Too young to retire and too old to get a job! There are many people in their forties and fifties that feel that way. They lost their jobs in the recession and cannot find another one. They already exhausted their unemployment and have given up. That’s right, they stopped looking! They do not have the savings they should have and they gave up. What should they do?
You can never start saving early enough! Having money means choices. Thanks to savings, I was able to buy my first house when I was 27 years old. Cash allowed me to assume their loan. Yes, you could do that in those days! If I only had the normal 20% down payment, I would not have the opportunity to assume their loan at nearly 2% below the prevailing interest rate. I ended up buying a home that was distressed at 25% below market.
Saving and Investing
Savings provides choices. My mortgage payment was lower than my monthly rent! I had no consumer debt or car loans. This provides a lot of flexibility and it all starts with savings. Those were the days before 401(k) and IRA plans. I guess that makes me old! I worked for a Fortune 100 company that had a very lucrative profit sharing plan for retirement. I still saved for the future by setting up a payroll deduction. That was forty (40) years ago!
Although interest rates were not as low as now, it was not high enough to make my savings grow faster than inflation. What does a saver do? I started to think about investing! At first, I started with bonds then stocks. I watched my investments grow, but it was nothing compared to real estate. My home doubled in value in less than three (3) years! I liked real estate because I could have more control over the investment.
In about three years, I bought another home using the equity from my first home to buy my dream home. It was about a year later that I started to invest in income property. Should everyone invest in real estate? As the real estate bubble may indicate, it is not always a wise decision. Saving and investing is important to planning your future. Having emergency savings is important, but not the only savings you need.
When do you want to retire? Whether it is in ten (10), twenty (20) or forty (40) years, you need a plan. Your plan can derail from job loss, illness, accident, natural disaster or divorce. Planning for all these things and more is not only possible, but necessary. It is similar to getting married and starting a family. You can have insurance for illness or certain disasters and the rest requires planning. Planning requires saving and investing!
When do you want to retire? There are plenty of retirement calculators to help you determine what kind of retirement you would like to have. Let’s start from the beginning! You are twenty-two (22) years old and a new college graduate. How much do you want to live on in retirement? The retirement calculator will tell you how much to save and how long it will take to achieve it.
Putting aside ten (10) percent of your income for forty (40) years will probably be enough for retirement at a reasonable lifestyle. Starting early means you can handle what may normally derail your retirement twenty (20) years later. Most people do not set aside ten (10) percent in savings right out of college because of student loans. Starting early is important!
Career describes an individuals’ journey through learning, work and other aspects of life. Whether you decide to work in corporate America, become an entrepreneur or retire early. You need a plan because a goal without a plan is just a wish! You need a plan because a goal without a plan is just a wish! You need to know where you are heading and how you will get there. Some people start out in college not know ing what they want to do and graduate no closer to their goal.
You may start a career and still not know what you want to do, but you need to think about it or you will work aimlessly because you do not have a goal and a plan. There are life coaches, career tests and counselors that can help you, but it is your decision. No matter what, don’t stop saving or you will be tied to your job and have no choices. This last recession has shown us that the recovery may be a jobless one. You could be in your forties or fifties and unable to get another job. Your savings will provide a choice to start a business, retire or just support yourself while you decide what to do.
There are a lot of things that can derail your plans and you have to plan for it. Savings and investing, retirement planning and career planning is supposed to help you avoid these issues. You need to do this planning when you are young so you can have the things you say you want when you are older. It is never too late, but the earlier the better! Remember that planning is not the destination, but the process! You will always plan to help you achieve your goals. It is the best way to reach your goals. When do you want to retire?
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When do you want to retire?
My Financial Independence Journey says
I agree that it’s best to start saving when you’re young. I wish I was able to invest a lot earlier, but I went to grad school after college, so my savings were a bit delayed.
I don’t think that young people need to figure out when they want to retire exactly. If they focus on increasing their savings rate first, then they’ll be able to figure out the details of retirement a bit later. I’ve got a savings rate of 50%, so for me it’s not so much a question of when do I want to retire, but how luxurious of a retirement do I want.
Starting early trumps the percentage! Saving and investing provides choices. Having the choice of early retirement is really important.
MADD Finances says
Its best to start saving when you are younger I agree but that is only possible it you are getting the knowledge and education you need about retiring. A lot of kids grow up not being taught about credit and finances because their parents don’t know or have their idea of whats needed.
Its hard for people to truly know at a young age when they want to retire. Heck at 22 hopefully they picked a major they will work in. I like the mixture of real estate, stocks, and other investments.
Most young people are no thinking about retirement at 22 years old. Any person starting out should think about their future which includes retirement or at least savings.
Free Money Minute says
I don’t think you should ever give up. Even if you think you are going to have a subpar retirement nest egg, you should continue working and contributing. At least you can improve it to some degree. The best time to start is when you are young, the second best time is NOW! I hope to retire from my corporate job by 55 at the latest, but I will want to have something else to do when I am retired. Maybe work on an online business or a blog. It will be nice to work as many hours as I want and doing what I want in a part-time role.
Very true! You can always improve your situation. Not every person wants to have their business, but you can make the choice.
We are working on being financially independent and hope to reach that by 30. We definitely need to focus on saving!
Although saving and investing is a great start, you need steady income to be financially independent. Good luck!
Financial Samurai says
Man, I hope to never be in that situation! Control your destiny!
A lot has been written about recent college grads having difficulty finding jobs, but there are many more middle management or older workers that are having difficulties finding work.
I don’t think about retirement in terms of a specific date (although my finances indicate an approximate age span), but more of a psychological letting go of my work.
I get it! When I retire, I am just entering another phase of life. I still need to be busy, engaged and satisfied with what I am doing.
This is one of the reasons that I took the plunge into self-employment. I don’t want to have to rely on anyone to “hire” me! I also want to retire early, although I’m not exactly sure when.
Self employment certainly provides some freedom, but it has its drawbacks too. One is taking time off, if there is no one to replace you.
Kyle @ Debt Free Diaries says
Starting some type of plan when young is the best. It gives you more choices and avenues to reach your goal of retiring when you want to. Plus, if something happens that doesn’t go according to plan you have the most time to make up for any mistakes. I have a goal to retire from my job before turning 30. That means a lot of hard work over the next 8 years!
Retire at 30, wow! What do you plan on doing for the next 50-60 years? Saving and investing early is the key to reaching your financial goals.
Kyle @ Debt Free Diaries says
Ideally I want to do a bunch of traveling and spend more time with friends and family. There’s so much world out there to see, and we’re only on this planet for a little bit.
If that is your goal, you know what you have to do!
Michael @ The Student Loan Sherpa says
You are right about student loans getting in the way of saving for retirement. I can’t even begin to think about retiring until my loans are paid off.
I’ve just shifted my focus to finding work I love so that never retiring is not a bad thing.
Isn’t that always the goal? After all you will probably work for 40 years.
MMD @ IRA vs 401k Central says
This phenomenon is something that I completely hope I never have to experience. I have a very strong goal of saving up enough in my 401k and having enough passive income to declare my own financial freedom by the time I’m in my 40’s. That way I can work if I want to, and I can stop if I want to. Money is a tool, and its up to you to decide how you want to use it – to be controlled or control it.
It is always a good idea to take charge of your life and your future.
Yeah that’d be a tough spot to be in. It’s unfortunate but age discrimination does exist and that can really make it hard to find work in your 40s and 50s.
Is it age discrimination or income discrimination? Either way, you need to take care of yourself.
I’m not sure that I will ever want to retire but I still want to have the choice. So saving and investing are two areas where I need to up my game.
Choices is what it is all about. Unfortunately, it takes time to accumulate enough money to have a choice.
Daisy @ Prairie Eco Thrifter says
I’m in my early mid twenties, and I’ve been saving for retirement for about a year. I am ramping it up in the next couple of years, too. I never want to be in a position like this. I want to retire at 55.
Whether you actually retire or not, you want the choice. Good luck.
John S @ Frugal Rules says
Good post! This is part of the reason why we took the plunge to running our own business. It allows us to have a better control on what we can make as it is unlimited in one sense. However, the need to get started early on saving/investing trumps that in most cases in my opinion.
Time is the biggest element in saving and investing.
pramod baviskar says
starting early planning is key success for earlier retirement!!
Absolutely! Even, if you start small!
Grayson @ Debt RoundUp says
I started saving much later than I should have, but I was focusing on my consumer debt. I did start saving and investing while I was paying it down, but I lost some good years. I have some good time before I retire, so I should be ok.
Too often, we make plans and things happen! It is good you are on track now.
Absolutely, Mitch, I’m with you on this. Generally, saving goals are ambiguous and change as per convenience and as per one’s whims and fancies. But it’s imperative that one shouldn’t. One must give long-term financial goals its due by finding a balanced solution to satisfy both long-term and intermediate financial goals like my financial planner who has strongly suggested an investment in gold backed IRA meritgold.com/ira
Any long range plan has shorter term goals too. A really good long range plan have short range goals hat are integrated to help you achieve the long range goals.
Start when young, as soon as possible. Focus on your career and make as much as you can, so you can turn around and save as much as you can. Then, invest properly and let compounding work magic. This will put a person in position to have more financial freedom later in life as well as some cash flow from money you’ve already saved and invested. Money will be working for you. When life throws curveballs later in life, you’ll then be able to handle them.
Very true! Time is always the most precious part of investing so starting young is key. It is a lot easier to handle the curves in life when you have sizable savings!
I have contemplated this many times. I started saving for retirement at 22 and have increased my contributions each year and at 28 have about 1 year’s income saved.
I’m now looking to the long-term options of my career and income and want to plan to be self-sustaining from non-primary income sources over the next 12 years. I don’t want to retire, but I want the freedom to do what I want and maintain an income stream at 40.
We will see what the next decade brings me, but it will certainly be full of savings and investments for my future.
I went through some of the some of the same thoughts in my early thirties. I started to invest in income property thinking the income generated would yield a better lifestyle. When given the choice, I chose to defer income to build a bigger asset base (business). Growth and cash flow (income) are 2 different directions even if you end up close in the end. I still invest for growth because I do not need or want income presently. My income property experience yielded a pretty good size nest egg that guarantees my latter years, but I want more for one reason. I do not know how long I will live. I plan for 30 years in retirement starting at 70 years old. My withdrawal rate will be between 2-3%. I am being more conservative.
Junior Herrera says
It was always useful to have a retirement savings goal. But many people seemed to pick a net worth number out of thin air and then spend decades trying to reach it without ever translating that final number into income needs to determine if they would have enough to meet at least essential expenses.
Along the way, you need to figure out if you have enough savings or you have to make a choice. Delay retirement or lower your standard of living will be your choices.
Allan H. Webb says
Many current workers realize they have not saved enough to retire and postpone retirement for a certain number of years. They still believe, however, that someday they will be able to retire and live off their savings. This strategy makes sense for workers who can hang onto their jobs at the same (or better) pay and are healthy enough to keep working. On the other hand, older workers who are forced by employers to agree to demotions, pay cuts or part-time status to stay on, may feel demoralized.
The last recession has changed things for many workers. They lost their jobs, home, savings and must rebuild which is not a problem for younger workers. Older workers, if they can find work or kept their jobs usually work past thee usual retirement age.
Bob Richards says
I think most people look at retirement incorrectly, defining it the same as in the last century. That definition will not work now and I explain the proper way to think about retirement in my last post
Bob Richards, Publisher
My idea of retirement is to have things I find interesting, challenging, engaging and stimulating to do. It will provide opportunities for additional income although I planned that very well already. You may want to read my idea of retirement https://www.krantcents.com/i-will-never-retire