No matter where you are in your career, NOW is a great time to give some thought to retirement. Unfortunately, no matter what your age, you may be tempted to neglect retirement planning.
In your 20’s & 30’s– you’re just starting out, perhaps buying a home, getting married, having children. Your income is none-too-high, and your expenses seem endless. You don’t have much to spare for retirement. BUT – even a small amount, invested regularly, will yield significant results. Why? Because you have so many years in which your investment can grow! Even just $10/week, earning an 8% return, will yield $135,000 in 40 years. If your employer contributes a dollar-for-dollar match, then your results will be $270,000. You can’t afford not to contribute. It is worth it to give up small things (such as stops at the coffee shop or lunches eaten out) in order to build security for your future.
In your 40’s & 50’s – your children hit college age, and suddenly every spare penny goes to tuition and college expenses, and even every penny you have isn’t enough. BUT… think again. First of all, many college students spend more than they need to – do you want to sacrifice retirement security so your college student can have a Caribbean spring break? And even if there is no luxury in your college student’s budget, experts consistently recommend that if a family can’t do both (retirement saving and college), then retirement takes priority. After all, if students graduate with some debt, they have their earning years ahead of them in which to deal with it. If you retire with inadequate resources, your ability to deal with a shortfall is much more limited. Make retirement saving a priority, even over college costs.
In your 50’s & 60’s – you wish you’d done more earlier, but now it is too late. With only 10 years left, you’re sure there’s just no way you can put aside enough to make a real difference. BUT… it’s never too late. Sure, you wish you could go back in time. But the planning and saving you do in the next ten years can have more impact than you might expect. Even saving for a few years can have an impact. Suppose you put aside $300/month, and your employer makes a 50% match, so you have $450/month going into a retirement account. At 8%, that account would be worth $82,000 in ten years. Or if your investment earned 5%, the result would be $70,000. Either amount is nothing to sneeze at. It won’t fund your entire retirement, but it will sure help when the house needs a new roof, or other special needs arise.
Along with saving, planning now will also help. Review your annual statement from the Social Security Administration, and learn more about any pension benefits available through your employer. Use A Ballpark Estimate of Retirement Needs or some other tool to calculate how your income and expenses will balance out in retirement. Ballpark Estimate is a non-commercial retirement calculator available in interactive form at www.choosetosave.org/ballpark/. This calculation will help you make the best possible decisions about how much to save, when to retire, where to live, etc. The National Endowment for Financial Education has cooperated with Extension at the federal level to produce a "Guidebook for Late Savers," available on-line at www.nefe.org/latesavers/index.html.