How Much You Need To Invest By EVERY Age

What's up you guys, it's Graham here. So, I know I can't be the only one who does this, but have you ever wondered how much does the average person have saved and invested by every age? Or what about how much income does it take to rank within the top one percent of your 20s versus 30s versus 40s? And how do you compare? Well, wonder no longer because we're going to break down exactly what the experts recommend you have invested throughout every decade, the average income within every percentile across the board, and then whether or not that's actually a realistic milestone for everybody watching.

The point of this video is not to compare yourself with everybody else, but it can be a very important measurement to keep track of. Because without knowing whether or not you're investing enough, you won't be able to properly adjust your spending, know when to cut back, and know how much money you need stashed away to make sure you never have to work another day in your entire life ever again. Plus, the top one percent isn't necessarily as high as you might think it is, especially if you're in your 20s.

So, sit back, relax, and I'll cover exactly which milestones to hit right after you hit that like button for the YouTube algorithm. Doing that gives me a really good indication that these are the types of videos you want to see more of. So, if that's the case, just let me know by hitting the like button. So, thank you guys so much, and also a big thank you to public.com for sponsoring this video, but more on that later.

All right, so right off the bat, here's what I found surprising. Did you know that you only need $1,400 to be richer than the average millennial? Yeah, neither did I. And these numbers get even more surprising when you start looking at the median statistics of people in their twenties in terms of how much they have saved and invested. Now, the first number we should look at is net worth. This is calculated by adding up everything you own of value and then subtracting your debt. And that number that's left over is your net worth.

So, with that out of the way, I want you to take a guess at what you think the average net worth is of a 22-year-old. Just go ahead, take a guess. All right, well, according to the College Investor, that average net worth is negative $39,915, which means if you're watching this at 22 years old and your net worth is zero, then technically you're way ahead of the average. Now, in all fairness, this number is heavily skewed by student loan debt since a lot of young adults start off with absolutely nothing. They're not making any money and they're taking on enormous student loan debt. So, don't worry, guys, the numbers do get a lot better from here.

Although, in terms of how much the average 22-year-old makes, here's where things get interesting. The average income for this category is $24,610 a year. And just take another guess at what you think it takes to make it within the top one percent of 22-year-olds. Seriously, just take a guess and comment it down below. One eternity later.

All right, well, that number is $132,000. Don't get me wrong, it's a lot of money, but it's still a lot less than what it would take to be within the top one percent of all U.S. earners, which is $737,000 a year. But lastly, as far as how much this age bracket has invested, unfortunately, there is not a breakdown that exists by age throughout this category. Although, it does appear that by the age of 24, the average 401k balance is $4,745, and by the age of 29 that number grows to $9,404.

Now, since there's a very limited and skewed data set of people in their 20s, here are my own recommendations that I think would apply to nearly anybody watching, regardless of how much you currently make or save. Number one, the first thing you should go and do is open up a credit card. The point of this is to begin building your credit score since 50% of your score is comprised from your on-time payment history and how long you've had your credit open for. It's really as easy as signing up for a no annual fee secured credit card like Discover It, putting a few small expenses on the card every single month, and then paying it off in full. It's that easy.

Second, also make sure you go and open up a Roth IRA. Now, I know I say this in every single video, but it's true, and I'm not going to stop talking about it until everybody eligible actually goes and gets one. This is going to allow you to invest $6,000 a year into an account that will eventually be completely tax-free at the age of 59 and a half.

The third, in addition to that, I would recommend you start saving 20% of your income. Now, usually, I would set a more strict measurement here, like save two to three times worth of your expenses, but honestly, I think setting yourself up with good financial habits as soon as possible is way more important. And if you could start saving 20% of your income now, it's gonna be so much easier to carry that forward in the future.

And fourth, you should get yourself invested in the markets in some way or another. Plus, by doing this, it's going to give you the experience of investing on a small scale. You could see what it's like and then you could learn how to grow your wealth for the future. And best of all, when today's sponsor, public.com, heard that I was making this video, they wanted to be a part of it and help you on your investing journey. If you're not familiar with them, they're one of my all-time favorite investment platforms because not only do they not sell your data and route your order flow to high-frequency hedge funds like some other investment apps do, but they also incorporate an optional social aspect into the entire experience where you can make a profile, talk with other like-minded investors, or you can follow me on there because I post some of my own stock picks and thoughts about what's going on with the market.

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And then lastly, finally, I want to say this now is the time where you should realistically start thinking about how much money you need in retirement. Now, I know this is not what most people in their 20s want to think about, but trust me, as you're about to see, the sooner you start, the easier it's going to be. For example, if you want your money to generate enough to let you earn $50,000 a year without ever having to work another job in your entire life ever again, you're going to need $1,250,000 invested. If you start at the age of 20, you could do that entirely within a Roth IRA by just investing $416 a month. That means if you ignore the rest of the video but you just do that one thing, you've essentially been able to retire regardless of how much other money you save or invest.

So, really overall in your 20s, there aren't that many goals or milestones to hit, but it is important to set good financial habits that you could build from, which eventually lead us to this: how much you need invested by 30 years old. Let's start off with the average net worth, and I have a feeling it's probably going to be a lot lower than what you would expect. According to the College Investor, the average 30-year-old has a net worth of negative $1,043, and by the age of 35, the Wall Street Journal reports the average net worth is $10,400. This is most likely due in part to student loan debt, making this number seem artificially lower than it should be. And I have a feeling most 20 somethings have not earned enough income to begin paying that down or really building their wealth to a significant degree.

Now, in terms of how much the average 30-year-old is making, that amount was recently found to be $49,813 a year. And if you want to make it to the top one percent of all 30-year-old earners, well, that's going to take you $210,000 annually. Then just for fun, if you want to know what it takes to be within the top 0.1 percent of all 30-year-olds, that's going to take $570,000 a year. As far as how much they have invested, one article shows that the average 30-year-old has approximately $45,000 saved, while Investopedia says that the average number is more like $38,400 in a 401k for those between the ages of 30 and 39.

So, even though some of these numbers are all over the place, the average rule of thumb is just this: by the age of 30, almost everybody recommends that you have the equivalent of one year of your salary saved and invested. Now, to me, this just seems a little bit too simplistic since most likely you're just settling in your career, paying down debt, and increasing your income. But overall, I think if you follow these few main milestones in your 30s, you'll be totally okay.

First, you should aim to have a credit score of at least 750. This is going to put you in the best position to get a low-interest rate mortgage or otherwise be the ideal borrower for anything you need. Second, you should also aim to be completely bad debt-free by the time you're 30. This means you paid off all of your debt or loans above a five percent interest rate, you don't have any credit card debt outstanding, and besides the possibility of a low-interest rate mortgage or student loan debt, you don't have anything else weighing you down.

The third, you keep a three to six month emergency fund at all times. Doing this is as simple as calculating how much money you need to survive every single month, whether that be food, rent, car payments, Pokémon cards, you name it. And then saving up three to six months worth of those expenses just in case you need it. This is meant to be your safety net in the event something happens, and you have nothing else to fall back on.

And fourth, I agree that having the equivalent of your salary saved up is a good base to aim for. Now, obviously, this will depend on quite a few factors, including your income, your student loan debt, and how quickly you're able to land a job. But under the right conditions, it's definitely possible to have a year's worth of salaries saved up by 30. But seriously, don't worry if you're 30 and aren't anywhere near close to this. There are too many variables here to make a one-size-fits-all approach, so as long as you follow every other milestone day-to-day, you'll be totally fine.

Now, since we're going with this whole earn $50,000 a year without working goal, if you're just now getting started at 30 and you want to have that same goal of $1.5 million by the time you're 60, you could still do it, but you will have to save $895 a month to catch up. Again, if you're earning the average income of $49,000 a year, that's the equivalent to you saving 25% of your income after tax. So, it's absolutely doable, but it's going to take some work.

And now in your 40s, here's where things really begin taking off. This is where most people begin to hit their peak earning years and all of that hard work you put in throughout the last 20 years begins paying off. Now, in terms of the average 40-year-old net worth, that's now grown to a median $80,000 according to the Financial Samurai blog. But since some people end up making so much money throughout their 40s, that tends to skew the numbers to some pretty high amounts. And that's why Bankrate found that the average net worth could be as high as $457,000.

But in terms of how much the average 40-year-old makes, that amount is $70,361. And if you want to reach the top one percent of all 40-year-olds, that amount would be a lovely $363,000, while the top 1 percent of net worth for 40-year-olds is one and a half million dollars. Of course, if you want to take it even further and be within the top 0.1 percent of all earners at 40 years old, that's going to take $1.1 million a year. Now, I also found that interesting, but if you want to turn it up even more and get to the top 0.01 percent of all earners, that amount is going to be $7.5 million a year.

Anyway, coming back down to earth, the average 40-year-old has $63,000 saved up, and Investopedia tracks the average 401k balance at $93,400. And generally, alongside that, most experts and guidelines suggest that you have three times your annual salary saved than invested by the age of 40. In order to do this, assuming that requires you to have three times the annual $70,000 salary invested, you would need to invest anywhere from 15% to 25% of your income beginning at the age of 25. And that would leave you with just over $217,000 at a 7.5% return. So, it's absolutely possible, but it will require some consistency to actually stick with it.

Beyond that, though, here's a few of the recommendations that I'd like to throw into the mix to make sure these are all milestones that everyone can work towards. First, you should focus on maxing out your retirement accounts every single year. This would include your Roth IRA at up to $6,000 a year, a 401k up to $19,500 a year, or an HSA up to $3,600 a year.

The second, you should also aim to maximize your earnings over the next 10 years. The reality is, as you approach the highest earning years of your life, you should do everything you can to make the most of it. After all, it was found that employees who stay within the same company for more than a few years get paid on average 50% less than somebody else who changes jobs more frequently. So now is the time to leverage that and make the most money for the time that you're going to be working.

Then third, have a budget that you stick to no matter what. Even though technically this is something that you should be doing at any age, it's especially important now because even though you're probably making a lot of money, you could be spending a lot of money. And that's why it's so important to still live within your means, think long-term, and make sure whatever you're doing is sustainable.

And fourth, you should know exactly how much more you need to invest if you want to retire by your goal. The rule of thumb here is that for a 30-year retirement, you'll need to have anywhere from 25 to 30 times your annual expenses saved up in order for that money to last you without running out. That means if you spend $40,000 a year, multiply that by 25 to 30, and you will need anywhere from $1 million to $1.25 million invested. Now, obviously, if you want more than that or if you're way further behind, it's going to take a lot more work to get there. For example, if you start out with nothing at the age of 40 and you still want $1.2 million by the time you're 60, you'll need to invest an average of $2,000 a month to catch up.

Point being, these are all calculations that you should really try to figure out as soon as possible because the sooner you start thinking about this, the easier it's going to be and the better you can plan ahead. But now we should talk about how things begin stacking up by the time you're 50. The median net worth for someone at this age is $212,000, while the average net worth is much higher at $1,175,000. Again, boosted up by all of those pesky billionaires who skew these statistics way too much.

And if you want to be within the top one percent of people who are 50, well that is going to cost you $9.7 million. Now what I found interesting is that the income in your 50s doesn't really increase that much from your 40s. In fact, the average income here is around the same, $77,000 a year, while the top 1 percent earn around $455,000 a year. Then the top 0.1 percent also earn about the same, $1.1 million dollars annually. So it's not a huge change from that of your 40s.

Now, at this point, most standard guides say that you should have about five times your annual salary saved up by 50. So if you're making the average $70,000 a year, you should have $350,000 saved and invested. But if you still have the same goal of reaching $1.2 million by the age of 60, then following this advice could actually leave you behind. Just consider this: had you been investing $416 a month starting at the age of 20, that would have grown to nearly $600,000 by the time you're 50, which would be a lot higher than the recommendation here.

So, as my own milestone recommendations to work towards, first ideally aim to have at least seven to eight times your annual salary saved up or 10 to 12 times your annual expenses invested, depending on how close you are to your goal. If you're further behind than originally expected, your options are really one of three: retire later, invest more money, or win the lottery.

The second, depending on your situation, you should be about halfway through paying off the mortgage on your primary residence. Some people might have mixed feelings on whether or not this is needed, but my personal philosophy is just this: I love low interest rates and good debt, but there is also something to be said about the security of having a paid-off home. So even though you don't need to pay it off sooner than expected, it's probably a good idea that once it's paid off, you keep it paid off.

And third, you should have a very clear date in mind in terms of when you could retire and how much money you need to get there. Again, this uses the same calculations that we've covered before, but assume you're going to need 25 to 30 times your annual expenses invested to be able to live comfortably without ever having to work ever again. This could include moving to a different location, cutting back on your expenses, and doing everything you can to plan for a time where you might not be making a lot of money. Now, that doesn't mean you could never be working in retirement, but it is about planning for a time where you have the option not to work if that's something you want to do.

And then finally, we got 60. For those who are curious, the average income stays about the same at $76,000 a year, with the top 1 percent making about $510,000 a year. Now, as for net worth, the median falls about $266,000, with the average being significantly higher at $1,217,000. And if you're wondering what it takes to be within the top one percent of this category, it's $11.1 million.

Now again, most standard guides say that by now you should have seven times your annual income saved up, but I somewhat disagree with this. And here's what I think: ideally by 60 years old, you're gonna want anywhere from 10 to 12 times your salary saved up. If you start thinking about this by the time you're 30, this could easily be achieved by investing 10% of your income every single month at a 7% return.

Then, if you bump that up to 20%, you could save 20 times your annual salary in 30 years. The second, I also think it's a good idea to have paid off your primary residence by now, or if you haven't done that yet, at least you're getting close. This is going to give you a lot more stability in retirement by having a fixed cost for housing. You won't have to worry about your other costs going up. Not to mention, you also have a paid-off asset that you could sell in the event you ever need the money or need to downsize.

The third, it's usually said that this is where your income will have peaked or begun to decline. So, if you're still in the highest earning years of your life, now is the time to really make the most of it and save away as much as you possibly can. And fourth, if you want to, now is the time where you could begin withdrawing from your retirement accounts without any penalties at all. You could also begin collecting Social Security beginning at the age of 62, so this could help offset some of these numbers.

And really from here, the rest is up to you. Now, obviously, all of this is just a rough ballpark and some people could be way ahead of this and way behind this, but that's not important. It's more important to realize that now is the best time to begin working towards these goals and showing you that the sooner you start, the easier it's going to be. Even if you're not as far along as you would have liked, it all starts small with budgeting, saving your money, investing consistently, living below your means, and then most importantly, over everything, smashing the like button and subscribing for the YouTube algorithm.

With that said, you guys, thank you so much for watching. I really appreciate it. Also, feel free to add me on Instagram, I post pretty much daily. So if you want to be a part of it there, feel free to add me there as my second channel, The Graham Stephan Show, I post there every single day I'm not posting here. So if you want to see a brand new video from me every single day, make sure to add yourself to that. And lastly, make sure to get your free stock down below in the description. Let me know which one you get. Thank you so much for watching, and until next time.