Early Career Earnings Indicate Lifetime Earnings

By Chuck Bentley

Your earnings in the first decade of your career established the probability of high or low lifetime earnings. This is fascinating…

Economists at the Federal Reserve Bank of New York said in a report published in February 2015 that your earnings the first decade of your career are the lead indicator for what you will earn for the rest of your life.

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Let me say it this way. People who end up wealthy start out earning more when they are young. Here’s the data: People projected to earn the median lifetime amount will see their earnings grow 38 percent from the time they are 25 to when they turn 55. Those in the 95th percentile of lifetime earners will see their earnings grow 230 percent over the same period; and those in the 99th percentile of income earners will see their earnings grow 1,450 percent before they turn 55.

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That may seem obvious—those at the top of the wealth differential were probably propelled there by astronomical earnings growth. But not so fast. The Fed report points out that the steepest pay increases happen early. Across the board, the bulk of earnings growth happens during the first decade of your career. Stay with me…

Workers whose lifetime earnings sit at the median can expect to see their earnings stagnate from ages 35 to 55. In fact, only the wealthiest 2 percent will see earnings grow after age 45. The projections suggest that the time to hustle is when you are young, because you’ll probably see your last big raise well before you celebrate your 40th birthday. They also suggest that if your goal is to have high lifetime earnings, you will need to consider starting your own business so that you control your wages, not someone else. But to the point of the Federal Reserve study, even then, it is better to start early.

Originally posted 3/2/2015.