a general view of how it works. You can certainly see that number go down depending on how the markets treat ya. Good for you for starting early. You will not regret it!
Ayee congrats on graduating nursing school at 20! That’s insane lol. Nursing is great since we only work 3 days for “full time” and have plenty of overtime opportunities. Are you thinking of going back to school for NP or CRNA? I don’t want to go into debt and stop investing for school but then again, the salary would increase by at least $20,000 starting out...too hard to decide haha
Congratulations on graduation with decent income. I'm at that 100k mark In my retirement account. It's funny I never got any marching so it was all my nickels and dimes it took forever to make that first 10k. This year I lost 20k and over the year I'm now up 30k. For what took years the account itself can make that 3 times just this year. Best thing I did was start investing I did make lots of mistakes but some way I stumbled through
This is a key that I didn't understand.... Thanks
Sweet! Happy to help!
yes it the interesting facts that are never told !
During the down years, does the value of my retirement fund shrink the same way as it grows after the 13.4 mark?
Not if the contributions stay on track.
Good stuff
Thanks!
Thank you for this video, this was really interesting.
Thanks for watching Nick!
Hi Dustin. Is target date fund on 401 K a good way to invest ?
so that 13 year mark where it picks up, is that due to the length of time, or the amount of money in the account, or both? Say what if someone late to the game comes with the same amount in their bank account the year before, would they get the same interest rate?
Not sure I understand the second part to your question.
Music, if they had the same balance at the same point in time then their gains over the next year would be identical, regardless of time the difference between when the two people started saving. It doesn't matter what the one person was doing within the 13 years prior to his buddy investing an equal size chunk all at once. The point of this exercise is to show that relative to their contributions the growth made off interest starts to outweigh their own contributions. If they continue to contribute the same amounts into their own accounts then their balance stays the same through time even though the one person in your question started 13 years ago.
That’s a lot of math to not mention inflation
Can that be cut down to 4.6 years with 3x leveraged etfs?
😝
what if we do not increase contributions by 2%
Ideally you should increase your contribution by the expected inflation amount.
So...say I get a 3.5% annual raise...do I still need to increase my contributions my 2% annually, or did that theoretically just happen when I got a raise...hope that makes sense. Keep up the videos, they are extremely informative and I enjoy the specific examples.
If it is a 401k you wouldn't need to do anything. Your contribution is based on your wage that has been increased. If it is an after tax account you contribute to yourself, you would likely need to make adjustments.
The problem is I wanted to retire before I started working. I can't even imagine 30 more years of this bullshit. I hate all jobs I've had. I make a LOT of money.
Regardless of the money/job-type... A job is a job: I hate it. I just want to travel and do drugs.
Haha! I feel the same at 64!
Good overall message but the phrasing in the video contributes to misunderstanding. A better way to say it is: for this scenario after 13.4 years the investment starts earning more than the “historical” monthly contributions. Calling it a match as if a future much higher contribution would magically change the immediate return is wrong.
No one is seeing that point this year guaranteed.
Were you vacuuming the house and just stopped to give us advice?? T shirt 😄
My Roth is negative?!
For how long have you had it? I'm betting your time frame is a year or less--which is way, way, way, too short a time frame.
Yeah that can happen early on
Yes about 6 months old. Very relieved this is normal for early Roths. Thanks for the info!
Is your Roth Still Negative? Which ETF/Stocks did you purchase in it?
So after 13 years, upping by 2% each year starting at 10%, wouldn’t that be putting in 36%??
no no...2% of the dollar amount you invest :)
Fucking A info bro🙏👊
This video is somewhat misleading. The amount your portfolio grows per year is not dependent on how much you put in last month. If you're at the 13 year mark where things start doubling as you say, and the market takes a downturn, you're not doubling anymore. Somewhat misleading video...
Market usually bounces back even stronger after a down time. As you can see now . Which is why he didnt bother to answer your comment .