George Kamel and Jade Warshaw explain on ‘The Ramsey Show’ how someone can still retire a millionaire even if they didn’t start investing in their 20s and early 30s
Credit: The Ramsey Show/Youtube; Getty
NEED TO KNOW
- A financial expert explains how starting retirement savings at 40 can still lead to over $1 million by age 65
- Consistent investing and compound growth are key factors in building wealth, even with a late start
- Starting earlier allows investments to grow more, but it’s never too late to begin saving for retirement
Saving for retirement is one of the earliest ways to set oneself up for long-term financial stability — but is it ever too late to start?
After accepting a call from a listener who said he and his wife hadn’t started saving for retirement until he was 39, co-hosts George Kamel and Jade Warshaw explain on The Ramsey Show how it’s still possible to have more than $1 million in a retirement fund by the time a person is 65 — even if it’s not ideal to wait so long.
The caller, Justin, explained that after opening up his own Roth IRA account — a retirement account that allows withdrawals completely tax-free at age 59½ once you have held the account for at least five years — he immediately maxed out the yearly contribution of $7,500. Warshaw and Kamel then broke down the next year’s maximum contribution month by month, totaling $625 each month that he would have to set aside to contribute the $7,500 max limit.
After 25 years with an average return rate of 11% — which they said was a “fair rate of return” if “you go and just look at an average annualized rate of return for the S&P 500” — Warshaw showed that he can still retire at 65 with around $1.1 million.
Credit: The Ramsey Show/Youtube
“You don’t need to be a prodigy investor to have wealth. You just need to invest consistently into the right things and not overthink it and jump in and out,” Kamel explained.
“It really does bring up a bigger teaching point that I think it’s important to hit, which is a lot of folks feel like it’s too late to start investing. But we just saw with Justin, hey, even if you’re 40, you know, yes, he’s going to invest $625 a month, but he still has the potential to be a millionaire,” Warshaw explained.
That said, she also reminded listeners that “the earlier the better,” as allowing investments to take advantage of compound growth over time will make reaching those lofty goals easier. It’s the compound growth, she insisted, that makes becoming a millionaire before retirement attainable.
She and Kamel ran more hypothetical numbers, stating that someone who invests just $100 a month with an 11% return rate starting at 21 will have more than $1.8 million by the time they’re 67 — despite only investing $56,000 out of their own pocket over those years.
Never miss a story — sign up for PEOPLE’s free daily newsletter to stay up-to-date on the best of what PEOPLE has to offer, from celebrity news to compelling human interest stories.
“That’s what we found in our millionaire study: their retirement accounts weren’t the $1 million they put into it,” Kamel said. “Most of that, 80% to 90% of your nest egg in retirement, will likely be compound growth.”
So while waiting until you’re 40 may feel like it’s too late to start saving for retirement, the numbers disagree.
“It’s up to you to do the first 10% to 20%, but the more time you have, the better. Because every dollar goes a whole lot further when you’re young,” Kamel said. “This is not a knock on those who are older and don’t have anything saved. It’s just to show you that we better get on it, and there’s no time like the present, because waiting ‘til tomorrow is worse.”
Read the full article here
