The Personal Finance Podcast - The Best Ages to Build Wealth (Ranked!)

Starting point is 00:00:00 On this episode of the Personal Finance Podcast, the best ages to build wealth ranked. What's up, everybody, and welcome to the personal finance podcast. I'm your host, Andrew, founder of MasterMoney.com. And today on the Personal Finance Podcast, we're going to be diving into the best ages to build wealth ranked. If you guys have any questions, make sure you join the Master Money newsletter by going to mastermoney.co slash newsletter. And don't forget to follow us on Apple Podcasts, Spotify, YouTube, or whatever your favorite podcast player is. And if you want to help out the show, consider leaving a five-star rating and review on Apple Podcast, Spotify, or your favorite

Starting point is 00:00:52 podcast player. Can I thank you guys enough for leaving those five-star rating and reviews? They really do mean the world to me and they make my day. So today we're going to be going through and ranking the best ages to build wealth. And what I'm going to do with each of these decades is I'm going to be talking through why it's a great decade to build wealth and why it's not a great decade of build wealth and some of the things that you can do to overcome some of the pitfalls of each and every single one of these decades. Then at the end of each decade, we're going to be ranking them on a tier list. So S tier is the top tier. Then we're going to have A, B, C, D, and F where we're going to be ranking these decades on a tier board.

Starting point is 00:01:30 And so at the end of this episode, you'll be able to see the entire list and how we rank each and every single one of these decades. There may be some surprises in there, and I will explain why as we go through each and every single one of them. So I am really pumped for this episode. Without further ado, let's get into it. All right, so the first decade that we're going to be diving into is the 20s. Now, the 20s is a time where a lot of you may just be finishing up school or college, and you are getting this entry-level job. You are just getting started in the real world. You may have student debt on hand. you may not be making as much if you are in an entry-level job. And so there's a lot of things that you're going to have to overcome in the 20s.

Starting point is 00:02:10 But the beautiful thing about the 20s is there's also a ton of pros. There's a ton of wonderful things that happened during the 20s that I want to make note of so you understand why this is such an important decade. Now, why is this a great decade to build wealth? Let's start there. Well, first is you have time. You have the greatest asset of all, which is time. If you asked Warren Buffett today, if he would trade all.

Starting point is 00:02:33 of his wealth to become a 25-year-old again, he would 100% say yes. He would get rid of $100, $300, $300 billion in order to be age 25 again. So you know what that tells me? You have one of the most valuable assets of all. You have time available. You have time to just get started investing. And that's why $200 per month from age 22 to age 65 at an 8% rate of return can grow to $765,000. So even small amounts of money in your 20s can grow to very large amounts of money just by staying disciplined and investing your money moving forward. Number two is the 20s is a great time to start to build out habits. This is the decade where you can form those positive habits, those good habits, and everything else can fall by the wayside. If you have poor habits when it

Starting point is 00:03:25 comes to health, if you have poor habits when it comes to your finances, if you have poor habits, when it comes to your relationships or the way that you learn. All of these can be shifted and changed very easily in your 20s. Why? You have a lot more energy in your 20s. You have a lot more opportunity ahead of you in your 20s. You have obviously the time that we just talked about. And there are so many different things that you can shift because you have not made the big mistakes yet. Everybody listening right now who is in their 20s or we have teenagers even who listen to this podcast. If you have not reached age 20 yet, I want you to make a list. of some of the habits that you feel as though you want to master.

Starting point is 00:04:03 For me specifically, it's always been making sure that I optimize for health. So that's getting my sleep right. That's getting my exercise right. That's making sure I am optimizing in my nutrition. And the way that I focus on every single area in my life. Number two is productivity. I want to make sure I'm as productive as possible. The best possible person that I can be so I can help as many of you as possible.

Starting point is 00:04:22 My goal is to bring all of you as much value as I possibly can. And so productivity is a huge one for me. Another one is to make sure that I am doing the best. best possible thing for my family. I'm a family person. I'm a family man and I want to make sure that I am honoring that. And so these are just some of the areas that I want to focus on. But maybe you have some areas that you want to focus on as well. And so you want to get wealthy. You want to make sure you get your finances right. You want to make sure it doesn't matter what the list is. Now is the time to do this. Number three is risk tolerance is on your side. The beautiful

Starting point is 00:04:49 thing about your 20s is you can really shift your asset allocation into a more aggressive portfolio. Because you have so much time for your portfolio to recover, I loved this about my 20s. So I was 100% in equities in my 20s and still for the most part I am now, even in my 30s. But in my 20s, I made sure that I was as aggressive as I possibly could get, where I would buy all different kinds of things because my goal was growth. I wanted to have growth on hand. So I would buy individual stocks, index funds, and ETFs. And I wanted to make sure I was growing that portfolio. And so this is something and an opportunity that a lot of folks in their 20s have, which is why it's a great opportunity to build wealth. Time plus habit formation, plus being able to have this asset allocation in place is amazing.

Starting point is 00:05:32 Four, is you have the ability to have the Roth IRA as a cheat code because you have so much time on hand and you have maybe a lower income during this time frame, you can utilize the Roth IRA for that tax-free growth. This is something where I really believe everybody in their 20s should look into a Roth IRA and see if it fits their risk tolerance. But for me specifically, I love the Roth IRA for people in their 20s. Number five, and this is actually a big pro for a lot of you, is that your expenses are low. You may not have kids yet, you may not have a mortgage yet,

Starting point is 00:06:04 and if you can live like you did in college, or if you can live as though you are in college, that is a huge opportunity. Why? Because you're building up your foundation, and you're building up your base, and if you can take extra dollars and put them towards that base, they will provide for you for the rest of your life. You could be focusing maybe on Coast 5, for example, and you can make a choice right now that you want to hit Coast 5 at age 35.

Starting point is 00:06:28 Well, if you went out and did that, that would be a huge milestone. You're setting yourself up in your 20s so that in your 30s you could take your foot off the gas. And so focusing on that savings rate, trying to get to that 20% while you're in your 20s and sticking to it long term, boy, oh boy, will that change your life forever. But the last thing I'll say is that mistakes are recoverable. Because you have so much time left, if you lose money on a dumb stock, pick, I've done that time and time again. You have 40 years to make it back. It's not as big of a deal as when you lose your shirt on a stock when you're 50 years old. And so for folks in their 20s,

Starting point is 00:07:01 they have these six amazing things that are going to happen for them. They have mistakes that are recoverable. You have the ability to form the right habits. You can increase your savings rate. Your costs are going to be low. Compound interest is in your favor. You have time in your favor, and you have the ability to max out that Roth IRA early on so you can get that tax-free growth. These are all wonderful benefits. But this is not just the perfect decade to bill wealth. All of those sound absolutely amazing, but there are things that you want to consider to note on why this could be a negative decade as well. And the first reason, and one of the biggest reasons, is that this is the lowest income of your entire career, meaning most people in their 20s don't make a lot of

Starting point is 00:07:40 money. And if you can figure out a way to make more money than most, you will eliminate the biggest downfall in your 20s. In my 20s, I hardly made any money, especially for my first three years when I was working. I made $30,000 per year at my entry level job. Some of you may be listening right now and you're making $40,000 or $45,000 per year. Maybe you're making $50,000 per year. Maybe you're working your way up the corporate ladder and you're trying to find a way to make more money. Well, if you're in those low income years, working on a couple of different things. One, negotiating your salary. Learning how to build side businesses that can turn into full-time incomes. All of these are really, really great things to do. But try to increase your income as fast as you possibly can in your

Starting point is 00:08:20 because that's going to set up the foundation and the baseline of dollars that you can put towards wealth building. So that is one downside for sure. Another one is student loan drag, meaning if you have student loans on hand, many of you are carrying them out of college, this can be something that starts to beat down your budget. You may have to spend a lot of money. Maybe it's three, four, five hundred dollars per month, or depending on how big your loans are, $1,000 or $2,000 dollars per month on student loan payments. And if that is you and you feel as though these are bringing you down, this could be one of those areas where it's going to, where it's going to drag into your adult life. And so you want to make sure that you're trying to pay those down as fast

Starting point is 00:08:59 as possible. Number three is you don't have a lot of experience. So you don't have a financial education usually. You don't learn it in high school. You don't learn it in college. So you have to figure it out by understanding maybe some of the things that your parents told you or the school of hard knocks. In the real world is where you want to figure some of this stuff out. And so that will be something that can bring you down if you start to make some mistakes early on. I know I made a lot of mistakes in my 20s. That's when I was living paycheck to paycheck when I first started making that $30,000 per year. But I vowed to figure it out.

Starting point is 00:09:27 And I did. And I know you will to just listening to this podcast will absolutely transform your life if you actually think about it. Number four is the I have time trap where a lot of folks in their 20s, I've heard people say this. I have all the time in the world. I can figure it out later. I'm not going to get started right now. Instead, I can start later on down the line.

Starting point is 00:09:45 And if you fall into that I have time trap, that can really get you in some muddy water if you're not careful. Five is that lifestyle creep starts when the first real paycheck hits. And if you allow for lifestyle creep to take over your life early on, it is very hard to go backwards. So if you take on the hefty car payment because you started to get paid real money, or if you take on the high-rise rent payment, or if you take on the fancy gym membership, all of these will be much harder to go backwards than they are to move forwards. It's easier to stay frugal when you're young than it is to kind of take these things away. Because if you have the fancy apartment and then the next time around you realize,

Starting point is 00:10:23 oh, I made a mistake and then you got to downgrade to the less fancy apartment, that's not easy to do. And the same thing goes for if you get the fancy car, but then you got to downgrade to the Toyota, well, that's not easy to do either. And so we want to make sure that we are making wise decisions up front so we don't have to go backwards because most people don't go backwards until they have to. And I don't want you to have to ever go backwards. And that's going to be one of those biggest things. The last one is that social pressure is the loudest. Travel, going out, going to weddings, brand name, everything. This is when

Starting point is 00:10:56 most young people are making bad choices. They haven't had the life experience yet. And so because they haven't had that life experience, they don't know how valuable it is to make sure that you get your finances right. I want you to be able to get your finances right. And And so if you avoid those six mistakes and if you focus on ways to reduce the overall impact of those mistakes on your money, your 20s will be an amazing time for wealth building and you will look back on them at the foundation of your entire financial life. So I'm going to rank this one. Let's rank the 20s and see exactly where we land on this one. For me, nothing beats compounding time.

Starting point is 00:11:32 Nothing beats the amount of time that you have in your 20s. And if you do them right, if you make sure that you're making the correct decision, This is S tier for me. This is one of the best decades in order to build wealth because you have so much time on hand and you have the ability to start to build out the foundation. Now, the thing about your 20s is this is not easy. It's simple, but it's not easy to do to some of the things that I'm talking about. You have to have discipline and you have to be willing to take on some of this stuff. And so if you can increase your income, boy, oh boy, can you rocket ship your financial life if you really, really focus. So the 20s, for me, that is going to be here. Now, let's jump into the 30s. All right, so next, let's look at your 30s. And your 30s is a time frame that is really cool for wealth building, but a lot of things are happening at the same time. Your career might be advancing. You might be getting married. Maybe you have kids or you're thinking about having kids. And you may be thinking about your first home purchase, daycare is hitting, maybe your peers are buying houses, your friends are leveling up and having kids. And so a lot of

Starting point is 00:12:36 things are happening all at the same time. You've got pressure from all different directions. And this can be a decade that will be one of the most stressful of your life, but you'll look back on it and realize, well, I've started to make a lot more money. And so maybe some of the pressure is being taken off me, but I've just got a lot more life stuff going on. There's a lot more messy things happening in your 30s. This is the decade where you really have probably the least amount of time you will ever have, especially if you start your family in the 30s or you have kids in their late 20s, early 30s. This is going to be the time frame where you really are going to see that your time starts to evaporate. Now, why is this a great decade to build wealth? There's a lot of great things when it

Starting point is 00:13:15 comes to your 30s and reasons why this is a wonderful decade, but there's also some cons as well, and so I want to make sure that I point all of those out. Well, first, on average, when you look at statistics, earnings growth accelerates fastest in your 30s, meaning when you start your 30s and you enter those 30s, on average, the person who is going to enter age 30 is going to be making a lot more by the end of their 30s. And so this decade is where it relieves some of the income pressure. Maybe job changes in this decade. Could it be happening? This could mean a 20 to 30% increase in your income over this decade if you do it right. And for those of you in your 30s, I want you to focus on increasing your income and really trying to maximize that income. So you have

Starting point is 00:13:55 that income floor that allows you to keep growing over time. Two is you still have 30 plus years to traditional retirement age if you wanted to retire at like age 65 or even if you wanted to retire at age 60. you still have 30 plus years until you get there. And compound is still doing some serious work. Every time you think about compound interest, it is really, really powerful what you can do in your 30s, even if you start late. Maybe you're listening right now and you're saying to yourself, I did not start in my 20s. I am beating myself up for it. Guess what? You still got plenty of time. You still got plenty of time for compound interest to get to work, but you got to start now. Three is the big financial decisions get locked in here. So places like, where are you?

Starting point is 00:14:38 you're going to live. Maybe in your 20s you wanted to try the big city, but in your 30s, you moved back home to your hometown and you wanted to buy a house there to raise a family, your parents are there, those types of things. I know a lot of people that have done that. And so you're kind of deciding where you live, the house you want to buy, how many kids you want to have, you know, if you're going to be dual income or if you're going to be single, there's a lot of different factors that are coming into play. And these decisions are going to shape the next few decades of your life. Now, sure, you have free will, you have flexibility. You can do whatever you want in this life. You can move and pick up really, really quickly.

Starting point is 00:15:08 But a lot of folks, when they reach their 30s and they start to plant roots, those roots grow deeper. And the deeper those roots go, the harder it is to leave. And so a lot of folks into their 30s are making a lot of these different choices. This is also the first decade where a lot of people start to realistically max out all their accounts. Now, some of you, if you're really disciplined like I was in your 20s, you may be maxing out those 401ks and IRAs even in your 20s. But once you reach your 30s, a lot of folks as their income increases, they see that, oh, maybe I can max out my Roth IRA or maybe I can max out my Roth IRA. and 401k. Or maybe we'll do the trifecta, the Roth IRA 401k and HSA, depending on how much money you're making. And so in this decade, that is the time frame where some people have the ability

Starting point is 00:15:47 to do this. Now, others of you, you may feel the pressure of paycheck to paycheck because of all these different obligations. So it's not just every single person can do this, but more and more people are likely to do this during this decade. Also, the HSA can be a massive leverage for your 30s. As you start to think about health savings, more people in your life, you have the ability to save more receipts. And so this is a wonderful decade to open an HSA and fund it if you have a high deductible health plan. And your career path is becoming more clear. Now, sure, some people have career changes, but for most folks in their 30s, they are seeing this clear career path. Maybe you have been in your job for a decade or more. And so you know what you're doing. You know what direction you're trying

Starting point is 00:16:26 to go. And you are climbing the career ladder. This makes optimization possible. And it makes it something that can really make a difference overall. But why might this not be? the optimal decade to build wealth. What are some of the things that could trip you up in your 30s and make this to where this is a tough decade to even get this going? Well, it's the most expensive decade for most people as number one. Wedding average is around $30,000. So if you get married, for example, the average wedding is going to cost you tens of thousands of dollars. And it's not a requirement, but most people are going to spend that anyway. So we have to make sure that we are talking through this. Maybe you're having your first home down payment. Maybe you're buying new furniture for

Starting point is 00:17:05 your house. And so you got to fund everything surrounding the house. Maybe you're getting brand new cars or maybe you're upgrading your car. Maybe the car that you drove in college is finally breaking down. It's been over a decade. And so you're getting a new car or you're getting a slightly used car. Whatever your thing is, there's a lot of expenses that pop up just like this. You may still be paying your student loans. You may still be paying some of those loans you've had for a long time, but then you also have kids. And when kids hit, we know how expensive this can get because one of the biggest cost to folks who have young kids in their line at them, especially if both parents are working, is daycare. Daycare alone can run anywhere from $1,500 to $2,500 per month per kid in most

Starting point is 00:17:45 major metros. And if you are somewhere where you're not in a major metro, maybe it costs you $1,000. It could even cost you right around $800. But it's not usually much cheaper if you have a child full-time in daycare than $800 per month, especially if you want to go to a reputable daycare or a place. that is reputable. And so for a lot of folks, this is spending, you know, $250 to $500 per week on daycare alone. If you have two kids in daycare, double that. If you have three kids in daycare because you decide to have three of them all close together, well, you can triple that and then you know how expensive that can get. So this could be something where a lot of households are paying more than their mortgage on daycare. This is also a decade of compounding is gone. We need to make sure

Starting point is 00:18:30 that we talk about this because for folks in their 20s who are listening to me talk about this decade, if you start in your 30s, you lost the early decade. This is something where I don't want you to feel bad about yourself because you can still get started right now. But for those of you listening in your 20s, get started now. You don't want to lose that decade. It's one of the most valuable decades. That's why we ranked the 20s as an S tier. Also, you may be dealing with job changes or relocation or career pivots, which is still common. And this can disrupt compound interest. This can disrupt wealth building. I have a family friend who went back to college to become a physician at age 39. He had a wonderful career as a physician, retired in his early 60s, and it was a great thing.

Starting point is 00:19:10 But some people have career changes like that. And if you are going through career change, that could disrupt wealth building. Also, decision fatigue. They get through houses and marriage and kids and location, all at once can be stressful. You really don't have much time. You're probably sleep deprived. There's a lot of things that are happening. And so because of this, it is hard to make good financial decisions. And so let's rank this decade. Well, this is a really powerful decade. The 30s or a decade where you still have a ton of time left in your time horizon, but expenses are also going to begin to peak because your obligations are rising. Maybe you're having those weddings, but you still have student loans on hand, but you still, you're having kids in daycare

Starting point is 00:19:47 and you're getting pulled in all different directions. Maybe you've got aging parents and you got to help them out as well. And so for a lot of folks in their 30s and in the millennial generation right now, you feel the stress, you feel the anxiety of what is going on during this decade. And so it isn't the perfect decade for wealth building, which is why we have it as a tier. I'm putting the 30s at a tier because the amount of time you still have left and the opportunity you have available. You can still make a career change and it's not a big deal. You can still make shifts in life and it's not a huge deal. You got so much time left before traditional retirement age if you wanted to go that route. Or if you decide you want to retire Earl, you got to get with it and get it going. But you want to make sure that

Starting point is 00:20:24 doing all the things in your 20s, but also adding some of the positives in your 30s. So I'm ranking this decade as an A tier. Now let's get to the 40s. Workplace chaos. You know the feeling. Deadlines are stacking up, emails are flying, and then someone on your team gives notice. That's when you think this is a job for sponsor jobs. When you need the right hire fast, Indeed, sponsor jobs helps your post stand out and reach quality candidates. Instead of hoping the right people see your listing, sponsored jobs boost it in search results so you can match with candidates who meets your

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Starting point is 00:22:54 Way fair, every style, every home. All right, your 40s is a fun decade because you have the established career already, but you also still have some pretty good energy to be able to get after some stuff. And you also have experience. So this is a decade where you can really accelerate your career because of that. You may have kids in elementary or middle school. You may already be a homeowner. And you may have aging parents that are starting to need your help.

Starting point is 00:23:23 And so you may be thinking through mid-career evaluation. is this exactly what you want to do or do you want to continue to shift? And sometimes you can have a midlife crisis in your 40s as well. All of this stuff is normal, but there are a lot of things that you're going to have to deal with. Now, why is this a great decade to build wealth? Well, peak earnings often begin either in your late 30s or your early 40s and many high earners cross six figures or they cross into multiple six figures during this decade. If you didn't do it in your 30s, make it your goal to do it in your 40s so that you can really increase that. income. That income is going to be a big deal when it comes to wealth building over the course the next

Starting point is 00:24:00 couple of decades. Secondly, is most likely you have your career stabilized. You understand what you're doing in your 40s. You understand what is going to happen moving forward and you have a plan in place on what your five year plan is, your 10 year plan is, and you're thinking through your career. You're reducing the amount of time that you're spending job hopping. You've got more compounding inside of your role. A lot of people maybe within the company know who you are. You're establishing credibility within your corporate environment. And you figure, out the game. You know how to play the game now because you've been doing it for a while. You've been doing it for a couple of decades. And so now you feel as though this is something that can be helpful.

Starting point is 00:24:35 Also, for a lot of folks in their 40s, if you did have kids early 30s, then daycare might be ending. Now, not for everybody, obviously. These are just some of the average situations, but daycare could be ending in your 40s. And so you don't have to worry about that expense anymore. You can eliminate that expense unless you are a high earner and you have kids in private school, then you don't have to worry about as many education costs when it comes to daycare. Also though, during this decade is Coast Fire becomes realistic. Now, if you don't know what Coast Fire is, this is where you save enough money where you can stop saving and compound interest will do the rest of the work where you will hit your retirement number by traditional retirement age

Starting point is 00:25:13 if you want to stop saving. Compound interest does the rest of it, the rest of the way. And so you don't have to worry about it anymore if you don't want to. Some people just try to achieve Coast Fire, then they're just going to take the rest of the dollars that they have on hand instead of saving investing them, they want to enjoy that money. But this becomes realistic, especially if you front load it in your 20s or 30s, which is a beautiful position to be in because Coast Fire can be your baseline. And if you want to continue saving, you can. But if you don't, spend more on things that you love. Also, your knowledge and your energy and your earnings are all going to overlap at the same time. And so because of this, I want you to take advantage of this decade.

Starting point is 00:25:51 My brother-in-law, for example, is 47 years old. He is in his peak earning years. He is, He's in shape. He is really sharp mentally. And so this is a time frame where I sometimes I'll look at him and I'll say, wow, this is just a great decade for a lot of folks where you get the trifecta of everything going on at the same time. Energy overlap. And this is the sweet spot for a lot of folks in their working career.

Starting point is 00:26:12 And if you do this decade, right, your 50s can be really high earning based on the work that you did in your 40s and your late 30s. And so I want you to remember that as you go through this. And plus, you still got 20 plus years to compound if you want to go to a traditional, you know, 60 to 65. retirement age. If you want to retire early, you can also plan that out right now and start to think about some of the things that you want to do when it comes to this decade and building wealth. Now, why is this not a good decade to build wealth? What are some of the things that could be

Starting point is 00:26:39 happening in your 40s that you may not have thought through? Well, there's a lot of pressure in your 40s. And there are things, I would argue, there could be situations if you have young kids in your 40s that your pressure is the highest. But I still think the 30s is where it gets the messiest. It's the most difficult because you don't have enough experience yet. And you're just trying to to get through life. But in your 40s, you may have college savings pressure. So you may be looking at this and saying, well, I haven't saved enough for my kids college yet. This is starting to come up. This is starting to happen now. I need to put some money in a 529. Maybe you have some private school decisions. If you are a higher earner and you want to put your kids in a private school,

Starting point is 00:27:14 you may try to make this decision and say, do I want to take on this tuition, this $8,000, $10,000, $20,000 per year. It can get really, really high out there. And so you want to make sure you're thinking through that. Plus, future tuition planning. There's a lot. lot of things when it comes to schooling that you really want to think through. Another big thing, though, is that this is the sandwich generation. Now, what does the sandwich generation mean? Meaning, you are taking care of your own kids during your 40s, but you also may have aging parents that need your help. And I have many friends who are in their 40s who are dealing with this. They are trying to help their aging parents either financially or just physically, and they're

Starting point is 00:27:50 also helping their kids, obviously, as they raise their kids and they have a lot of expenses based on that as well. And when you're caring for kids and aging parents at the same time, it can get tough. I know how hard that can be. And so for some of you out there, you may be dealing with that. And so this is a tough decade for that. But also, your lifestyle may be locked in. The house, the cars, the kids sports, the vacations. All of these are locked in. It is really hard to go backwards if you've locked this in and you feel as though you are not getting ahead financially. And so for many of you out there, as you start to deal with some of this stuff, you want to make sure that you are thinking through every single liability that you take on. Now, one of the questions I like to tell people is ask

Starting point is 00:28:31 yourself, if your income went down 30%, could you still afford this liability? If the answer is no, then make sure you make those decisions based on your income floor, not your income ceiling, especially if you have variable income or those things, you want to make sure that you're making this decision based on your income floor. But also in your 40s, your compounding run way is half of what someone in their 20s has. It is visibly shorter unless you plan on working for a longer period of time. So to match what something like a 20-something year old does is just not going to happen anymore. And so you need to contribute multiples of that instead of contributing $200 a month. You need to contribute $600 per month in order to get the same outcome as someone in their

Starting point is 00:29:13 20s. Plus, the midlife crisis can't happen for some people. Maybe you want to spend more in some new car or some second homes. You may be going through a divorce. Divorce is a reality for 50% of households now. And so if you are going through that, you know, it is a difficult situation, but there are things that you can do to protect you and your family as you start to go through some of those hardships. And then lastly is kids activities. Kids activities, by the way, are just getting way out of hand. Thinking about travel sports, some of these tutors or music lessons, the entire works can get so incredibly expensive. I don't even have kids who are past the age of 10 yet. And I am watching this happen in real time. Where I have my kids, I,

Starting point is 00:29:51 want my kids to be in sports because I think it teaches them so many different valuable skills and lessons and they love playing sports. We're in basketball. We're in soccer. We're in flag football. We've done T-ball in the past. My daughter's in swimming and there's just all these different things that are going on at the same time. But it feels as though every single month I'm renewing multiple different sports for $500 or whatever it ends up costing. And so this can be very, very expensive. And we're not even in the travel ball scene. We're just doing public recreational sports right now. And it is still expensive. So when you look at some of this stuff, I can see how it adds up. And sometimes I'll do this and I'll be like, I don't know how somebody on $30,000 to $40,000 per year can even survive if they have kids because there's

Starting point is 00:30:31 so many different activities going on. And so this is a solid decade because your earnings are growing. You have some of your energy levels. But the compound discount is real when it comes to some of this stuff. And so I would give the 40s a B tier. This is a B tier because your compounding distance has shrunk. And if you have not started yet, then this is going to be a time frame where you got to get started right now. And it's much more difficult to get the ball rolling. And so I want you to think about this in a way where you get that peak earning and making sure you get the peak earnings, but your liabilities are going to be rising. And so I want you to make sure you're making moves that are going to help your long term future. Now let's get to the 50s.

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Starting point is 00:32:29 my pay, spot me, and travel perks, go to chime.com slash disclosures. We've got a lot planned this summer. Trips with kids, time outside, long weekends, and just more moments together as a family. And honestly, the older I get, the more I realize how important it is to protect it all. The good news is getting life insurance doesn't have to be this huge, stressful project anymore. That's why I like PolicyGenius. PolicyGenius isn't an insurance company.

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Starting point is 00:34:44 When I started building this podcast in business, I underestimated how many different jobs I'd suddenly have. From recording, editing, branding, scheduling, websites, emails every day felt like a new problem that I had to figure out. And honestly, when you're building something, having the right tools matters a lot. That's why platforms like Shopify are so powerful. Shopify is the commerce platform behind millions of businesses and handles 10% of all e-commerce in the U.S. Whether you're launching something brand new or growing an existing business, Shopify gives you everything in one place. You can build a professional-looking online store with ready-to-use templates, use AI tools to help write product descriptions and improve listings, and create email and social campaigns without needing a giant marketing team. Plus, if you ever get stuck, Shopify's 24-7 support is always there to help.

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Starting point is 00:36:10 trade school, and they're doing some new things and they are leaving your house. often, if you set up your 40s correctly, this can be a decade where maybe your earnings start to peak in your 50s. And that's a beautiful thing to have because this is going to allow you to really build out a tremendous amount of wealth at the last decade before retirement. Also, maybe your mortgage is close to paid off or you're thinking through this in a way where you are trying to pay off as much debt as you possibly can. And retirement is finally close enough to see. You can see it on the horizon or maybe you plan this out perfectly and you are retiring in your 50s. I want many of of you wealth builders to be able to have the opportunity to do that and you get to work because

Starting point is 00:36:47 you want to instead of because you have to. Plus, your health starts to matter even more during this decade and you're spending more time thinking about your health and making sure that you're optimizing it. Health is obviously always wealth. You want to focus it on your 20s, 30s, 40s, and 50s. But your 50s is where a lot of folks need to think about, hey, I need to make sure I'm doing regular doctor's visits. I need to make sure I'm getting all my blood work done and all the extra stuff that you need to make sure that you're doing on hand. Now, why is the 50s a great decade of wealth. You may be asking yourself, well, that's not a great decade of wealth. I don't have much time left before retirement. It actually is. And here's why.

Starting point is 00:37:20 One is this can be peak earnings for a lot of people. The 50s often produces the highest savings potential for any decade out there. Why? Because two, you have the ability to have catch up contributions. So at age 50, you can actually contribute more to your retirement accounts than many other decades. So in 2026, you can add around $8,000 extra to your 401k and an extra $1,000 to your Roth or a traditional IRA on top of the regular limits. So you can get an extra $9,000 into those accounts based on catch-up contributions. Now, these are only available for people who are over the age of 50. If you're under the age of 50, you cannot take advantage of those catch-up contributions. Three, is that emptiness savings can boost your savings rate if your kids

Starting point is 00:38:08 leave out of the house and they are not there anymore or maybe they're graduating from college. If you had kids early, then you may have a boost in your savings because kids' expenses can drop sharply unless you're paying for their college and their room and board and all that kind of stuff, which if this happens, can free up a $1,500 to $3,000. If you never had kids, you already had that savings available to you. And so this is something where you may have the ability to all of a sudden catch on to some of these areas. Or if you pay off your mortgage and the mortgage is gone, then you also have that money that you can put towards. savings because you lived in your house early on. Now, this is one of the reasons why if you do

Starting point is 00:38:45 buy a house in your 20s, I want you to try to find something you think you could stay in for a long period of time because when you get to your 50s, you may have a fully paid off house and you don't have to worry about it anymore. Well, that's a beautiful position to be in. Even though it may not be the optimal investment choice, it is a great position to be in and having no debt is just wonderful overall. Plus, the finish line is visible. Your motivation finally kicks in because you feel oh man, I can do this. I am getting closer and closer to retirement or I may be retiring in the next just couple of years and I know I can make this happen. And health care is still relatively manageable even before Medicare, but you want to make sure you plan that out. If you plan on retiring

Starting point is 00:39:23 early, make sure you plan for health care. That trips a lot of people up. But if your company's not going to be paying for it anymore, you got to have a plan in place. Now, why is this not a great decade for wealth building and compounding? Well, obviously it's just the time horizon. You have 10, maybe 15 years of compounding left if you plan on working until age 65. If you plan on working longer because you like your job, maybe you are someone who just really enjoys your work, then you have an even longer time horizon. So it's not to say that it's for every single person that you only have 10 to 15 years. It depends on what you want to do and you enjoy work or not. Sequence of Returns Risk is the number, it's the second one. So we just had an episode

Starting point is 00:40:00 talking about that recently. Sequence of Returned Risk. It's called the episode. We will link that episode down below in the show notes if you want to check it out. It was very eye-opening for a lot of you out there. But this sequence of returns risk is becomes very real. And so you want to watch the market drops. You want to watch what the market is doing before you retire to make sure you're retiring at the right time or to make sure that you are building up that cash buffer. So sequence of returns risk does not get in your way. Layoff risk is also something that's high. The reality is for older workers and they're not going to tell you that's the reason why they're laying you off. But for older workers, it is real. And so you want to make sure that you are still

Starting point is 00:40:35 valuable to your company and building on your skills, staying sharp mentally, all those different things. The 50s is not a time where you're going to have any crazy mental decline. But for some people, depending on what your industry is, this can happen. So you just want to make sure you're staying on top of it. Plus, health care costs are going to start to climb. You're going to need more medical care as time goes on. The older you get, this is just the reality of what is happening. And so you want to have a plan before Medicare at age 65, what you're going to do and how you're going to pay for some of that additional health care. And aging parents often need more. support. I remember when my parents were in their 50s, watching them take care of their parents

Starting point is 00:41:10 can be very difficult because your parents get really old at that point in time. You know, if your parents had you when you're 30, they are now 80 years old in your 50s. They're between the ages of 80 and 90 in your 50s. And so even if they had you earlier, they're even older than that. And so it's one of those things where you're going to have more responsibility when it comes to aging parents. And if you're behind in your 50s, making sure you catch up is very hard. It is hard to catch up in your 50s, but you can absolutely do it. It is never too late to build wealth, and you can definitely do it in your 50s. You still have time. It is not too late. But you got to strap up. You got to make sure that you're getting this done because you're losing out on years

Starting point is 00:41:48 every time time goes on. So this ranking might surprise some of you, but I'm going to put the 50s at a B tier because of those catch up contributions, because you still have the ability to plan out your retirement, because you have flexibility, and because you have some of those peak earning years, this can be a wonderful decade, especially if your expenses begin to drop, or you get that house paid off, or you're getting rid of all of your debts and you have no more liabilities. This can be a wonderful decade to think about building wealth. And you get to put your plan together. Now, when you're five years out from retirement, I want you to make sure that you are focusing your time and energy on building up that retirement plan if you don't have one already.

Starting point is 00:42:24 Five years out is the minimum time frame that you should have. If you're like one to two years out, you're too late, I want you to plan it five years out and make sure that you are doing that. Now, if you're listening right now, I don't know when I'm going to retire or I'm going to retire in the next two years, that's fine. But five years out is optimal so you can start to build up some of those cash reserves or have a plan in place for sequence of return risk. All right. Next, let's jump into the 60s. This is the last decade we'll do. All right, let's go into your 60s.

Starting point is 00:42:51 Now, your 60s is a decade where there's a lot of decisions that you have to make. And if you are still working early on in your 60s, I know many people who do, then this is going to be a decade. where you want to start to make choices that are wise for the rest of your life. Now, retirement's either near or you're already in retirement. And Social Security decisions are things that you're going to have to make. Do you want to take Social Security early? Maybe you want to take it at 63, 4, 5, 6, or do you don't wait till 70 and get that guaranteed 8% rate of return?

Starting point is 00:43:20 Medicare kicks in at age 65, which is going to help you with some of those health care expenses. And for the most part, kids are fully launched. Although I have a friend who had his first child with a 60, so it's possible, I guess. But it's one of those things where, for the most part, most of your kids are fully grown. Also, you possibly have grandkids coming into the picture, which is also a really fun and enjoyable thing. And so the lifestyle transition from earner to drawdown is underway. There's some psychology things behind that where it's going to be something

Starting point is 00:43:46 where you want to make sure you're going from the accumulation phase to the preservation phase when we are thinking about our portfolio. Now, why is this a great decade to build wealth? What are some of the pros to your 60s? Well, one is catch-up contributions are still available. And Secure Act 2.0 actually introduced something called super catch-up contributions for folks between the ages of 60 and 63. And so this lets you contribute even more than the standard 50 plus catch-up contributions. And so check the current year's list if you want to see what those are. And then your Social Security claiming strategy can be worth six figures over a lifetime if you get it right. So waiting from age 62 to age 70 means that you might make 77% more per check.

Starting point is 00:44:29 but if you don't think you're going to live very long, it may not be the optimal decision. So it's going to depend on every single person. Also, if you need Social Security early on because you want to retire, hey, then go ahead and take that. It's really important to make sure you think through that. And then this is the final push to your retirement number, because this is the last realistic chances you have to close the gap fast in your 60s. If you are able-bodied and you are sharp-witted,

Starting point is 00:44:51 then you want to make sure that you are taking advantage of some of these things. And the Roth conversion window is also here. The years between now and retirement at 73, when you have to start taking RMDs can save serious money in a lifetime taxes. And so making sure you do some Roth conversions here, talking to your advisor or talking to your CPA can help with this. But why is this not a great decade to build wealth? And some of this may be obvious. But compound runway is very limited. You have five, maybe 10 years to compound your money during the rest of your working years. And this is one of those things where I don't want a lot of you

Starting point is 00:45:24 working until 70 unless you love your job. And so for most of you, we want you to retire earlier than that if you can. This also isn't really a building decade anymore. It's more of a transition into preservation of your money and preservation of how you're thinking about this. And sequence of returns risk is at peak danger. Now, if you're going to work until you're 80 years old because you are a physician and you love your work and you love what you do, then you can still have a lot of time to compound. But if you're someone out there who has been working a desk job for your entire life and you're just tired and you want to be done with it, then you're not going to have as much much time frame for that. And so health decisions can also make a big impact on your timeline.

Starting point is 00:45:59 At least you have Medicare available to you at 65, but you're still going to be spending more as health as time goes on. And most of your 60s is about preservation and optimizing what you've already built. It's not as much about building as it once was. And so because of all of these factors, because of the shorter time horizon, I'm actually going to give the 60s a D tier for building wealth, especially if you're just starting in your 60s, it's not too late, but it is very difficult to accomplish all of your wildest dreams with your money if you are starting in your 60s unless you plan on working for a couple of decades. Or you're making really, really good money. So this is a decade. If you are a business owner out there, consider selling your business. If you are someone who has

Starting point is 00:46:39 built up this portfolio, make sure that you are utilizing your portfolio to enjoy your life. Now, one other thing that I will say about the 60s is if you did build up a portfolio but you're scared to spend down your money, don't feel that way. The worst thing you can do is not spend your money on things that you enjoy, make sure you are spending and building up the skill of spending in your 60s, because in your 70s, 80s, 90s, it gets harder and harder to spend more money as you age. And we've seen this firsthand. If you are in your 60s and you're like, I don't know how to spend my money, read a book called Die with Zero by Bill Perkins. This book will open your eyes on how to think about spending money in retirement. And it's going to be very, very helpful

Starting point is 00:47:14 for you if you have not read it yet. So that is our final board, which will put it back on the screen here. S tier is your 20s. A tier is going to be your 30s. 40s and 50s are going to be B tier. And we have no C tier, interestingly enough. And then a D tier is going to be your 60s. And this is where I rank all these decades. Which ones do you disagree with and which ones do you agree with? Let me know down in the comments below. Would love to hear more if you are watching this. And I truly appreciate each and every single one of you being here. Listen, if you want to get coached by me, join Master Money Academy. We will leave a link down below in the show notes.

Starting point is 00:47:51 Really excited to have you in there as well. Thank you guys so much for being here, and we will see you on the next episode.

The Personal Finance Podcast - The Best Ages to Build Wealth (Ranked!)

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