Retinol & Retirement

Because You Can Never Start Too Early

When you get to your mid twenties, everyone starts talking about their skin. They ask about your skincare routine, your morning/nightly rituals, if you think the rose quartz roller works, and the ever scary, “Do you think I’m getting wrinkles?” I got pretty overwhelmed by the conversations, especially when my friends started talking about preventative botox, so I decided to go to the dermatologist. 

When I first arrived, she asked me if I thought anything was wrong and if there was anything in particular that I wanted checked out. 

“No - not that you can see yet. But I am really trying to prevent wrinkles.”

“Listen, there is no secret potion to age - it’s simply going to happen. But I recommend that you stay out of the sun, wash your face at night, and moisturize twice a day with Cerave.”

I couldn’t help but roll my eyes and ask, “But isn’t there anything else I can do.... Naturally?” And please don’t say drink more water. 

“While the majority of the products on the market won’t help, retinol is the one product that does. It is made from Vitamin A and helps neutralize free radicals to boost the production of elastin and collagen. You have to use it every day and you won’t see any results for a few weeks or months. You also may experience some skin irritation as a side effect.”

I secured the goods that day and never looked back. And that leads me to today’s topic, Retinol and Retirement, because you can never start too early.

WTF is Retirement?

Retirement refers to the time of life when you choose to leave the workforce. The traditional retirement age is 65 in the United States and most other countries. And no, it is not just when your parents decide to move to Florida.

What do Retinol and Retirement have in Common?

1. Start Early - One of the most important things about retinol is starting early. It is a preventative product rather than a retroactive solution (like a face lift). Investing for retirement is very similar because you need to start early to see the best results. And truth be told, I’m not sure if face lift solutions exist for retirement other than the lottery or another stroke of luck.

For example: If you want to have $1mm in your portfolio by the age of 65 (the recommended retirement amout at that age), you’d need to invest:

$111/month starting at age 20

$180/month starting at age 25

$294/month starting at age 30

$811/month starting at age 40

$2,510/month starting at age 50

Note: This assumes a 10% compounded annual growth rate - the historical average from the S&P with dividends reinvested. 

2. Age - When I first started using retinol, I was 25. Now, this might seem insanely early to some of you, but the fact is prevention works and in order for it to work, you need to start early. I’m no wizard, but I don’t think my grandma using retinol for the first time today is going to have the same effect of me using it for the next 60 years. (I love you Meme, your skin already looks amazing). When we think about retirement, age matters too, so don’t fall for the trap, “I’m young, wild, and free. I’ll think about retirement later.”

For example: If I invest $5,000/year from 18 to 30 (13 years), never investing another dollar, I will retire with $2,646,713.

If Alex invests $5,000/year from 25-65 (41 years), he will retire with $1,516217. This is due to compound interest.

Note: Do not freak out if you have not started. Today is the best day to get started - don’t beat yourself up over the past.

3. They Can Cause Some Irritation - When you first try retinol, it dries the F out of your face. You literally start looking like a lizard with rosacea because the chemical is so potent. However, over time, your skin gets used to it and your skin starts to get softer. Retirement can also cause some irritation. I remember when I first signed up for my 401k through my job and had absolutely no idea what was going on. There were so many options, and I had no clue how to think about asset allocation. Irritated was honestly an understatement. That being said, if we can ravage our skin for beauty, we can certainly take some time thinking and investing for our future. I’ll explain more below how to think about retirement investing.

4. It Takes Time - When I first overhauled my skincare routine, I expected to see changes overnight (although my doctor told me it would take months). While I was annoyed my face wasn’t getting snatched immediately, I stuck to the plan, used the retinol everyday and now feel like there has been some major improvement. Retirement can feel the same. You’ll start by investing a fixed amount and feel like you’re not making a dent. But trust me, after 5 years of investing in that puppy, you’re going to look at your account and be shocked by how much it can grow in even just a few years.

How Should I Invest for Retirement?

I’ve been getting this question a lot lately, so before I dive in, I want to explain some of the different types of retirement vehicles that exist. Before putting a dollar into any of these accounts, you have to know the difference. I know you’ve spent hours looking at facial product labels, so let’s spend some time looking at retirement labels.

Traditional 401k -  This is a retirement plan sponsored by your employer. Funding comes directly off your paycheck and can be matched by your employer. 

• Max yearly contribution: $19,500 

• Tax Benefits: Contributions are made pre-tax. That means, you don’t pay income taxes on your contributions until you withdraw them. So, say you make 80k per year, but you contribute 6k/year to your Traditional 401k, your income tax would be charged for 74k.

• Why Choose It: You believe you are taxed more now than you will be during retirement. Wonder why your parents are moving to Florida before they turn 65? Well, this is why. Your company may also match your contributions up to a certain amount, so when thinking about how much to contribute, consider at least reaching the employee match!

Roth 401k - This is a retirement plan sponsored by your employer. Funding comes directly off your paycheck and can be matched by your employer. 

• Max yearly contribution: $19,500 

• Tax Benefits: Contributions are made after-tax. That means you pay income tax today and you are not charged tax on your withdrawals. 

• Why Choose It: You want to pay taxes today and believe you may be in a higher income bracket during retirement and you want to reap the rewards of tax free growth. Your company may also match your contributions up to a certain amount, so when thinking about how much to contribute, consider at least reaching the employee match!

Traditional IRA - A traditional IRA is a way to save for retirement that gives you tax advantages.

• Max yearly contribution: $6,000 & $7,000 if you're age 50 or older

• Tax Benefits: Your contribution to a traditional IRA reduces your taxable income by that amount. So, say you make 80k per year, but you contribute 6k/year to your Traditional IRA, you would only be taxed on 74k of your income.

• Why Choose It: Many people choose the traditional IRA if they believe they will be in a lower tax bracket when they retire than they are now. You need to pay tax on interest and gains in the account once you retire, so be cognizant of what you think the future will look like.

ROTH IRA - A ROTH IRA is a way to save for retirement that gives you tax advantages.

• Max yearly contribution: $6,000 & $7,000 if you're age 50 or older

• Tax Benefits: Contributions are made after-tax. 

• Why Choose It: If you think your tax rate will be higher at retirement, this is the better option. You can also withdraw contributions penalty free.

How do I start?

Now that you know your options, you’re probably wondering how the heck they actually work. However, before you start, you need to decide if you want to actively or passively manage your portfolio. 

Active: If you’re active and want to Gua Sha the shit out of your portfolio, it means you actively choose the investments in your portfolio. If it’s a 401k, you first need to check with your HR department if they offer 401ks. If they do and you want to actively manage it, power to you. Just remember to revisit your portfolio on at least a yearly basis to make sure you’re allocated appropriately - because 20 year old you has different needs from 50 year old you. 

If you want to actively manage your IRA, you need to open a brokerage account (some suggestions here: https://www.nerdwallet.com/best/investing/ira-accounts). Then, you need to choose the investments in the account. 

Passive: If you are passive, you want someone to invest for you. Basically, you wear your retinol and take care of your skin but don’t spend hours in Sephora finding a 14 step skincare routine. You have someone do that for you. If you want passive management with your 401k, check out the target date funds your firm has to offer (these are rebalanced as you get older and your time horizon/risk tolerance changes). If you want passive management with your IRA, consider a robo advisor (some suggestions here: https://www.nerdwallet.com/best/investing/robo-advisors). 

Things to Be Mindful Of:

1. Stock Market Dips - Your retirement accounts WILL experience dips. In my last article, I talk a lot about dips which are inherently natural. When your account finds itself in the red, remember what you are investing for - THE FUTURE. So hang tight and try not to drive yourself crazy looking at it all the time. 

2. Long Term Mindset - Having a long term mindset is hard. And this is coming from someone with a TikTok addiction and very short term memory. That being said, do your future self a favor by investing in them today. Even if you are just investing $100/month (which I know is less than you pay for your skincare routine), pay yourself forward because compound interest will turn those dollars into something much bigger. 

3. Liquidation Fees - Stopping retinol after a few months of using it is not going to help you long term. Neither is liquidating your retirement account. In fact, if you liquidate you may not only hurt your future self but you might be subject to liquidation fees (sometimes up to 10%). So really think before you liquidate. Note: There are circumstances where this can make sense like purchasing a home, but I will cover this in a later article.

4. Catch Up - Retirement accounts have maximums but you might not always reach the max with your monthly contributions. Therefore, you have the option to “catch-up” at the end of the year by making a catch up contribution. If you want to max out and make the most of your retirement benefits, this is something to consider!

What’s next?

This week’s topic is brought to you by Rebecca Greenberg and Florian Maganza. If there is a topic you want to discuss, please DM me on Instagram at @notyourbfsinvestmentadvice or email me at kelsey@tardiapp.com. I also am building a company called Tardi to help individuals on their journey from cautious savers to savvy investors. If you’re interested in joining the beta, sign up here: https://www.tardiapp.com/

See you next week lover!

Disclaimer: All investment strategies and investments involve risk of loss. Nothing contained in this website should be construed as investment advice. Any reference to an investment's past or potential performance is not, and should not be construed as, a recommendation or as a guarantee of any specific outcome or profit.