Best Age To Start Investing – Here’s How To Start

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You’ve probably heard plenty of lectures on the importance of investing. But if you haven’t started yet, I bet you think you’re either too young or too old to invest your hard-earned money.

The best age to start investing is whatever age you are today. Getting started now gives your money more time to grow and benefit from the compound interest it can earn over time. Developing a portfolio in your 20’s or 30’s is ideal, but it’s never too late to begin investing.

If you understand how to invest at different stages of your life, then it’s never too late to get started. Find out how Gen Z, Millennials, Gen X, and even Baby Boomers can begin investing right now with the age-specific strategies outlined below.

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Why Start Investing At The Earliest Age Possible?

The sooner you begin investing, the quicker your money starts making its own money through compound interest. 

For example, when you invest in stocks, you earn money through interest and dividends over time. By letting your investments sit and reinvesting those earnings instead of cashing them out, they generate interest and dividends of their own.

This process of your money earning money that earns more money — is referred to as compounding or compound interest.

The reason you should begin investing today, no matter what your age, is because your investments increase exponentially with every year that passes, thanks to compound interest. The longer you leave your investments sit, untouched, the more compounding they can do.

• For example, If you begin investing at age 18 and contribute just $10 a day, you can stop investing at 40, let your funds sit, and retire a millionaire at age 65. That’s because, by forty, you’ll have $80,000 in investments.

Assuming an average return of 7%, that money will grow to over a million dollars over the following 25 years.

• If you wait until you’re 40 to start investing, your earnings don’t have time to compound and grow as much. For example, $10 a day would only generate about $246,198 (instead of one million +) by the age of 65.

Even if you double your investment and contribute $20 a day beginning at age 40, you’d still retire on $812,146 less than if you started at 18.

Investing early means you pay less and earn more throughout your lifetime. That’s why the best time to begin investing is right now.

How To Start Investing Based On Your Age

It’s never too late to begin investing. Whether you’re 18 years old or 50, you can develop a strategy to secure your future and help your money increase in value to keep up with inflation.

Using tools such as an investment calculator, retirement calculator, and inflation calculator can help you set goals and build a personalized investment strategy at any age.

How exactly should you invest at different ages? We share some ideas below to help determine how much money you’ll need to contribute to meet a variety of financial goals at different ages. Find out how to invest if you’re younger than 25, age 25 – 40, or over the age of 45 below.

How Should People Younger Than Age 25 Start Investing?

Do you think of investing as an “older people” thing? If so, you could lose millions of dollars waiting on “old” age!

The #1 best time to start investing is before you turn 25 because it gives your money more time to grow. 

If you’re ready to set up a formal investment plan, here’s how much you’ll need to invest each month to fund your retirement, retire early, or build wealth that allows you to enjoy the profits while you’re still young.

If you want to retire at 65 and live the equivalent of a $50,000 lifestyle (without Social Security or other investments), here’s how to achieve that goal.

Note: The data below are projections only — your results may differ. It assumes that you’re new to investing, have no significant savings, and will not figure Social Security income into your financial plan. 

If you’re ambitious and want to aim for early retirement, here’s how you can retire fifteen years earlier, at the age of 50.

You don’t have to follow the charts. We recommend allocating a percentage of your income toward investments, rather than a flat monthly fee, especially if you’re young. 

For example, if you’re single with no dependents or mortgage, you might allocate 30% of your income toward investments. If you’re supporting children and a mortgage, however, you’d probably drop to a 10% monthly contribution.

How Should People Age 25 – 40 Start Investing?

Millennials, are you under the mistaken impression that you need a lot of money to get started investing?

• 46% of Millennials think they need at least $1,000 to start investing.
• 17% of Millennials think they need at least $10,000 to start investing.

Good news: you don’t need a big budget to become an investor. You can start investing on almost any budget. Many apps let you become an investor for less money than you probably spend at Starbucks each week.

For example, M1 Finance lets you open a stock market investment account with a $100 deposit, then contribute as little as $10 a month.

Crowdfunded real estate platforms, such as CrowdStreet and Fundrise, let you buy into real estate properties with other people, so you can build your first real estate portfolio for as little as $10.

While ten-dollar contributions are great for learning your way around the world of investing, you’ll need to spend more to prepare for retirement or build wealth.

When you’re ready to get serious about investing for retirement or early retirement, the chart below shows how much you need to contribute to stock market investing each month to generate the income you need for retirement. 

Note: The data below are projections only — your results may differ. It assumes that you’re new to investing, have no significant savings, and will not figure Social Security income into your financial plan. 

You can tailor your investment strategy to your age, income, and goals using the calculators listed at the beginning of this section.

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How Should People Over The Age Of 45 Start Investing?

You’ll need to step it up if you haven’t begun investing by the age of 45 — but you probably already know that!

To retire by 65, 70, or 75, you probably either need to:

• Invest between $2500 – $3500 per month, or
• Come up with a one-time payment of roughly $300,000.

Whew — that sounds like a lot of money, right? Don’t panic!

Despite the fact that you’ll need to invest significantly more money to generate income for retirement, your earning potential is probably greater now than at any point in your life. 

How can you fund a retirement plan if you’re over 50 years old and haven’t started investing yet?

• Use your life experience and skills to your advantage by starting a side business.
• Get the education or training you need to transition to a higher-paying career.
• Consider selling your home.
• Downsize your lifestyle.
• Use inheritance money.
• Consider extending your retirement age to 70 or 75.

Here’s how much Genx X and Baby Boomers need to invest to build a passive income through stock market investing:

Note: The data below are projections only — your results may differ. It assumes that you’re new to investing, have no significant savings, and will not figure Social Security income into your financial plan. 

Even if you already have retirement funds in place, investing is an excellent way to generate more money without expending a lot of time or energy. For example, Investing $300,000 today, then contributing $500 a month for the next ten years (a total $360,000 investment) would result in $676,155 if the market produces average (7%) returns. That’s more than $300,000 profit over just ten years.

Today’s Technologies Open The Door To Investors Of All Ages 

When your grandparents and parents were young, earning extra money was probably a struggle. If they taught you about investing at all, they most likely drilled in the idea that you have to start young if you ever hope to retire. Lucky for us, things have changed dramatically over the past ten years. Today, we have game-changing advantages that our grandparents (and probably parents, too) never imagined possible, such as:

• Unlimited access to additional income, thanks to free online education and remote work
• Instant access to online investing apps and brokers that allow you to get started at any age on nearly any budget.
• Free, high-quality financial education and investment training on sites and apps such as Minority Mindset, M1 Finance, and Fundrise 

Young people (under 25) can easily build wealth and even retire young by allocating a portion of every paycheck toward investing. Older people, even those beyond 50 or 60, can still generate extreme profits, keep up with inflation, and create passive income through investing. Stock marketing investing is only one way to build wealth. Starting your own business or becoming a real estate investor are other ways to put your money to work for you. Both require more risk but also have the potential for far greater profits.

What matters most about investing is not how much you put in, when you start, or what path you choose, but that you get started now instead of putting it off until “someday”

Why Getting Started With Investing Is Critical At Any Age

Investing matters at every age, even if you don’t start young, because Social Security, 401K’s, and savings accounts aren’t enough to cover you in retirement.

More than half of the households in the U.S. have some investment in the stock market. That’s because they know that savings accounts, social security, and traditional retirement plans can’t provide a secure financial future.

Savings Accounts Make You Broke

Savings accounts don’t earn enough interest to keep up with inflation. The average savings account earns .06% annually, but inflation rises an average 3.24% every year. For example, if you live on $50,000 a year today, you would need $141,00 a year to retire and live an equivalent lifestyle 35 years from now.

To give you an idea of how money depreciates in a savings account, imagine you put $50,000 in the bank right now. Then you let it sit, untouched, (earning an average .06% interest), for 35 years.

Over three and a half decades, your $50,000 grows to only $51,061, which means you lose nearly $90,000 in buying power.

Savings accounts serve a purpose. They’re an excellent place to put your emergency fund (equal to about six months of living expenses) because you can access cash quickly when you need it. They aren’t an “investment,” though, because your money depreciates dramatically over time due to the low-interest rates.

401K and IRA Plans Aren’t Always What They Seem

It’s hard to resist putting your money into a 401K when your employer provides a matching contribution, but you shouldn’t rely on a traditional plan to provide for you in retirement.

Traditional retirement plans may not return enough money to allow you to retire when the time comes. For example, if you contribute $100,000 and your employers contribute $100,000 to your 401K over the course of your lifetime, your total investment of $200,000 may grow to $400,000. 

Congrats! You're 65 years old and now have a $400,000 retirement fund. Or do you?

Downsides of investing in a 401K:

• The $400,000 you invested over your lifetime is now worth about $120,000, thanks to inflation.
• You haven’t paid taxes on that $400,000 yet, and you’ll pay at the current rate, which could be much higher than it was when you deposited it.
• Overall, you can lose as much as 50-90 percent of your investment due to inflation and taxes.

Even if you choose a Roth 401K or IRA, which have better tax structures, your employers’ half of the contributions will still need to be taxed when you retire, at the then-current rate. Leaving your financial future in the hands of traditional retirement plans won’t make you wealthy or allow you to live comfortably in the future. 

Social Security Benefits Will Be Depleted By 2034

According to a recent report, Social Security benefits will be depleted by the year 2034 if no changes are made to address the current shortfall. If its funds become depleted, Social Security won’t have the money to pay full benefits to retirees, who would likely receive only 78% of the benefits they’re entitled to.

Is it possible they’ll address the upcoming shortfall and get back on the path to full retiree benefits? 

Yes.

It’s also possible that future catastrophic events may derail the Social Security system even further, reducing your retirement payout to less than the currently projected 78% of what you’re entitled to. You can see where I’m going with this…

Relying on Social Security to pad your retirement thirty or forty years down the line would be like sending money to a friend of a friend of a friend in Las Vegas and asking them to gamble for you, then betting your future on the hopes that they win. If Social Security is still around and paying retirement benefits when you’re 65 — great! You’ll have some fun money for extra trips, gifts, and home upgrades. 

At any age, you should avoid relying on Social Security when planning for retirement.

Investing Pays Off At Every Age

Investing is a more reliable way to fund your retirement than social security, traditional retirement plans, or savings accounts.

But preparing for retirement isn’t the only reason to invest.

At any age, investing can produce extreme profits if you know how to develop a solid strategy and stick with it.

One-third of millionaires say they never made a three-figure salary during any single year of their life but reached the one-million-dollar mark in less than 30 years of investing and before the age of 50.

 – The National Study Of Millionaires, 2021

It’s easier to build wealth when you’re young because your money has more time to grow. But it’s still possible to create retirement funds and wealth through investing, even if you don’t get started until your 40’s, 50’s, or 60’s.

Keep reading to find out how to develop an investment strategy that’s tailored to your age and lifestyle.

Get Started Investing Now, No Matter Your Age

Today is absolutely the best time to start investing, so your money has time to earn compound interest.

Start investing before the age of 25, and you’re likely to become a multi-millionaire by the age of 50.

It’s never too late to invest, though. Getting started in your 40’s, 50’s, or 60’s can still help you generate passive income and wealth.

If you’re young, you can begin investing a percentage of your income each month, and may even consider early retirement. If you’re over forty, you can still generate passive income by making larger deposits into your portfolio.

Investing matters because many of the programs we think will cover us, such as Social Security, 401K’s, or savings accounts, will probably not generate enough money to live securely or even keep up with inflation.

The best age to start investing is whatever age you are now because every day that you’re not investing is a day that your money is losing value — regardless of your age.

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