Most people would agree that at some point in life they will no longer want to work for a living. The decision to stop working, call it retirement if you want to, may be by choice, because of health reasons, or by force. It doesn’t really matter if you plan to work beyond normal retirement age. At some point you will not be able to physically handle it.
How you are sitting financially when this day arrives can influence your lifestyle greatly. The money you save during your working years can go a long way in providing the quality of life you hope to have. We will all need some money to supplement social security and any pensions you and your spouse may be lucky to have. I say lucky because pensions or defined benefit plans are going the way of the dinosaur. Most people have 401(k) or 403(b) plans at their disposal. These plans put the burden on you to make all the decisions with regard to amount of savings and investment choices. This places the responsibility on the individual to save enough money in their working years to enjoy retirement.
Nobody has ever said to me when they retire that they have too much money. Although, I do hear a lot of people say they wish they would have saved more. People who save more money during their working years just have more money when they retire. It is as simple as that. Saving money is not easy however. There are always impediments along the way that prevent people from saving more.
If you have an opportunity to enroll in a retirement plan at work you should take advantage of it. Retirement plans offer tax advantage savings and many employers match some of your contribution. Contribute at least the amount that provides the greatest match. Then on an annual basis increase your contribution by one or two percent. Generally, people who do this find that it doesn’t affect their take home pay enough to wreck the budget. The benefit down the road is substantial. Consider a participant in a retirement account who starts contributing 5% at age 32 and is able to increase their contribution by 2% per year. By the time this person reaches age 42 they will be contributing 25% of their income without even realizing how the small yearly increases added up. The challenge is to do it year after year after year.
In this world there are Savers and there are Spenders. Maybe you know someone like this. A Saver is someone who, when they get paid, has a specific amount of money that goes into the bank or their retirement account. When this person is faced with the possibility of needing to buy something they talk about it and talk about it and talk about it until they decide they really don’t need it after all. A Spender is someone who, when they get paid, has to buy something. When this person realizes one day that maybe it would be a good idea to start putting money away for retirement they think about it and think about it and think about it and they never get around to doing it.
Try to become more of a saver in life. If you save first, make sound investment decisions and live within your means, you will have more money the day you say so long to the working world.
~ John Abitz, CRPS, CRPC, Account Executive
Securities & Investment Advisory Services offered through VSR Financial Services, Inc., a Registered Investment Adviser and Member FINRA and SIPC. ISG Advisors is not owned or controlled by VSR Financial Services, Inc.
This commentary should not be considered individual investment advice. You should consider your individual investment objectives and risk tolerances before making investment decisions. Not all strategies discussed may be suitable for all investors. Investing involves risk including risk of principal. Asset Allocation and Rebalancing strategies do not guarantee a profit.