TikToker Shows How Much Money You’ll Have Investing 15% Of $40,000 Over 40 Years
The Wealth Gang team writes about financial information, passive income ideas, apps, programs, cash management tools and other wealth gadgets that we think you might want to use or learn more about. Sometimes, we write about products, services or items that might be associated with affiliate partnerships. In these instances, we will earn a small percentage of the revenue from sales. There is, of course, no cost to you.
Thank you for all your support! Without you, we could not keep this site running. Gang Gang!
Compound interest shouldn’t be thought of as a mystifying phenomenon. It’s not magic – just healthy financial habits applied to practice.
It’s really just the following factors coming together for one’s wealth-building:
- Basic math
- Personal savings discipline
- Utilizing the proper financial vehicles for savings, like a Roth IRA
- A quantitative analysis of historic interest rates for ROI – return on investment
Mikey Taylor is a pro skateboarder, co-founder of Saint Archer Brewing Company, and president of Commune Capital.
On TikTok, Mikey does an excellent job breaking down why it’s important to start proper savings habits early.
Rule Of Thumb – Save 15% For Retirement
Fidelity’s well-documented rule of thumb for retirement savings is 15% of your income. We previously broke this down with another way to thinking about retirement milestones based on your age range.
Let’s say you make $40,000 a year and invest 15% – $6000 a year – for 40 years.
In under a minute, Mikey plugs the numbers to explain how this makes you a multimillionaire: $6,000 a year grow at an average historic interest rate of 10% in a Roth IRA comes out to $3,000,000 in savings.
He adds in the comments:
The average annual return for the last 10yrs: 13%. 30yrs: 10.7%. 50yrs: 10.9%
Reinforces why savings habits are so important at an early age, especially in one’s 20s and fresh in the workforce.
The math checks out, though the algorithm of life itself certainly has many other variables. One commenter points out that the after-tax income on $40k, with $6,000 going to saving, is only $25,000. That’s not a lot of money to live on in most of the United States. It’s hard, but not impossible.
It just reinforces why it’s so important to learn how to live a lot on a little from an early age.
That’s the main takeaway with Mikey’s TikTok.
Let’s talk about gains
Another commenter on TikTok asked “where the heck can u find an index fund with a 10% return?”
This is another topic we’ve covered: SPY has a historical average annual return of the last 15 years is 10.80%. VTI has a 15 year return of 10.50%. Mikey’s math appears to be based on the historical averages of these ETFs.
One’s income – hopefully – grows as one advances through their career path, making saving easier. Also, it doesn’t consider any potential employer benefits for retirement, like matching a 401k. Adrian Brambila, for example, built a $4 million net worth by the age of 32 with some simple saving and spending strategies.
Current Top Offers
Invest in Commercial Real Estate With As Little As $10
Get a $50 bonus for creating and funding a new account
Invest spare change easily. Get $5 when you sign up for Acorns.
Earn an unlimited 1.5% back in Bitcoin on every purchase with the BlockFi Rewards Visa® Signature Credit Card.
Put your crypto to work. Get up to a $250 crypto bonus with a transfer of $100 or more in crypto.