If
you’re thinking "I’m way too young at age 30 to give a moment’s thought
to my life at 65 and beyond..." don’t feel guilty. The vast majority of
us simply cannot wrap our minds around what our lives will look like so
far into the future.
While we see retirement savings as
preparing for a distant time in the future, the truth is that the
future is far closer than we think.
If you’re thirty-five right now, sixty-five is just three decades away.
That’s just a little more than the time it takes to plan a family, have
a boy and a girl two years apart; raise them through preschool,
elementary school, high school, college, a little post-graduate work .
. .
Then guess what? Thirty years just went by. Yeah, I know: it's depressing when you think about it.
A single woman who is thirty today as other special considerations she must take into account, too:
Statistically you are more likely than your male counterparts to cycle in and out of the job market.
You are also more likely to dip into your retirement savings in
starting a family: from decorating the baby’s nursery to opening a
college savings fund, there’s a good chance you’re going to want to
take out some savings well before you reach retirement. Another
special consideration is that a woman reaching age 30 in 2008 has a
better chance of living to age 100 than all the generations who came
before her. So retirement savings, on average, will need to work harder
for you than your shorter-lived ancestors.
And since
there is little reason to doubt that by the midpoint of this century
many of us will be still engaged in our working lives at seventy, even
eighty plus, early retirement savings allows you to choose if you want
to work or not work at age seventy and beyond. You could argue that the
senior who took your order today at McDonald’s is simply trying to have
a life outside of their house, but an increasing number of seniors are
taking part-time and full-time positions because their financial
resources make it essential that they do that. The smart retirement
saver is leaving herself the option not to work, depending on her level
of interest and her commitment to her career.
And beyond being able to have that choice, retirement for 21st Century
seniors is not what it was fifty years ago. Retirement today may well
mean the pursuit of an active lifestyle that includes travel, tennis,
golf, boating, and dozens of other choices.
As one semi-retiree said to me recently, “I want to be able to choose
when I work, and when I go off to play.” At age sixty-one, retirement
for this early senior includes globe trotting to exotic destinations,
long car trips to undiscovered destinations, and much more time with
friends and family.
So if you think that saving early for a secured retirement income means
buying your rocking chair for the porch, get rid of that illusion right
now. Sure there are some of us who won’t be a healthy 60+, but most of
us will, like my globetrotting friend, be ready to explore new horizons
after leaving the burden of a daily workplace job behind.
If it’s your choice to have that kind of option available to you, and more importantly
to face the future with a greater sense of financial security then start planning now.
Here are a few easy ways to start doing just that:
The first and most obvious option available to many of us is to participate in a company supported savings plan.
Some of these plans match your contributions as high as 4 to 6% of your
earnings. So start by learning more about this option if indeed it is
available to you. Millions of employees put into these corporate
savings plans less than the maximum option, 2% for example, which is
turning your back on free money: never a smart move. So match the
maximum your employer gives, and plan your budget accordingly.
Start your savings plan as early as possible.
The real benefit in starting your savings plan by 28, 30, 32, for
example, is that the difference in accumulated savings is eye-opening.
Look at these projections based on an annual salary of $55,000. Saving
at a rate of 7% of your gross earnings will produce a retirement nest
egg at age 70 of approximately $535,000. But if our 28 year-old put
aside 14% of that gross, or $7,700, her retirement savings, at age 70
will top $1 million. The bottom line is that one of those scenarios
yields a $24,000 annual return, while the $1 million dollar-plus
savings gives you over $45,000 in annual income, above and beyond
whatever Social Security will yield in the year 2060.
Are there uncertainties in these numbers? Absolutely. We’re projecting
today’s dollars and making certain assumptions about interest rates and
fund performances that may under perform or outstrip those
expectations. But take this bit of caution to heart. Many of us use the
future’s natural degree of uncertainty as a convenient excuse not to
save for retirement. Members of each generation who have made that
choice have consistently guessed wrong. The world did not come to an
end and they did not die young. Instead they lived out their retirement
years in a relatively poor financial position wondering what may have
been if they had been more confident in planning for their future.
Finally, cultivate relationships with financial consultants.
That does not mean going to one source—perhaps a pal who sells stocks
for a living—and put all your investment eggs in that one basket. Work
with two or three consultants, look at the long-term performance
records of the funds that they recommend, and spread your investment
dollars into several different baskets. The general rule that you
should divide your savings into thirds, conservative, moderate-risk,
and aggressive higher risk options, is a sensible approach.
Most importantly, start your savings NOW!
By the time we enter the midpoint of the twenty-first century, you’ll be very glad that you did.