If You’re Under 35 and Have Under $50K Invested, You Could Be Losing $100K in Free Money
Have you ever looked at your investments and wondered whether or not you’re on track?
According to a 2025 Vanguard report, those ages 25-34 have a median 401(k) balance of $16,255. The average balance sits quite a bit higher at $42,640.
In any case, if you’re under 35 years old and have less than $50,000 invested, you could be losing out on quite a lot of free cash. The reason for this comes down to two things: time and compound interest.
Find out how much money you could be losing out on -- or, more optimistically, gaining -- with a higher invested amount.
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Compound Interest Explained
To understand how much you could actually be gaining, start with compound interest. This is basically the interest earned on interest.
Say you’ve got $100 in a bank account with a 4.00% annual percentage yield (APY). After one year, you’ll have $104 in that account (thanks to the $4 earned in interest). After two years, you’ll have $108.16. That extra $0.16 comes from the $4 in interest your balance earned during the first year.
These are relatively small amounts, though they can add up. In, say, 20 years, you’d have $219.11 -- all because you invested $100.
These calculations assume the interest rate remains the same and that no additional contributions (or withdrawals) are made.
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How Your Investments Can Grow Over Time
For the sake of argument, say you’re a 35-year-old starting to save for retirement. Now, say you decide to retire once you reach the full retirement age for Social Security. Since you were born in 1991, your full retirement age is 67.
That gives you roughly 22 years to invest. Thanks to the power of compound interest (and time), you could see some huge gains over that period. Just how much your money can grow comes down to:
How much you invest
Your average annual returns
Let’s assume you decide to invest in the stock market. Since 1957, the S&P 500 has seen average annual returns of 10.61%. Adjusted for inflation, this drops to 6.75%.
Here’s how your investments can add up over time based on different invested balances.
$50K Investment After 32 Years
Total balance with 10.61% average annual returns: $1,055,689
Balance when adjusted for inflation (6.75%): $404,336
Total interest (free money) earned when adjusted for inflation: $354,336
$40K Investment After 32 Years
Total balance with 10.61% average annual returns: $1,008,046
Balance when adjusted for inflation (6.75%): $323,469
Total interest (free money) earned when adjusted for inflation: $283,469
$30K Investment After 32 Years
Total balance with 10.61% average annual returns: $756,035
Balance when adjusted for inflation (6.75%): $242,602
Total interest (free money) earned when adjusted for inflation: $212,602
$20K Investment After 32 Years
Total balance with 10.61% average annual returns: $504,023
Balance when adjusted for inflation (6.75%): $161,734
Total interest (free money) earned when adjusted for inflation: $141,734
As you can see, you could be losing out on anywhere from $70,867 ($40,000 initial investment) to $212,602 ($20,000 initial investment).
Editor's note: Calculations were made using Investor.gov’s online calculator. All figures assume the initial investment was made without further contributions and that interest compounds annually.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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