Only 10% a Paycheck Could Make Millions
Average Americans who started investing just 10% of each paycheck 40 years ago might now be millionaires! People with average incomes who started investing when they were 25 years old and invested in a broad market fund that tracked the S&P 500, could have retired at the age of 65 with over $1 million!
40 years ago the average individual salary was roughly $10,000 and has grown about 4% per year. The annual return for the S&P 500 during the past 40 years was approximately 12%. If a person had set aside 10% of their paycheck for 40 years and invested it in the stock market, they would now be a millionaire. The chart below shows how their investment would have grown to over $1,000,000.
Today, the average annual income is almost $50,000. If market returns are half that of past 40 years and income growth remains the same, you may have over $1 million in 40 years. You could potentially have over $5 million assuming the same income growth and market returns as the past 40 years.
Get started! Putting away some portion of every paycheck from a young age is probably wise decision. While it might be more fun to spend it now, it probably won’t be any fun retiring without any money at all.