Your lifetime earnings are probably determined in your 20s

Average wages stagnate after 35. (bigstockphoto)

Ah, your 20s: A decade of self discovery, smartphone dating and shopping for IKEA coffee tables  -- right?

A new report from the Federal Reserve Bank of New York sends a more sobering message to millennials: Your first 10 years in the labor market likely shape your lifetime earning potential.

"Across the board, the bulk of earnings growth happens during the first decade," wrote economists Fatih Guvenen, Fatih Karahan, Serdar Ozkan and Jae Song, who studied the career paths of about 5 million workers over nearly 40 years.

The jump in pay could be largely driven by the steep learning curves early in your career, said Guvenen, an economics professor at the University of Minnesota.

In other words: “At 25, I choose a job that allows me to learn valuable skills,” Guvenen said. “I’m investing in my future, and my employer is allowing me to invest in my future. Soon, I’m producing more for my employer -- and my employer is paying me more.”

For the average person, however, earnings growth stagnates after the first 10 years of a career. Average earnings growth for the 35-to-55 set is zero, the data shows. (Only the wealthiest workers see sustained increases throughout their career.) And things are even more grim for the lowest earners.

Earnings for the average worker

Workers projected to earn the median lifetime amount will see pay swell 38 percent from age 25 to 55, with the strongest upswing in the first decade, the Fed study found.

Top earners gonna earn

Workers in the 95th percentile can expect a 230 percent increase over the same period. Those in the 99th percentile --  the doctors and lawyers and engineers --  will see earnings grow a whopping 1,450 percent.

Lowest earners see lifetime declines

But the bottom fifth of American earners, whose jobs are typically more physically demanding, suffer an income decline from age 25 to 55. “Low-skilled jobs tend to use brawn, not brain,” Guvenen said. “Brawn depreciates very quickly. Your back starts to hurt. You become less and less productive. You cannot work as much.”

So, unless you plan to become Zuckerberg-ian wealthy, the lesson is clear: Chase the proverbial carrot while you're young. Save your money while it’s coming in. Or ask for that raise -- sooner, rather than later.