Retirement Planning is Like Flossing, You Know You Should, But Are You?

Have you been saving for your retirement? Have you been exercising? Have you been flossing regularly? Your answer to each of these questions is probably the same; no, but I know I should… I’ll start tomorrow. These are habits we should all begin as early as possible.

If you haven’t been saving for retirement, you are not alone. About one third of all Americans are not actively saving for their retirement. If you aren’t participating in your company’s 401(k) plan, you are not only failing to save for your retirement, but you are also very likely leaving money on the table.

Most employers will match a portion of your investment dollar-for-dollar. Would you decline a raise from your employer? Of course you wouldn’t, but by failing to invest in your company’s 401(k) plan and taking advantage of their corporate match on your investment, that’s exactly what you are doing.

If you earn $50,000 per year and your employer matches the first 3% you contribute to your 401(k) account, you would invest $1,500 and your employer would contribute an additional $1,500 into your account. Why would anyone in their right mind tell their employer, “no thanks, I don’t want that extra $1,500 a year.”

A Harris Survey was conducted in October 2014, on behalf of Wells Fargo. Most people in the survey believe that they will need about $250,000 in order to have a reasonable retirement. As mentioned in the example above, most people could amass this amount of money in their nest egg simply by participating in their company’s 401(k) plan.

The survey also found that roughly two-thirds of Americans find saving for retirement harder than they expected. Furthermore, more than half of the participants indicated that they would have to save more money later in life in order to enable them to have a reasonable retirement.

Planning to save more money for retirement later in life makes it more difficult to attain your goals. You are much better off starting to invest early in life. By starting to invest early in life you will be able to amass more money for your retirement.

As mentioned above, by investing just $1,500 a year in your employer’s 401(k) plan along with your employer’s match, you could end up with over $257,000 in 25 years, assuming an 8% return on your investments. Most of that gain is actually due to the power of compounding. The $1,500 that you and your employer would each contribute to your 401(k) over 25 years only adds up to $75,000; the other $182,000 is a result of your investment gains.

Waiting until later in life to start investing requires considerably more capital to reach that $250,000 goal. By waiting to start investing for retirement, you would miss out on many years of compounded investing results. If you only had ten years to reach that same $257,000 worth of retirement funds, you would need to invest about $14,500 per year. Most employers only match the first 3 or 6 percent of your investments. Therefore, much of that $14,500 would have to come out of your own pocket.

Almost half of those surveyed indicated that they believe that they have not saved enough money to “live the lifestyle that they want” during their retirement years. Many people express feeling of depression when discussing their potential financial situation during retirement. It is an unpleasant prospect to be faced with the idea that you won’t have enough money to retire and will have to continue working long past your planned retirement age.

Ideally, you should start saving as early as possible and diligently put aside money into your retirement account each and every year. If you haven’t saved enough for your retirement, there is still time to do something about it. Take a long hard look at your expenditures. Determine which of those expenses are unnecessary and then start investing that money instead of spending it. Invest as much as you can. Whenever you receive a raise, redirect a significant portion of that raise into your retirement accounts.

Don’t forget to take advantage of your company’s 401(k) plan. Invest as much as you can. At the very least, invest the minimum required to max out your employer’s company match.

The earlier you start saving for retirement; the better off you will be later in life. Start doing something right now. Don’t delay another day. Start saving for your retirement, and while you’re at it, you might want to start a regular exercise and daily flossing regimen too, after all, you want to be healthy enough to enjoy your retirement.

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