According to the Federal Reserve Bank of New York, 11.5% of student loans are delinquent by 90 days or more, or are in default. Although this seems like a small percentage, for the borrowers faced with mounting defaulted or delinquent student loan debt…
Forget What You've Heard: Retirement is Possible, Even if Your Income is “Average”
Survey after survey shows that an alarming percentage of Americans are worried about coming up with enough money to retire. About half of workers feel certain they’ll have to work past their 65th birthday — and nearly 1 in 4 believe they’ll have to work for the rest of their lives. One of the major reasons people are nervous is that they don’t feel like they earn enough income to save for retirement. If you fit into this category, you’re not alone. But the truth is, you may still be able to leave the workforce at or around 65 even if you’re bringing home modest paychecks. That income may take you further than you think.
Consider this: while researching his book Everyday Millionaires, Chris Hogan surveyed 10,000 American millionaires. He found that 33% of them never earned six figures as a household in a single working year. So be encouraged. If you decide to get serious about retirement, you may be able to get rid of those fears for good.
Focus to Reach Your Retirement Goals
If you want to retire comfortably and on-schedule, here are a few things to focus on.
Get Started Now. The sooner you start putting money away, the more you’ll be able to save. More important than that, you give the forces of compound interest more time to work.
For example, let’s say you’re 30 years old, earning $40K/year. If you start putting just $200/month into a retirement account right now, you could have about $650,000 by the time you reach 65, assuming a 10% annual return on your investment.
Now let’s say you decide to wait until you hit 40 to start saving. All other things being equal, you’ll have $236,000 in your account. That’s $414,000 less than you would’ve had if you hadn’t waited!
No matter how old you are now, it makes sense to start saving NOW rather than later.
Make Your Employer Work for You. If your job offers a company match on your 401(k), you’ll be in even better shape.
At your current $40k salary, your job may match up to 3% of your contributions. That equals $1,200/year or $100/month. So if you started saving your $200/month now (at age 30), with your job kicking in an extra $100. With the same 10% annual return as before, you’d have about $975,000 your account at age 65. The company match adds $325,000 to your savings.
Just to reinforce the value of starting sooner, let’s look at this scenario if you’d waited to invest until you were 40. All other things being equal, you’d have about $354,000 saved up. Waiting 10 years steals $621,000 from your potential savings. Mind-boggling!
Now you can understand how the millionaires in Chris Hogan’s study accumulated their wealth without six-figure incomes!
Stay consistent. Now that (hopefully) you’ve decided not to wait any longer to start investing in your future, come up with a plan and stick to it.
Regardless of how much you’re going to save, be consistent. Setting up automatic deductions from your paycheck is probably the simplest way to do eliminate any temptations. Another thing you may want to do is look at your budget. Find expenses you can reduce or cut completely. That gives you room to save without too much pain. Consistently strive to spend less wherever possible.
Call in the Reinforcements. To make sure you’re getting the biggest bang for your retirement buck, it makes sense for many people to speak with a financial advisor. Our advisors at Freeman Capital can help you explore the various retirement account options, think through your budget and create a plan that will help you retire as comfortably as possible. When you start doing the math for your personal situation, it can be surprising. You really can retire. Maybe sooner than you thought possible.
Take a look for yourself. Just $200/month could turn into $1 million given enough time and consistency. Use this simple retirement calculator to see how much you can accomplish, no matter your income level.
Freeman Capital Advisors is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.