How To Save For Retirement With Any Income
Saving for retirement can be done with any income. In addition, it is something that everyone should be doing. Nowadays, if you aren’t saving for your retirement then you probably are not going to be able to retire. Saving is very simple. All it takes is the willingness and determination to nurture the desire for a better future.
In order to live a better future, you must save your money and let your money grow. You can’t bury it in the ground because $100 today will most likely be worth significantly less when you retire. Therefore, your $100 needs to grow significantly by the time you retire.
When it comes to retirement saving, the earlier you start the better. It is like anything, the longer you have the better off you’ll be. With retirement, the more time your money has to grow the more it will grow. It will begin gaining something called compound interest. This is when your interest starts earning interest.
Once this happens, your growth will be astronomical! Therefore, the longer you wait to start saving the less time your savings will have to grow. Thus, when you retire, you will retire with much less than you could have had.
Look at this example of two people saving for retirement at different stages in life. Person A put $2,000 a year into a Roth IRA from age 19 to 26 for a total of 8 years. Then, he did something that may seem really strange. He stopped investing. Person A decided that enough was enough and he was going to forget about his investments and not put in another dime. He was going to live his life using his money however he saw fit because he believed he had invested enough. Person A worked hard and invested and is now going to live life.
Person B, on the other hand, put $2,000 a year into a Roth IRA from age 27 to 65 for a total of 38 years. He noticed the value of investing and was determined to put away as much as possible during his entire career. He committed $166 a month to savings for 38 long years. Person B wanted to retire wealthy and didn’t want to have to work when he became old. He had a plan of action and followed that plan down to the letter. He learned about investing and started it when he began his lifelong job. Now he is going to retire.
Who do you think will have more retirement money?
Remember, Person A saved $2,000 a year for 8 years or a total of $16,000 and then stopped investing. Person B saved $2,000 a year for 38 years for a total of $76,000 and then stopped investing.
So… Who will have the most money?
It’s not Person B! Even though his retirement account is at a healthy 1.5 million dollars, Person A’s account is at a whopping 2.2 million dollars! This is because it had more time to grow.
Even though person A only saved $16,000 over 8 years and person B saved $76,000 over 38 years, Person A still ended up with more money at retirement. Yes, you may be shocked but this is no surprise due to compound interest. That is your best friend when it comes to retirement.
Remember, the $16,000 had much more time to grow. The full balance was there, untouched, for 38 years! Since it was invested earlier, the interest kicked in earlier and turned into a lot more money. Person B’s money was continually growing by $2,000 a year.
Thus, the compound interest was only on a small portion of the overall balance each year. As a result, the overall balance at age 65 was a lot less than Person A’s.
The bottom line is that when it comes to saving for retirement, the earlier the better. You must get started right away no matter how much money you have. It doesn’t matter what you can afford to save, something is better than nothing so start saving right away.
Therefore, if you are older and haven’t been saving then you need to start. It is never too late to retire wealthy. In addition, if you are younger, then you really need to start saving because you have so much more to gain!
If you are reading this and are a teenager and can make this a reality then you will have just made a multimillion-dollar discovery. In addition, if you know someone who is in their teenage years, then you really need to share this with him or her. This is a great way to help ensure their future is taken care of.
In addition, it will also teach them some discipline and keep them from squandering all of their money. Therefore, no matter where you are in life, investing to retire wealthy is a two-step process.
Step One – Pay Off Your Debt
Before you start doing any investing you need to pay off all of your debt. This doesn’t include your house. However, it does include all of your other debt. Do whatever you have to do to get that paid off. Work extra hours, get another job, et cetera. You also need a plan of attack to pay off your debt.
List your bills from smallest to largest and pay them off in that order. Pay the minimum amount due on all of your bills except the smallest debt. Put any and all of the extra money toward that debt. Once the smallest bill is paid off, take that money and put it toward the next bill. Pretty soon you will have all of your debt wiped out. This is called the debt snowball.
Step Two – Invest 15% Of Your Income
Once your debt is paid off you need to start investing like crazy. If you have an employer that matches a portion of your investments then fund up to the match. That way you will easily double your money. After that, take the remaining portion of your 15% and start investing in a Roth IRA. There is a limit on Roth contributions so be sure to fund up to your limit. Then, fund your Health Savings Account or some other tax-favored retirement plan. If you are determined you will retire with wealth.
Of course, there is much more that goes into saving and investing money so it is essential that you do your homework before getting into anything. In addition, make sure you consider several different options and do the one that is best for you. In the end, you are the only one who can choose whether or not you will retire wealthy or poor. How you lay the foundation will determine the sturdiness of your retirement. Build well!