You say you’ve got too much on your plate to save for your retirement? You should rethink that.
Saving money for something that seems as far off as retirement can be hard, and you can probably list several good excuses for not doing it. Some of the ones you’ll read below may sound familiar, but we’re going to show you why it’s time to think more seriously about how much you’re saving for that stage of your life.
Excuse #1: There’s still lots of time.
The amount you need to save each month in order to meet your retirement goals depends on several factors. One vital component is the number of years you’ll have for saving. And that’s not clear, of course, but the sooner you start, the better chance you’ll have of attaining your goal.
Let’s look at an example:
|
Years to retirement
|
40 |
30 |
25 |
20
|
| Average annual ROI |
6%
|
6% |
6% |
6%
|
| Your savings goal |
$250,000
|
$250,000 |
$250,000 |
$250,000
|
| How much do you need to save per month? |
$126
|
$249 |
$361 |
$541
|
|
Your savings goal
|
$500,000 |
$500,000 |
$500,000 |
$500,000
|
| How much do you need to save per month? |
$251
|
$498 |
$722 |
$1,082
|
| Your savings goal |
$750,000
|
$750,000 |
$750,000 |
$750,000
|
| How much do you need to save per month? |
$377
|
$747 |
$1,082 |
$1,623
|
This is a hypothetical example for illustrative purposes only, and does not represent any specific investment product. Your results will be different. This example assumes monthly capitalization. The money you accumulate in your tax-deferred retirement plan may be subject to taxes upon withdrawal. Amounts have been rounded to the nearest dollar.
Excuse #2: I’ve got too many expenses right now.
There’ll always be a reason to spend money, or to save it for something else. Paying off student loans, the down payment on a house, the kids’ summer camp, college tuition. . . . These are all important reasons. But so is continuing to save for retirement, because if you don’t save enough now, you’ll probably need to save a larger amount in the future, or else run the risk of not having enough money to cover your needs in retirement.
Excuse #3: Save how much?! That’s a lot!
Of all your financial goals, having enough money to comfortably retire should be Number 1. You should consider that retirement could last for more than 20 years, and you should have the mechanisms to replace your current income during that period. But don’t be overwhelmed, or let yourself become discouraged—adding another excuse for not saving. It’s best to take the savings process step by step: save a little out of every paycheck. As time passes, try to put aside a little more. If you get a raise or a bonus, you should take that opportunity to increase the amount you’re saving. After all, it’s money you didn’t have before and it could help you increase the balance in your retirement account.
Excuse #4: It’s that I’m counting on. . .
You think you’re going to inherit a large amount of money at some point? Or are you planning to win the lottery? You may be lucky, but depending on assumptions for your retirement reduces—by a lot—the possibility of attaining your goals and having a retirement with peace of mind.
It’s better to bet on your own abilities and put aside excuses—make saving for your retirement a priority. That’s what will give you the best yield.
Source: DST
The information and general descriptions in this article are designed to help you understand the factors that should normally be taken into consideration when assessing the effectiveness of any strategy or investment in your retirement plan. Any description in this article is for informational and educational purposes only, and for your independent consideration; it is not to be considered, or seen, as advice or a suggestion for taking (or not taking) any particular action. In providing this information, we assume that you are capable of evaluating this information and the general descriptions included here and exercising independent judgment.
