Take Retirement Seriously
Retirement strategies are a favorite topic of mine. Often I’ll get an idea from other articles that I’ve read that will prompt me to write a blog. One recent article had a 401K retirement account advising it’s owner on retirement strategies. Its first piece of advice – take retirement seriously. In my mind, in order to take retirement seriously, you have to answer the following questions (preferably with the help of a financial professional). And the sooner you can answer them in your retirement planning, the better prepared you will be.
When Do I Want to Retire?
When do you want to retire? If you have a date in mind, is that date a “wish” or a goal? The difference is the level of commitment you have to the date or age you selected. Wishes are merely something you hope will happen. Goals are achievable.
How Much Will I Need to Accumulate to Live the Life I Want in Retirement?
This question is being raised more and more on TV commercials by investment companies. And good for them. How can we expect to answer the first question if we don’t marry it with an answer as to how much money we have to have to retire at the date we select? Don’t we also want to live the lifestyle we selected?
How Much Money Do I Have Saved for Retirement?
Somewhat relevant don’t you think? I read articles constantly that acknowledge Americans are woefully ill prepared for retirement because they have saved so little. Like less than $100,000. That amount allows you to draw $5,000 per year (or there about) during your retirement. Can you live on $5,000 plus Social Security? If not, you’d better start putting money away!
How Many Years Do I Have Before That Magical Date I Picked for Retirement?
Time is money in so many ways. Time allows our retirement account to grow through the magic of compounding. Albert Einstein described compounding as the 8th Wonder of the World. Listen to Albert, he knows his stuff! Compounding is wonderful! The Rule of 72 helps us understand it. Take your earnings rate – let’s say 8% – and divide it into the number 72. It goes 9 times. That is the number of years it takes for your money to double. So $10,000 invested at 8% for 9 years becomes $20,000. If we only make half that – 4% – it takes us 18 years to make that $10,000 become $20,000. Which do you prefer? How do you get the one you want?
How Much Are You Willing/Able to Invest for Retirement Each Year?
Money doesn’t grow on trees and we often put other things before investing for retirement. Start early, save often. Combining this idea with the compounding principle will help your retirement fund grow appreciably. Just like “many hands make light work”, a little investment every year for many years makes saving for retirement or any goal much easier.