Why Millennials Should NOT Invest

What's up, you guys? It's Graham here. So, as many of you know, I spend a lot of time on the internet. Like, half my day is spent browsing Reddit, reading up on investments, watching YouTube videos, and reacting to bad spending habits. I do all of this because every now and then, I come across some information that gets me thinking, that sends me down a rabbit hole of information and research all night long. And today, ladies and gentlemen, I may have found it.

It's a brand new article from Business Insider citing brand new research that suggests that millennials are making a mistake by investing before the age of 40 and that it will make you miserable. From their findings, saving too early is rather pointless, and they explain why it's better instead to wait until you're older, which if that's the case, I've been doing it wrong this entire time.

But evidently, you shouldn't wait too long either because those findings coincide with something even more alarming, and that's that 50% of Americans may be forced to retire near poverty, caused by somewhat of the opposite of the first article. So let's go and dive into this further because you know what they say: the truth usually lies somewhere in the middle. We'll answer exactly when you should wait to invest, but also why you shouldn't wait to invest too long, and exactly how much you will need to save to live indefinitely off of your investments and passive income without ever needing to work another day in your entire life ever again.

That is the end goal of investing, that your mega yacht maintenance costs are fully paid for by meme stock investments because you have diamond hands and know how to read technical analysis, and that, of course, is what we're going to be covering today. But before we begin, I want to say a huge thank you to everybody who smashes the like button and comments for the YouTube algorithm. Doing that helps out my channel tremendously, and even something as small as destroying the like button helps the YouTube algorithm recommend my videos to an even bigger audience. So for that, I really appreciate it, and thank you so much.

And also, a big thank you to Wealthfront for sponsoring this video, but more on that later. All right, so first let's address this brand new research which found that investing before the age of 40 could make you miserable. See, the conventional advice when it comes to this is that the sooner you invest your money, the faster it could grow because you could take advantage of what's called compound interest.

This is your money's ability to make more money, which then makes more money, because it's making more money, which makes it even more money. For example, if your money doubles in value every 10 years, you're gonna have twice as much money left over at the age of 60 if you start at the age of 20 versus starting at the age of 30. Basically, the point I'm getting at here is that mathematically speaking, the longer you wait to invest, the more money you're going to need in the future to be financially independent.

That's why I'll admit I was very skeptical when I saw a claim like this, but I wanted to be open-minded and see how they would be able to argue against math. And I gotta say, they came up with some very interesting reading material. I'll link to the full article down below in the description for anyone who wants to pull their hair out from boredom because the whole thing reads like a dictionary. But I'll sum it up for you in a minute.

As of now, the general consensus is that college-educated salaries go up over time as you gain more experience. In fact, they say when you're 25 years old, you're only making 42% of what you will be making when you're older. Because of that, it becomes easier to contribute larger amounts of money to your retirement accounts later in life. Plus, inflation also makes buying things more expensive over time. So they say the time to spend is while your income is low, enjoy things while you're still young enough to enjoy them.

And then, by the age of 40 years old, saving for retirement is going to be a lot easier because you're going to be in your peak earning years and can contribute more money. So, in order to maximize how much value you get from both your savings and your life experience, if you expect that you're going to be making a lot more money in the future, don't stress about investing now. Just wait until you're 40 and do that— their words, not mine.

But I gotta say, after reading the entire article, I think they went horribly, horribly wrong with a few very dangerous assumptions that we gotta talk about. First, they assume that social security is going to replace 33% of your income in retirement, which honestly could be a video in and of itself because the entire social security program is a train wreck that will need to be addressed.

See, for those not aware, every single time you pay your taxes, a portion of that, anywhere from 6.2% to 12.4%, goes towards a social security fund that promises to pay you a portion of that money back after the age of 62 in retirement. This was set up as a way for people to receive guaranteed income if they become disabled or unable to work. But the problem is that the system design was very much flawed. Ultimately, the only way for the social security fund to continue operating is if more and more people continue to pay into it to pay off the previous people who are now living longer and continuing to receive payouts.

But that's not happening. The social security fund is said to be underfunded, and the current reserves could run out by 2031. Then, after that, the taxes coming in from active employees will only be enough to pay about 76% of the benefit to retirees.

And then, after that, a few things could happen: One, social security taxes go up for everyone else who's working, or number two, the benefits of social security end up going down. Now, the conundrum we have here is that if we raise taxes, we temporarily solve the problem by pushing the problem further down the road. But that then leaves you with less money of your own left over to invest on your own behalf.

But on the other hand, if we reduce benefits, then you get less money in retirement from social security. So what do we do? That's why I think, for an article like this, it's somewhat misleading to assume that you're going to have the entire social security benefit by the time you retire. Because even if you do, you're probably going to be taxed more to pay for it, which kind of defeats the calculation in the article.

The second assumption they make is that your income is going to be steadily increasing over time, and that's not guaranteed to happen. Now, I will certainly admit if there was a crystal ball that would guarantee a certain amount of income for the rest of my life no matter what, it would be a lot easier to plan ahead and spend accordingly, knowing that the best earning years are ahead of me. So I don't have to stress about buying a Starbucks every now and then.

But you know what? Life doesn't work like that. I've seen both of my parents go from stable careers to unemployment in a year due to circumstances completely beyond their control. Even though statistically you're most likely to make the most amount of money in your 40s, that's not guaranteed to happen for everybody.

The third point is that sometimes life just happens. Now, I realize that this goes both ways, and there's no shortage of people out there who say that you could die tomorrow, but there's also an even greater possibility that you will live tomorrow, and the day after that, and the day after that, for many, many decades to come, knock on wood. But that needs to be accounted for.

Even though it's fun to live life now with the expectation that you could always save and invest more money in the future, you never know when the realities of life might come into play where you might be stuck with a big hospital bill, or a big car repair bill, a failing business, or a family to take care of. And it's important to have the savings and investments to fall back on if you absolutely need to.

Point being, nothing in life is guaranteed, including that we'll even live long enough to enjoy our money one day. And I know it's kind of morbid to think this way, but if you're 20 years old right now, you're going to have an 80% chance of living to 70 years old, a 60% to 70% chance of living until 80 years old, and women have an almost 40% chance of living until 90. So the odds are in your favor that you're gonna live longer than you think, and I think that's worth planning for.

And that's a good segue to talk about the more serious implications of this and why it's so important to start saving and investing as soon as possible. And that brings us to this article here: why half of Americans over 55 may retire near poverty. But before I go into that, when Wealthfront found out I was making this video, they wanted to be a part of it and help more people build their wealth long-term.

So they've decided to sponsor the video. For those not aware, Wealthfront is an automated investing platform that utilizes software to help you find the best portfolio to grow your money long-term. But, of course, by now you're probably thinking, "But Graham, that sounds so expensive, and I hate fees. How much is it, Graham?" And I'm glad I asked that question to myself.

Their fee is 0.25% of your portfolio annually, but in terms of the net cost to you, it could basically be fee-free or pay for itself many times over. Wealthfront utilizes a strategy called tax loss harvesting, which works by selling off investments which have dropped in value and replacing it with a similar asset, thereby allowing you to take a tax loss.

That way, those savings could be reinvested elsewhere to increase your return. This strategy was found to have paid for the annual management fee up to 13 times over for the average client. And if your account is over a hundred thousand dollars, you get access to direct indexing where they literally buy every single individual stock that makes up the S&P 500, so that they could trade within the index at a stock level, providing you with even more opportunity.

And best of all, because they say you have a really good taste in YouTube channels—okay, they didn't actually say that, but I digress because they're awesome—they've agreed to manage your first ten thousand dollars completely for free for the rest of your life just for trying them out. Plus, their website is extremely simple, it's easy to use, and they make long-term investing as smooth as possible. Not to mention, I've been using their high-yield cash account for years.

I also get access to their free financial planning tools that'll estimate how much you could be worth in the future and how you can further save and invest more money. So, if you're interested in signing up and learning more, like I mentioned, Wealthfront has agreed to waive the advisory fees up to the first ten thousand dollars for the rest of your life if you use the link down below in the description.

So thank you, guys, so much! Enjoy! And with that said, let's get back to the video. So here's the recent claim: half of Americans over 55 years old might retire near poverty. As for what they consider to be in your poverty, they say an income of twenty thousand dollars a year.

Which, if you have a paid-off house, might not be that big of a deal, but for many, it will be. Since the illness unemployment remains high, many employers have had to reduce the match in the 401(k), and people have had to pull from their retirement in order to cover daily expenses.

Now, to make matters even worse, Americans over the age of 55 years old were 17% more likely to lose their job than somebody younger and were slower to get rehired, pushing many towards involuntary retirement if they can't find further work. That's exactly why the assumptions made in the first article were so misleading. And as we get older, priorities will change, things will come up, and it's important to be prepared for that by saving and investing as soon as you can.

Unfortunately, it's a bad situation all the way around, but that brings us to the ultimate debate: live now or save for later. I think no matter what, there's always going to be a group out there who says that you might get hit by a bus any day now, so you may as well just live it up today.

Although I think you can enjoy your life today, you must first budget for it. I'll admit there's no point to being a hermit and saving money left and right just to finally live maybe one day when you're 65 years old, but there does need to be a balance, and you shouldn't necessarily prioritize one over the other.

If you've calculated how much money you need in the future, you're saving enough money, and your expenses are reasonable, take a portion of what's left over and spend it on things that really add value and enjoyment to your life now. That does not mean take 90% of your income and spend it on Starbucks and Gucci, but if spending 10% means you get to travel and go places you've always wanted to visit, budget for that and then go and do that!

But don't do that at the expense of your future self. Because anecdotally, I had no regrets by putting my head down in my 20s, working non-stop, and setting myself up for the rest of my life by saving everything I could. And also, I gotta say practically, it is so much easier to save money when you're younger.

It's a lot easier to keep your lifestyle the exact same and then save the difference than it is to spend a lot of money and have to save even more money in the future to pay for it. Not to mention, the money you save at 20 is so much more valuable than the money you save at 30.

Just consider this: if you invest one thousand dollars at 20 years old at an eight percent return, you're going to have 217,000 dollars by the time you're 60. But if you invested that very same ten thousand dollars at 30 years old instead, you're only going to have a hundred thousand dollars left over by the time you're 60.

That literally means that ten thousand dollars invested at 20 years old is going to be worth 117,000 dollars more than that same ten thousand dollars invested at 30 years old. That should really be enough to make you realize that you have two options: one, you can invest a smaller amount of money in your 20s, or you could invest a lot more money throughout your 30s and 40s.

Then, of course, in terms of how much money you need in order to live entirely off your passive investments—that is the million-dollar question, quite literally. To do that, we're going to be working backwards, and I will assume you want enough in passive income to replace a 50,000 dollar median salary here in the United States.

So, generally speaking, the rule of thumb with this is that if you invest in an index fund, you're able to spend four percent of that every single year without running out of any money throughout your lifetime. So that would mean if you want fifty thousand dollars a year in passive income, you would need one million two hundred and fifty thousand dollars invested. But of course, sometimes because life happens, let's bump that number up to one and a half million dollars just in case something comes up.

Or maybe you want to buy a first edition Base Set pack of Pokémon cards, and those are very expensive! So if one and a half million dollars is the goal, here's how much money you need at what age to get there. If you're 20 years old, you're gonna have to save 416 dollars a month or 5,000 dollars a year.

By the time you're 60, you're gonna have over one and a half million dollars invested if you do all of that within a Roth IRA—the entire amount is going to be completely tax-free and yours to keep. Now, if you start at 30 years old, however, you're gonna have to save 950 dollars a month or eleven thousand four hundred dollars a year to reach that same one and a half million dollar amount by the age of 60.

Because you're also above the Roth IRA limits, some of those profits might also be subject to tax. And now if you start at the age of 40, like this article wants you to do, you're gonna need to save 2,300 dollars a month or 28,000 dollars per year just to be able to reach that same one and a half million dollars by 60 years old.

So you tell me, would you rather save 416 dollars a month at the age of 20 or 2,300 dollars a month at the age of 40? That's something this article never really touched on. And even with consistent savings throughout your 20s, it's still possible to enjoy life and save some money for the future.

Now, as far as what I think of all of this, when it comes to the first article, I would say it's nonsense. If saving for retirement makes you miserable, then you really need to evaluate what you're saving for, what you want long-term, and how much money you need to make that happen. There's got to be a balance between being responsible while also creating a life that's worth living.

And if you're not earning enough to do both, then it's going to be vital to increase your income, cut back on the things that don't matter to you, and learn new skills so that you're able to earn more money in the future. I think not saving for retirement in your 20s is going to be a huge mistake simply because it's a lot easier to invest in your 20s than in your 30s or 40s or 50s.

And if anything, I think not saving for retirement until 40 is going to make you a lot more miserable than saving too much money by the time you're 40. That's something a chart will never be able to show.

Now, as far as the second article about half of Americans retiring near poverty, I agree that it's a huge issue that will need to be addressed. We're going to have to deal with the reality that automation is probably going to take away a lot of jobs that there's simply not going to be enough to go around for everybody.

Obviously, keeping up with your skills, continuing to learn, and saving and investing consistently is going to alleviate some of the problem, but I think that's only going to go so far. The social security fund needs to be dealt with in a way that's not just postponing the inevitable at some other point in the future.

Now, if I were to guess, I would say there's no way social security benefits would be cut anytime soon. So the only likely scenario here is that taxes wind up going up so that we're able to fund it temporarily into the future, at which point maybe something better comes along.

That's why I believe it's best not to count on programs like this, just in case, and simply take matters into your own hands by saving and investing. If social security exists when you retire, then that's great, that's a bonus. And if it pays out less, then that's okay, it's still a bonus. And if you get nothing at all, that's okay too, because you are not counting on it.

That's why I think the easiest solution overall is very simple: just save and invest as early as you possibly can and treat it like a budget, like you would anything else. But just like you wouldn't skip on your rent payment so you could go to Coachella, you shouldn't skip out on your Roth IRA contribution because you feel like doing something else instead.

By setting up good habits now, it's going to be that much easier to keep those habits going in the future. So ignore stuff like this, keep investing, and most importantly, keep smashing the like button for the YouTube algorithm! And like I said, a big thank you to Wealthfront for sponsoring this video, and all of their information is down below in the description.

So with that said, you guys, thank you so much for watching. I really appreciate it. As always, make sure to destroy the like button, subscribe button, and notification bell. 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 Stefan 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, if you guys want two free stocks, use the link down below in the description, and Webull is going to be giving you two free stocks when you deposit 100 dollars on the platform.

And those stocks could be worth all the way up to 1,850 dollars! So if you pretty much want free money, the link to that is down below in the description. Let me know which free stocks you get. Thank you so much for watching, and until next time!