Nearly half of Americans will be broke in retirement! They will rely solely on Social Security to support themselves. What if Social Security changes and how will you survive the changes? How do you see your retirement? Do you have enough savings for a comfortable retirement? Will you live off of Social Security or keep working? What will you do?
Whether you are twenty (20), thirty (30) , forty (40), fifty (50), or even sixty (60) years old, you can do something. If you are at the beginning of your career, you can start with as little as forty dollars a week. That’s right as little as $2,000 a year can become a meaningful amount in forty (40) years. Using historical returns on investments (ROI) for the stock market over a 40 year period, you should have over a million dollars. That’s right, you invested just $2,000 for six (6) years and never added a penny, you should have over a million dollars. Time works very well when it comes to investing!
What do you do, if you missed out in your twenties? Is it enough to double down? Not really, but don’t let that stop you. It will take more money because you are starting late. Yes, starting to save for retirement in your early thirties is late, but don’t give up! Savings targets are meaningless, if you cannot meet them. By the time you are in your thirties, you are usually married, have children and have a home. I know it was difficult to save when you have student loans and other obligations, but it is not going to get easier. As you earn more money, you find ways to spend more on your family, home and other expenses.
Your thirties are no different from any other decade! You need to make savings a priority. What does that mean? It means making savings more important than something else. If you wanted to take a vacation, you would save your money to pay for it. A little longer term would be saving for a down payment on a home. It may take a few years to save for a down payment. Whether the goal is less than a year or several years, you start to put away funds each month until you meet your goal. Retirement savings are much longer term goals.
First you have to figure out how much you need to retire. There are many retirement calculators to help you to do that. It even helps you determine how much you need to contribute to your 401K , but it can not predict the rate of return. You have to use average returns over time to approximate your growth factor. The stock market has had an average return of 10% over a 100 year period. How many of you will invest for 100 years? Most of us will invest for far less! More importantly, it depends when you start and when you need to withdraw funds. Average returns are just that, an average of the returns over an extended period of time.
In order to accumulate $1,000,000 with an average return of 8%, you would need to contribute $126 per month for 50 years. If you take off ten (10) years, your contribution increases to $286. It dramatically increases as you have less time! It goes from $670 (30 years), $1,698 (20 years) and $5,466 (10 years). Will a million dollars make a comfortable retirement? How much do you need? A 4% withdrawal rate will provide $40,000 a year in income before taxes. Is that enough?
What is your goal and how much can you contribute to achieve our goal? The sooner you start, you can invest less each month and still achieve your your goal. Sounds so simple and still more than half of all Americans do not save enough to have a comfortable retirement. What prevents you from saving for retirement? What can you do?
- Make savings a priority
- Figure out your retirement needs
- Contribute to your 401k, IRA or Roth IRA
- Learn about investing
- Ask questions
You can never start too early to think about retirement! What are your retirement needs? You cannot reach a goal unless you are willing to identify it! After you identify your retirement needs, you need to start saving sufficient contributions to reach your goal. There are retirement calculators to help you figure that out. What is your retirement strategy? You cannot predict the returns, but you can start early to contribute to your retirement. Time is the one element alone to help you achieve your goal. Waiting is not an option. What kind of retirement do you want?
Photo by: Phillip Taylor
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