Why Investing Early Is the Key to Achieving Financial Goals

For long-term investors, knowing the difference between what can and cannot be controlled is the key to both financial success and peace of mind. While all investors would like to believe they can predict or even control the direction of the market, experience teaches us that this is difficult to do. Constructing and managing an appropriate portfolio, while making strategic and tactical allocations based on market opportunities, ideally with the guidance of a trusted advisor, is often the best approach. However, while following markets and maintaining perspective on the economy is important, an even more fundamental key to success is simply to start saving early, stay invested, and remain focused on long-term financial goals. What can investors do to benefit from these principles today?

The growth of an initial $1 investment over the last century has been remarkable

Past performance is not indicative of future returns. This should not be considered a recommendation to buy or sell any security. Indexes are unmanaged, do not incur management fees, costs and expenses, and cannot be invested in directly.

Staying financially disciplined has never been more important due to the sheer volume of noise from the media and the financial services industry. It seems as if headlines bounce from one concern to the next every week, with markets constantly swinging from exuberance to distress, as they have already done many times this year. For inexperienced investors and financial professionals alike, this can often be overwhelming.

The reality is that this is nothing new. In 1979, for instance, the cover of BusinessWeek famously proclaimed “the death of equities” due to inflation – just as many did last year. In the short run, these assessments were correct as markets pulled back due to economic shocks and recessions. However, both the market and economy eventually recovered. Not only has the market experienced strong returns this year, recent volatility notwithstanding, but the past forty years since that magazine cover was published have been some of the best in history.

This pattern plays out when looking back even further: the accompanying chart highlights the growth of $1 invested in 1926 in stocks and government bonds. Amazingly, a $1 stock investment almost a century ago would have grown to over $13,000 today despite the numerous challenges along the way. Even when invested in risk-free government bonds, the value of that dollar would have climbed to $98. In comparison, inflation has eroded the purchasing power of cash, with $17 now needed to buy what $1 used to.

What this chart shows is that over this time frame, the stock market has created significant wealth for patient investors. However, bonds are also needed to smooth out the bumps along the way in order to preserve wealth. A proper asset allocation that takes advantage of both asset classes, and possibly many others, is the best way to navigate turbulence while positioning for long run growth. (Please note that this chart uses a “logarithmic scale” to highlight the comparison between stocks, bonds, and inflation. If shown on a linear scale, the steepness of the stock market line would be even more dramatic.)

Saving early can have a significant impact on portfolio values

What’s just as important, and fully within an investor’s control, is when they begin to save and invest. For example, an initial $1,000 investment, compounded annually at 7%, can hypothetically grow to over $10,000 by age 65 if the investment is made at age 30. If it’s instead made at age 35, only 5 years later, the investment will only grow to about $7,600. The accompanying chart shows this pattern across different ages and return assumptions, highlighting how significant a difference any delay can make.

While investing is often viewed as the activity of following markets, economic data, stocks, and current events, this underscores the fact that budgeting and planning are equally important, if not more so. After all, investors don’t get to choose whether they live in an era of low or high annual returns. However, this chart shows that investing at age 30, instead of age 40, makes as big a difference as experiencing a 5% or 7% annual return over the course of one’s life.

The compounding effect of investments requires time

Past performance is not indicative of future returns. This should not be considered a recommendation to buy or sell any security. Indexes are unmanaged, do not incur management fees, costs and expenses, and cannot be invested in directly.

This is because the compounding nature of investments can only work if there is sufficient runway. Given enough time, not only do investment returns add to a portfolio, but those returns generate their own returns, and so on and so forth. In this way, compound interest is what creates true wealth for investors over long periods of time.

The rule of 72 is a simple way to understand this compounding effect. It is a rule of thumb that estimates how quickly a rate of return would lead to a doubling of a portfolio, or similarly, what return is needed to double a portfolio in a certain amount of time. For example, with a 5% to 10% annual rate of return – a range consistent with long run historical returns – a portfolio would double in 7 to 14 years. Thus, starting early creates more opportunities to benefit from this effect. Of course, while the rule of 72 is based on pure arithmetic, markets can vary wildly on a week-to-week or month-to-month basis.

The bottom line?

While investors should understand and maintain perspective on the market and economic environment, it’s equally important to invest early and stay invested through challenging times. History shows that this is the best way to achieve long-term financial goals.


Copyright (c) 2023 Clearnomics, Inc. All rights reserved. The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete and its accuracy cannot be guaranteed. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness, or correctness of the information and opinions contained herein. The views and the other information provided are subject to change without notice. All reports posted on or via www.clearnomics.com or any affiliated websites, applications, or services are issued without regard to the specific investment objectives, financial situation, or particular needs of any specific recipient and are not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. Past performance is not necessarily a guide to future results. Company fundamentals and earnings may be mentioned occasionally, but should not be construed as a recommendation to buy, sell, or hold the company’s stock. Predictions, forecasts, and estimates for any and all markets should not be construed as recommendations to buy, sell, or hold any security–including mutual funds, futures contracts, and exchange traded funds, or any similar instruments. The text, images, and other materials contained or displayed in this report are proprietary to Clearnomics, Inc. and constitute valuable intellectual property. All unauthorized reproduction or other use of material from Clearnomics, Inc. shall be deemed willful infringement(s) of this copyright and other proprietary and intellectual property rights, including but not limited to, rights of privacy. Clearnomics, Inc. expressly reserves all rights in connection with its intellectual property, including without limitation the right to block the transfer of its products and services and/or to track usage thereof, through electronic tracking technology, and all other lawful means, now known or hereafter devised. Clearnomics, Inc. reserves the right, without further notice, to pursue to the fullest extent allowed by the law any and all criminal and civil remedies for the violation of its rights.

7 Financial Skills for Young Adults

Learning how to properly manage finances can be an overwhelming process for anyone, but especially for young adults earning a salary for the first time. Common questions can include:

  • How do I create a budget?
  • When should I start contributing to retirement? It seems so far away!
  • Should I open a credit card? How do I select the right one for me?

The answers vary from person to person, but there are a few skills the MAI Capital team believes everyone should learn as early as possible.

1. Managing Cash

Research several reputable banks and screen the options for fees, such as maintenance or overdraft, to find out which best fits your financial situation.

2. Budgeting

Manage your income and expenses by using the 50-30-20 method.

50% – Living expenses & essentials: rent, groceries, utilities, and other day-to-day needs.

30% – Flex spending: dining, travel, and other fun activities.

20% – Financial goals: savings, debt, buying a home, and more.

Use tools like an excel spreadsheet to track how and where you are spending money currently and how you might adjust to avoid overspending.

3. Savings

Define your goals based on a timeline:

1 year or less: short-term emergency fund

1-5 years: mid-term

5+ years: long-term

This way, you can allocate resources according to your needs, like a downpayment on a home, purchasing a vehicle, or a last-minute emergency that arises. By planning ahead, you may be able to avoid difficult financial situations that negatively impact your future.

4. Retirement

When you start your first job, contributing to your retirement may seem overwhelming. But opting into a 401K or a Roth 401K early can set you up for great success down the road. Educate yourself on the options available to you, like an employer match, and consider meeting with a financial planner to make the best decision for your future.

5. Credit Cards & Loans

Building a credit history is important, but use these tools responsibly. Focus on paying off existing debt as soon as possible to avoid interest rates and fees.

6. Tax Returns

File on time and correctly. There are many tools available to file your taxes at a minimal cost, especially while your finances are less complicated. If and when your finances become more complex, review your options with a professional who can guide you through the process.

7. Protection

You work hard for the money you earn, so protect your assets. Research coverage and premiums to protect against unexpected losses or damages, such as accidents, illness, or lawsuits.

At the beginning stages of your career when you first start earning money, it can be difficult to think toward the future. But it is important that you do so. Balancing enjoying life while also planning for anything unexpected is an important skill to learn. Educate yourself in these 7 areas to get a head start on your financial future.

If you have questions about any of these topics, please reach out to our team at info@mai.capital so a team member can help.

If you have any questions related to this topic or your portfolio in general, please do not hesitate to reach out to your wealth advisor at any time.

Please send your questions, comments, and feedback to: info@mai.capital. Any statement non-factual in nature constitutes only current opinion of this author which is subject to change without notice. Certain statements are of future expectations and other forward-looking statements are based on management’s current views and assumptions. Any statistics mentioned have been obtained from sources we believe to be reliable, but the accuracy and completeness of the information cannot be guaranteed. Neither the information nor any views expressed should be considered investment, legal or tax advice, or constitute as a recommendation to buy or sell any security, strategy, or product. It should not be assumed that this is a forecast of future events or that any security transactions, holding, or sector discussed where or will be profitable or that the investment recommendations or decisions we make in the future will be profitable. Past performance is not indicative of future results.

What is a Fiduciary?

A fiduciary is an individual or business who has a legal duty to act in the best interest of a client, building a bond of trust and avoiding conflicts of interest. The duties of a fiduciary depend on the specific profession and the laws or regulations that govern a specific industry or role.

How does MAI Capital act as a fiduciary?

Registered Investment Advisers (RIAs) are companies registered with the Securities and Exchange Commission. RIAs provide investment advice and often advise on a wider range of subjects relating to clients’ financial lives. They are required to act as fiduciaries and must only recommend investments and other financial planning products that are the best fit for their clients.

CERTIFIED FINANCIAL PLANNERs™ (CFP®) are highly trained specialists with significant financial education and experience who are held to a code of ethics. The Fiduciary Duty of a CFP® applies when the professional is providing financial advice to a client. To act as a fiduciary, the CFP® must fulfill:

  • The Duty of Loyalty
  • The Duty of Care
  • The Duty to Follow Client Instructions

How to vet a fiduciary financial advisor

The easiest way to determine if your advisor is a fiduciary is to ask. You can then verify his or her status using the FINRA’s BrokerCheck database. Another way is to work with a CERTIFIED FINANCIAL PLANNER(CFP®), who is a highly trained specialist required to follow a specific code of ethics.

Why does any of this matter?

Your money is important to you. You deserve to know that the people handling your financial wellness put you, not their commission or their firm, first.

MAI Capital Management, built on the ideal of taking care of clients first, is a fiduciary financial adviser that aims to empower clients to simplify, protect, and grow their wealth.

To learn more about working with our team, please contact info@mai.capital.

Information updated as of Friday, June 16, 2023. Please send your questions, comments and feedback to: info@mai.capital. The opinions and analyses expressed herein are subject to change at any time. Any suggestions contained herein are general, and do not take into account an individual’s or entity’s specific circumstances or applicable governing law, which may vary from jurisdiction to jurisdiction and be subject to change. Distribution hereof does not constitute legal, tax, accounting, investment or other professional advice. Recipients should consult their professional advisors prior to acting on the information set forth herein.

Roth IRA Versus Traditional IRA

Knowing the difference between a traditional IRA and a Roth IRA enables investors to plan effective strategies to maximize returns and to adjust those plans when change occurs, like the recent Secure Act 2.0.

What is a Roth IRA?

A Roth IRA is an individual retirement account to which you contribute after-tax dollars, which simply means that you pay taxes on the money going into the Roth, but future withdrawals are tax-free.

Other criteria and details:

  • Distributions are tax-free and penalty free if taken after 5 years and after 59 ½ years old.
  • Maximum contribution for 2023: $6,500 and $1,000 additional catch-up contribution if you are 50 years or older.
  • Certain income levels prevent contribution.
  • Contributions grow tax-free.
  • No required minimum distributions.

What is a Traditional IRA?

A Traditional IRA is an individual retirement account that is made from pre-tax or after-tax dollars and defers taxes on your earnings until you make withdrawals.

Other criteria and details:

  • Distributions are subject to ordinary incomes tax and may also be subject to a 10% federal tax penalty if taken before the age of 59 ½.
  • Maximum contribution for 2023: $6,500 and $1,000 additional catch-up contribution if you are 50 years or older.
  • Anyone with earned income is eligible to contribute.
  • Contributions grow tax deferred.
  • Based on the changes with the SECURE Act 2.0, Required Minimum Distributions must begin by:
    • 73 if born between January 1, 1951-December 31, 1959
    • 75 if born on January 1, 1960, or later

Planning Strategies for Roth IRAs

What is a Roth IRA conversion?

A Roth IRA conversion involves the transfer of retirement assets from a traditional IRA or 401(k) into a Roth IRA. You must pay tax on the money converted, but future withdrawals can be tax-free.

Are there limitations or guidelines?

Yes. Contributions to a Roth IRA cannot be made if modified adjusted gross income (MAGI) equals or exceeds certain limits ($138,000 for single filers and $218,000 for married couples filing jointly in 2023).  However, there is no income limit level to convert all or part of funds in an existing Traditional IRA to a Roth IRA.

What else should I know?  

  • If you own more than one Traditional IRA, the IRS regards these as one entity and will prorate the cost basis on the conversion amount.
  • If the taxes on a conversion are paid using funds from the Traditional IRA, a 10% penalty may apply if the account owner is under the age of 59 ½.
  • The amount converted into a Roth IRA will grow tax-free and the distributions will also be tax-free and penalty free if taken after 5 years and age 59 ½.
  • After conversion, there are no minimum distributions. 

SECURE Act and SECURE Act 2.0

The SECURE Act was passed by Congress in December 2019 and 2.0 was passed in December 2022.

What changed about Inherited IRA Accounts?

  • As of January 2020, most non-spouse beneficiaries are required to liquidate inherited Traditional and Roth IRA accounts within 10 years of owner’s death.

How should my planning strategy change?

  • Use a Roth conversion as a wealth transfer technique.
  • The converted amount will be tax-free income to the non-spouse beneficiary over the 10-year period.
  • Work with your MAI wealth and tax advisors to determine an amount to convert that won’t push you into a higher federal tax bracket and increase your Medicare premium payments due to IRMAA (Medicare Income-Related Monthly Adjustment Amount).

What changed about Roth 401(k)/403(b) Accounts?

  • Beginning in 2024, catch-up contributions for those with income over $145,000 must be made into a Roth 401(k)/403(b) account.  If the employer does not allow for Roth 401(k)/403(b) accounts, these individuals will not be able to make a catch-up contribution.
  • Beginning in 2024, individuals with assets in Roth 401(k)/403(b) accounts won’t be subject to Required Minimum Distribution rules.
  • Beginning in 2025, the law permits employer contributions to be made into Roth 401(k)/403(b) accounts.

What changed about SIMPLE and SEP IRAs?

  • Beginning in 2023, both SIMPLE and SEP IRAs can offer Roth options.

What changed about 529 Plans?

  • Beginning in 2024, the law permits 529 plans to roll over up to $35,000 into a Roth IRA. The account owner on the Roth IRA must be the same as the beneficiary on the 529 plan.
  • The 529 plan must also be open for at least 15 years, and the amounts rolled over are limited to the annual contribution limits.

There can be beneficial strategies with Roth accounts based upon changes to tax laws with the SECURE Act and the SECURE Act 2.0.  Schedule a meeting with your MAI Wealth Advisor to see if these strategies will benefit you.


Information updated as of Friday, June 16, 2023.

Please send your questions, comments and feedback to: info@mai.capital. The opinions and analyses expressed herein are subject to change at any time. Any suggestions contained herein are general, and do not take into account an individual’s or entity’s specific circumstances or applicable governing law, which may vary from jurisdiction to jurisdiction and be subject to change. Distribution hereof does not constitute legal, tax, accounting, investment or other professional advice. Recipients should consult their professional advisors prior to acting on the information set forth herein. In accordance with certain Treasury Regulations, we inform you that any federal tax conclusions set forth in this communication, were not intended or written to be used, and cannot be used by any taxpayer, for the purposes of avoiding penalties that may be imposed by the Internal Revenue Service.

6 Key Aspects of Financial Literacy

The world of finance can be confusing to an “outsider,” especially when it comes to understanding the lingo. The technical jargon can be so overwhelming that it pushes people to give up trying to understand the basics, which can lead to procrastination and poor decision-making.

If you are feeling overwhelmed or confused by it all, here are 6 key aspects that can jumpstart your journey to financial literacy.

1. Basics of Financial Planning

Mastering financial, economic, and cash flow/debt management concepts is a great first step. Ask yourself: What do I own? How do I own it? What do I earn? What do I owe? By answering these simple questions, you are starting to build an understanding of your financial status.

2. Investment Planning

Investment planning is all about making your money work for you. Work with a trusted advisor who can help you build a diversified portfolio, manage your risks, and include a variety of     investment vehicles.

3. Retirement Savings and Income Planning

Setting money aside today—delayed gratification—will allow you to have more choices in the future. A well-performing retirement fund needs consistent analysis, an evaluation of plans,        and an understanding of Social Security, Medicare, and Medicaid.

4. Tax and Estate Planning

Understanding laws and management techniques related to taxes, property transfer, and estate planning can help you accomplish current and future financial goals.

5. Risk Management & Insurance Planning

Evaluating risk and assessing different types of insurance can help you protect your family, decreasing your anxiety about what may happen in the future.

6. Psychology of Financial Planning

When making financial decisions, never underestimate the power of fear and greed. Assess your feelings and behavior, then adjust accordingly.

How can MAI advisors help you understand this process more completely?

  • A financial advisor can help you develop a clear picture of your current financial status by reviewing income, assets, and liabilities and by evaluating your insurance coverage, investment portfolio, tax exposure, and estate plan.
  • Our advisors work with clients to establish individualized, prioritized financial goals and time frames for achieving them.
  • We implement strategies that address current financial weaknesses and build on strengths.
  • We can utilize solutions and services that are tailored to help you meet your goals.
  • MAI advisors monitor your plan and make necessary adjustments as goals, time frames, and circumstances change.

Authored by Mark Van Drunen, CFP®, Regional President and Managing Director, MAI Capital Management | Information updated as of 03.28.2023.


Please send your questions, comments, and feedback to: info@mai.capital. The opinions and analyses expressed herein are subject to change at any time. Any suggestions contained herein are general, and do not take into account an individual’s or entity’s specific circumstances or applicable governing law, which may vary from jurisdiction to jurisdiction and be subject to change. Distribution hereof does not constitute legal, tax, accounting, investment or other professional advice. Recipients should consult their professional advisors prior to acting on the information set forth herein. In accordance with certain Treasury Regulations, we inform you that any federal tax conclusions set forth in this communication, were not intended or written to be used, and cannot be used by any taxpayer, for the purposes of avoiding penalties that may be imposed by the Internal Revenue Service.