You can't afford to wait
Friday, February 22, 2008 Posted by Christina
I recently had a relative scoff at me and my husband for meeting with our financial advisor. This relative... who is a lot closer to the age of 50 than I am, has ZERO dollars saved for retirement. She says that she can't afford to save money for retirement... that she's "investing in the phone company and the public utilities." (As if we don't pay our phone and light bill!)
Her comments were totally jarring to me. Can't afford to save money for retirement? How does she expect to afford LIFE when she is no longer able to earn money? She must be - as author Dave Ramsey puts it - planning to read the "75 ways to serve Alpo" book.
My husband and I have been contributing to our 403(b) plans since we started our jobs. According to our financial planner, we are right on track to have a comfortable retirement, even if I don't return to work for awhile. And the estimates don't factor in any Social Security income we may get.
He also showed us why it is so important to save money NOW rather than later. For example, if you put away just $100 a month starting at age 25, based on average returns, you will have approximately $325,000 saved up by age 65.
If you wait to start saving that same amount until you are 45, you will only have about $57,000 for retirement.
You can't afford to wait to save. You have to find money to put away for retirement NOW. Cut back on your soda or coffee consumption, cut out a few magazine subscriptions, shop around for better insurance rates.... and take that extra money and put it away in a good growth mutual fund.
Her comments were totally jarring to me. Can't afford to save money for retirement? How does she expect to afford LIFE when she is no longer able to earn money? She must be - as author Dave Ramsey puts it - planning to read the "75 ways to serve Alpo" book.
My husband and I have been contributing to our 403(b) plans since we started our jobs. According to our financial planner, we are right on track to have a comfortable retirement, even if I don't return to work for awhile. And the estimates don't factor in any Social Security income we may get.
He also showed us why it is so important to save money NOW rather than later. For example, if you put away just $100 a month starting at age 25, based on average returns, you will have approximately $325,000 saved up by age 65.
If you wait to start saving that same amount until you are 45, you will only have about $57,000 for retirement.
You can't afford to wait to save. You have to find money to put away for retirement NOW. Cut back on your soda or coffee consumption, cut out a few magazine subscriptions, shop around for better insurance rates.... and take that extra money and put it away in a good growth mutual fund.
February 22, 2008 8:46 PM
I completely agree. Retirement savings are so important. Each year we increase the amount we put into a retirement fund. In addition, we have three different types of savings. Since teachers in Alaska retire after 20 years, I'll only be 43 come retirement time so I need something I can draw from before I'm 65. So, we started a Roth IRA. It's really a great option for early retirement. Another idea I'd like to throw out there is instead of starting a college fund for your kids. Start a retirement fund instead. Get that compound interest working for them when they're only one. The way we figure it, there are tons of good deals on students loans for college. They're easy to get and have low interest. (I had $18,000 in student loans and with a little planning I had that paid off in 5 years.) Instead of college, we're starting our children their very own retirement fund. We believe life is not about work, the sooner you can be free of the 9-5 the better. So, we'd like to set our son up for a comfortable future. I hope your short sighted relative will see the light soon.
February 22, 2008 8:48 PM
I told C.O. about this post and he say, "You can borrow money for a car, you can borrow money for a house, you can borrow money for an education but you can't borrow money for a retirement." It's worth considering.
March 1, 2008 11:12 AM
It is great to see you talk about this. My little sis just got her first job and I started in on her about 401k investing. When I started my first job, I was told to max out my 401k with the thought that since I never had it, I would never miss it. It has been so true!
March 2, 2008 10:27 AM
I have to correct myself. We don't have a Roth IRA for ourselves, we're just investing in mutual funds for our early retirement. Roth IRA's are for when you're older. Hey, I'm learning more each day. =)
March 2, 2008 2:16 PM
Well, you can certainly start saving with a Roth IRA now, but you can't start drawing on it till you're older. (I think it's 59 years of age, someone correct me if I'm wrong). A Roth is a great long-term investment vehicle because you can withdraw the money tax free once you are old enough.