Vincent Chan Shares How People In Their 20s Can Build Wealth On Autopilot: 'You Can Pretty Much Forget About It Until You're 60'

Building wealth is a long-term journey. You have to diligently save and invest money over many years. However, modern banking tools make it easier to build a big nest egg on autopilot. You don't have to make each deposit into your stock portfolio or spend too much time monitoring the market.

Financial guru Vincent Chan lays out a path where people in their 20s can become millionaires by the time they retire. However, since the strategy is on autopilot, it gives you time to focus on other things.

"You can pretty much forget about it until you're 60," Chan states.

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This claim only applies once you have the autopilot strategy in place. Here's how you can start building wealth without having to check your bank account every day.

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Open A Roth IRA

Chan starts the video by recommending that his viewers open a Roth IRA at an established brokerage firm like Fidelity, Vanguard, or Schwab. Roth IRAs allow you to grow money tax-free, so you won't have to worry about capital gains when you retire. 

These top brokerages offer simple user experiences that allow you to find what you need. They also have various financial services beyond Roth IRAs that can help you build wealth.

It's pretty easy to open a Roth IRA, and you don't have to be employed to get started. It works great for freelancers or individuals who want to contribute additional funds to a new retirement plan. Contributing to a Roth IRA does not affect your ability to contribute to an employer-sponsored retirement plan.

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Transfer $7.20 To Your Roth IRA Every Day

The next step in this autopilot plan is to transfer $7.20 to your Roth IRA every day. Keep in mind that this money will be taxed, but you won't pay taxes when you withdraw it. Contributing $7.20 per day to a Roth IRA results in $2,628 per year for years with 365 days. 

However, you can contribute much more than $2,628 per year. The IRS currently limits taxpayers to an annual $7,000 contribution to a Roth IRA. However, anyone who is 50 years or older can contribute an additional $1,000 per year to their Roth IRA. 

If you want to contribute $7,000 per year, you will have to transfer $19.17 per day. People who qualify for an $8,000 annual contribution should invest $21.91 per day. 

The IRS periodically raises the maximum contribution limits, so it's good to stay updated and adjust your daily transfer accordingly. If daily transfers are too stressful, you can also opt for weekly or monthly transfers. 

See Also: Maximize saving for your retirement and cut down on taxes: Schedule your free call with a financial advisor to start your financial journey – no cost, no obligation. 

Automatically Invest In An S&P 500 Fund

Chan encourages his audience to keep it simple and invest in an S&P 500 fund. He mentions the SPDR S&P 500 ETF Trust SPY and the Vanguard S&P 500 ETF VOO as potential choices. Notably, VOO only has a 0.03% expense ratio while SPY has a 0.09% expense ratio. VOO is technically cheaper to own, and both funds deliver nearly identical returns.

Chan mentions that the S&P 500 usually goes up by 7% to 10% per year. The S&P 500 automatically diversifies your money across the 500 largest profitable corporations. Companies are added or removed to the index based on their performance. It's a market-weighted index, so the tech giants will have more preference than companies with market caps just above $20 billion.

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