Older people tend to be richer because they’ve had more time to earn and save money. Compare a 20-year-old to a 40-year-old. Both spent about 20 years being a kid, growing up and going to school, but the 40-year-old had an extra 20 years after that to earn and save money. You can do the same comparison between a 40-year-old and a 60-year-old, but take all the money the 60-year-old earned in the first 20 years of working and invest it in the stock market for the next 20 years, while also continuing to work.
Wealth can build like crazy. If you invest at 7% average annual return, you’ll double your money in just over 10 years. At 10% the doubling period is just over 7 years. Now consider that the S&P 500 had an average annualized return over 10% between 1957 and 2023, and that 60-year-old’s 20 year investment would multiply by 6.7x.
Older people tend to be richer because they’ve had more time to earn and save money. Compare a 20-year-old to a 40-year-old. Both spent about 20 years being a kid, growing up and going to school, but the 40-year-old had an extra 20 years after that to earn and save money. You can do the same comparison between a 40-year-old and a 60-year-old, but take all the money the 60-year-old earned in the first 20 years of working and invest it in the stock market for the next 20 years, while also continuing to work.
Wealth can build like crazy. If you invest at 7% average annual return, you’ll double your money in just over 10 years. At 10% the doubling period is just over 7 years. Now consider that the S&P 500 had an average annualized return over 10% between 1957 and 2023, and that 60-year-old’s 20 year investment would multiply by 6.7x.