When it comes to retirement savings, the early bird gets the worm. The sooner you start the better off you’ll be. Everyone has their own set of circumstances, but here are some milestones that you can work toward achieving.
Ideal Savings for Retirement by Age:
Times your annual income
Age 30 1x
Age 40 3x
Age 50 6x
Age 60 8x
Age 67 10x
If you feel bad about yourself, you’re not alone. These numbers may be daunting but there are a few ways to make sure you can catch up or stay on pace.
Start Early
If you haven’t started or saved enough, create a plan so you can get on track. I shared this post on Twitter (@ChicagoAdvisor) that highlights the importance of starting early..
“Investor A – saves $3K year from age 20-35. Investor B – saves $3K year from age 35-65. Both achieve 8% annual return. At age 65, who ends up with more? Investor A
Investor A: $885,240
Investor B: $367,037”
Investor A saved for 15 years less than Investor B but because he started early, he had substantially more money than Investor B. It takes time for compounding interest to make a notable impact.
Save 15% of your income
I suggest saving at least 15% of your income (Before tax!). Some people wonder how this is possible and the first step I would take is to review your spending. A common mistake is when people overspend and have little money left over for saving. One of my favorite quotes from Warren Buffet is “Do not save what is left after spending, but spend what is left after saving”.
Make Logical Investments
Before investing, do your research and look at the history of your potential investment. If it sounds too good to be true it probably is. There is no day trading or real estate course that will make you rich quick. Making ill-advised investments can delay you from reaching your goals.
Have a Plan
Having goals without a plan to get there will make it much more difficult to achieve. The 50/30/20 rule breaks down spending to 50% on your needs, 30% on your wants and 20% to savings. It’s a basic rule that refers to your after-tax income. It’s a good way to start before making a full plan where you will dig deeper into your specific goals and how to best achieve them.
Save More Money
This isn’t the advice most people would like to hear but it is one of the best ways to help you be better off financially. One of the hardest things to do is being disciplined about saving money.
If you have any further questions or would like to know how we can help you, please email me at george@pmgwealth.com or call 847-550-6100.
Past performance is no guarantee of future results. This content is for informational purposes only and not a recommendation to buy or sell a specific security. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. All investing involves risk including loss of principal. No strategy ensures success or protects against loss.
