Self Directed IRAs – Why It Pays to Start Saving Young

Self-Directed IRAWise young people invest early with a Self-Directed IRA.

In this business, we’ve heard all manner of excuses why people haven’t amassed much in the way of IRA or Self-Directed IRA or other retirement savings – despite nearing retirement themselves! Here are some of our favorites.

“I was busy living life in my 20s/30s/40s/50s.”

“We’re waiting till the kids are grown.”

“We’ll start saving after I get that big promotion.”

“This year I’m totally investing my bonus! Not like the last 20 bonuses I received.”

Ok, we’re exaggerating that last one.


One thing we do notice, though, is how very rarely we hear any kind of excuse from our most financially successful clients. The ones who have had the greatest successes over time (minus a vanishing few who seem to have gotten lucky) began the discipline of saving and investing early.

Our observations are confirmed by a recent Gallup survey: The average age people begin saving for retirement is 29. For over a quarter of them, they started by the time they were 25!

Why start young

Because of they way investment earnings compound over time, the retirement investing you do when you are young is likely the most important retirement investing you will ever do. Time is the investor’s best friend. Consider the Rule of 72s: If you assume a 10 percent rate of return on your investment, that money will double, on average every 7.2 years.

Start when you’re 25, and every dollar you can invest at 10 percent will grow as follows:

  • 2 dollars at 32.2 years.
  • 4 dollars at 39.4 years.
  • 8 dollars at 46.8 years.
  • 16 dollars at 54 years.
  • 32 dollars at 61.2 years.
  • 64 dollars at 68.4 years.
  • 128 dollars at 75.6 years.
  • 256 dollars at 82.8 years.
  • 512 dollars at 90 years!

Now, let’s work the math backwards:

For every 7.2 years you put off saving a single dollar, you are giving up 256 dollars at age 90, 128 dollars at age 82.8, and 64 dollars age 75.6! Again, assuming you get 10 percent on your money over time.

See how this works?

Not to get lost in the mathematical weeds, here, but it is true: Money you invest in your 20s has lots more chances to double than money you invest in your 40s.

Meanwhile, it’s much easier to get inflation-beating returns in your 20s and 30s than it is when you are 50 or 60. This is because with the advantage of a long time horizon lasting 4 decades or more, you can afford to be more aggressive, and take on more risk, with the expectation of a higher return over time. You can buy longer-term bonds, for example, or more speculative stocks that will take a long time to play out. As the great investor Warren Buffett put it, he and his team are more interested in earning a bumpy 15 percent over time rather than a smooth 10 percent.

If you have the luxury of time on your side, you can take a similar approach. The longer you wait, though, the more you’ll have to hedge your bets and focus on wealth preservation as opposed to accumulation.

If you use a Self-Directed IRA, you can also invest that money in a small business or real estate practice that you yourself control, over time.

If you’re interested in securing your financial future, you’re entrepreneurially minded and creative, and you are able to “think outside the box,” or you’re an experienced investor in real estate, small business, or other endeavors, you may be an excellent candidate for the powerful option of Self-Directed IRAs or other retirement accounts.

American IRA, LLC, is one of America’s leading experts on self-directed retirement investing, including Self-Directed IRAs, 401(k)s and SEPs for small business owners. Give us a call today at 866-7500-IRA(472) for a free, no obligation consultation, or visit our extensive library online at You can also download one of our exclusive Guides to Self Directed Retirement Investing. We look forward to working with you.





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