When you think of your retirement what comes to mind? It might be the classic scene of sitting on the porch with your cute spouse and watching the flowers grow. You might identify with the couples that buy an Airstream and take off to Florida. Or last option, never thought about it, don’t want to think about it, and don’t really care. Unless you want to be working until you are 80, here some reasons why you should care about saving for retirement.
“Never working again” is closer than you think: We think it will never happen to us. “Retirement is for when we are in a wheelchair,” we used to say. Let me guess, you got a degree, found a spouse and you never thought you would do that either. Before you know it, one thing will lead to the next and you will want to spend all your time with the family. We think retirement is for “when we are old”. Guess what, you are old and it is time to save.
More time, more money: Albert Einstein once said, “Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.” The returns of compound interest are greater over a longer period of time. Assuming an average annual return, someone who invests five thousand dollars annually between the ages of 25-65 could accumulate up to 1 million for retirement. Now we have your attention.
It will spill over to other areas of your budget: Saving for a retirement, is kind of like making your bed in the morning. When that is done, the rest of your room tends to stay clean as well. When you contribute to your retirement, you tend to be more discipline in how you spend your budget. When you commit 10 percent to your potential Airstream trailer, you might think twice about those late night taco runs.
What your 401k/IRA can do for you: Either you are responding, “oh ya forgot about those” or “is that a license plate number?” If you are the latter, educate yourself. In short, both will give you access to an account where you can start saving your retirement fund. If you have an employer, they usually offer a 401k option. If you are a freelancer like the rest of the millennial generation, look into an IRA. Both have investment options so you can get an early jump on that compound interest we tackled earlier.