3Q2018 | Ages 30 – 49
Saving for Retirement Should Never be a Vacation
As many of us head out with family and friends to our favorite vacation getaways, to unwind from the stress that comes with balancing home and work, be mindful to never take a day off from saving for retirement.
Our 30’s and 40’s are an important time in our lives. Many of us are establishing our careers, possibly beginning the ascent up the corporate ladder and hopefully earning more. Families start to grow, and for others, kids are going o to college. Either case can put saving for retirement on the back burner, but it’s important to not let that be the case – slow and steady wins this race.
Now that life is a little more manageable and you have a better grasp on your finances, challenge yourself to save above the company match. It’s always good to save at least enough to get the company match so you’re not leaving any free money on the table; but let’s pretend that you make $50,000 and start contributing to your company’s retirement plan at age 30. Assuming a 2% annual salary increase and a 7% average annual return, saving 3% of your salary with a 3% company match will net you a little more than $560,000. Now let’s bump your savings rate to just 5%. The same growth and company match would get you slightly more than $750,000. An amazing increase of more than 33% with just increasing saving by 2%!
Given the same scenario, someone that starts saving at age 40 would have slightly over $215,000 and $330,000 respectively (over a 53% increase). This goes to show the power of starting as early as possible, but neither of those account balances are nothing to sneeze at.
All of those piles of money sound nice at the finish line, but we all have different retirement goals. So how do you know if what you’re doing now will be able to support what type of retirement you’d like to have?
Typically, at age 30, to be “on track” for retirement you’d like to have one-year worth of salary saved, and 3 times your salary by age 40.
For those that aren’t quite there yet, check to see if your plan has an auto-escalate feature, so you can automatically set to increase your deferrals on a specific day. Many of the participants I work with that utilize this feature have their auto-escalate set for December 31 or January 1 as we enter a new year. For those that don’t have access to this feature, simply set a calendar reminder to get in the habit of increasing your contributions at the beginning of the year or when you get a raise or bonus.
Saving for retirement is easier said than done, but it’s the constant effort of continuously contributing while systematically increasing what you save that can have a monumental impact on turning your retirement into a reality.
Jasen Mangrum, AIF®
Advisory services offered through Prime Capital Investment Advisors, LLC. (“PCIA”), a Registered Investment Adviser. PCIA: 6201 College Blvd., 7th Floor, Overland Park, KS 66211. PCIA doing business as Qualified Plan Advisors (“QPA”).
This commentary is provided for information purposes only and does not pertain to any security product or service and is not an offer or solicitation of an offer to buy or sell any product or service.