Grob1o61's Blog

December 3, 2009

Saving for Retirement

Filed under: Uncategorized — grob1o61 @ 1:27 am

Zeg aan hallo kinderen, Papa DonderVogel Is op de zeepdoos opnieuw.

Today I’m going to pass out my advice on one of the ways to start saving for retirement.  What’s that? Your only 18 and you have lots of more important financial needs?  Doesn’t matter because if this option is available to you, it is pain free.

If your employer offers a plan that you can invest in, with pre tax dollars, from your paycheck, you are in luck.  It is certain that you can invest at least 5% of your gross income, before Uncle Sam gets a bite out of it, and the best part is, you will still get your full take home pay because Uncle Sam will get less.

     For most people you can invest 6% or even 7% without affecting your take home pay. Let’s take a look at this, say you only make $100 per week, and therefor invest $20 per month and average 5% interest. If you start at age 20, you will have over $22,700 at age 55.  Doesn’t sound like much? Well, do you expect to spend the next 35 years at $100 per week?  Let’s up it only a little bit, say twice as much, $40 per month.  That equals $45,443 at age 55. At age 65 that comes to $81,057 and change.  Wait a minute, how did that happen?  The financial magic of compound interest.  Aren’t you glad you didn’t wait to start saving until you were 30?  Let’s say you graduate at 22 and make $30,000  per year in your new job.  For some reason, you never get a raise.  If you invest 5% of your income every month, and save until you are 65 years old, at 5% you will have $226,397 plus.  If you can’t get better than 5%, you aren’t looking.  Lets’s try that last one at 6% – $302,800, 7% – 409,500 and so on.  If you can’t get a raise in 43 years, you went into the wrong field.

     One more suggestion, when you get that raise / those raises, take a close look at how they compare to your previous pay.  If your budget isn’t running extremely tight, you probably can get by with only part of that raise in your takehome.  You received a 2% raise, how about increasing your pretax withdrawal and therefor your investment by another 1%?  If you increase by 1 or 2 percent every raise, you could easily end up with a million dollars by retirement.  Now that’s sounding like some fun.  If you would like to play with these numbers on your own, see last weeks blog and email me to get my free little financial program.  No strings attached!  However, I can already see making a few improvements to my programs.  When that happens, you’ll find out here.




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