If you chose to make some New Year’s resolutions, you have plenty of options. You could strive to study more, or strive to eat healthier and exercise more. You could decide to shoot 100 free throws a day. Or you could strive to save more.
I’m starting my New Year’s Resolution off with this blog. I’ve been helping clients for years with their finances and retirement goals. Now it’s time to help all of you. I believe now is more important than ever to educate our generation on the importance of saving for retirement. Most of us will never have the luxury of a pension like our grandparents; which means we will have to take retirement into our own hands.
Now I know we just finished the two biggest holiday seasons of the year, but I want to challenge you to start investing in your future. Like opening a savings account, enrolling in your employer plan at work, or starting an investment account. Do something that will benefit your future self.
A recent finance study by Go Banking Rates showed that approximately 45% of American’s said they had no money put aside for retirement. 45%! The study went on to show that about 42% of people said they will retire with less than $10,000 in retirement savings. Only 3.9% roughly of the people said they will have $500,000 or more.*
Let me show you an example how easy it really is to save for retirement. Let’s say you are 30 years old and you want to start investing. You’ve determined that you have enough discretionary income leftover each month to invest $500. Over the history of the stock market, the average return has been about 10% even though it varies greatly year to year. For the purposes of this example, let's say you make 8% on average. By the time you are 65 years old you will have accumulated $1,146,941.24 in retirement savings. I bet I have your attention now. That same number has the potential to provide $45,000 of annual retirement income.
Past performance is not an indication or guarantee of future results.
Now, I understand not everyone can put back $500 a month. After all that is a good chunk of change. I encourage a lot of new investors to start with $50 a month. Once you get use to money being withdrawn from your bank account/pay check you will feel more comfortable with your savings habit.
Here are a few ways you can start investing:
- Enroll in your employer’s retirement plan. Your most common retirement plans are your 401k's, 403b's, and 457 plans. You will elect to have a certain amount withdrawn from your paycheck each pay period. That amount will then be invested into a number of funds provided by the 401k company.
- Setup an automatic bank draft to a Traditional IRA, Roth IRA, or Investment account. Although this option is not setup through your employer; anyone can open an individual retirement account on their own. A local financial advisor can also be a great resource.
- Open a savings account with your local bank or online institution. Most banks offer some kind of savings/interest bearing account. These accounts usually do not pay a lot of interests, but are great for emergency funds.
If your employer does not offer a retirement plan, you may discuss setting up a “Payroll Deduct IRA”. More info here: https://www.irs.gov/retirement-plans/choosing-a-retirement-plan-payroll-deduction-ira
However you decide to save for retirement, just know that you are doing something that has a huge impact on you and your family’s future.
Stay tuned for future financial topics!
Happy New Year’s and a great 2020!