No matter what your age, you will retire one day. Now I don’t know about you, but I don’t want to retire just to have to pick up a few hours at my local Wal Mart greeting customers to make ends meet. My friend recommended me to read an article on investing and that’s why I started investing. I know investing is a scary word for some, but it doesn’t have to be. Let’s pretend for a moment…
There was a 65 year old gentleman with a median net worth of $170, 156. Let’s pretend that all of that net worth is invested in assets that will earn him an annual return of 7%. This is a reasonable return for a fairly conservative stock and bond based mutual fund. Let’s also pretend that he expects to live for 25 more years to the age of 90. That means this $170,156 has to last 25 years.
Based on these assumptions, this gentleman will have just under $15,000 to live on each year. That is barely above the poverty line for a one person household. No less than half of all retirement-age residents of the U.S. have only that much to their name.
Can you see the dire situation that this gentleman is in?
No matter what your age, it is time to start investing in assets that will earn you more money. This is the key principle that makes some people wealthy while others get stuck living paycheck to paycheck. If you set money aside, invest it and learn to live on less than you earn, you will end up with more than those who spend their money as soon as they earn it, or worse, before they earn it.
Here is another illustration to show, the difference between beginning your investing at the age of 25 versus starting later in life.
Most 25- year- olds think they have their whole lives ahead of them, and they do, but let me tell you those years pass by quicker than you think. People in their 20s may think they don’t need to save for retirement because that feels so far away. Boy, are they wrong. If at the age of 25 you start investing just $50 a month into a plain old mutual fund that earns a long-term average of 10% per year, then at age 65 those $50 per month will be worth about $265,000 and you will have only actually invested $24,000 over those 40 years.
I know what you are thinking: I don’t have that kind of money to invest right now. I’ll have to wait until I’m a little older. Let’s take a 35- year- old. They will have to invest $134 per month, (totaling over $48,000) to have as much as the 25-year-old in the previous illustration by age 65. That’s twice as much! And a 45- year- old will have to invest $386 per month totaling $93, 000 over those 20 years from 45 to 65.
If you want to save for retirement I have two suggestions for you:
- Invest your money. Use it to buy assets that pay you back and
- Invest early. Start as soon as you possibly can
Whatever your situation, I suggest that you take a moment and think about your golden years. You really can’t afford not to invest today. Whatever you do, do it now!!! None of us are getting any younger.