1 IN 4 MAY NOT HAVE ABILITY TO RETIRE
The January issue of the Journal of Financial Planning shared a startling statistic. It reported that over 40 percent of respondents to an online survey, conducted by GetRichSlowly.com, indicated that they do not invest at the present moment. My gut instinct, like most people’s for sure, is to react to this number with startling dismay and if this number is even fairly close to the true number of people not investing then it is truly an upsetting figure. If the number were off by 10 or 15 it would still represent 1 out of every 3 or 4 people not investing for their future!
You may ask why this alarms me so much. The moment I read that stat my mind immediately jumped to the future when my generational cohort (GenX) is living in retirement, but 25 – 30 percent of us haven’t the money to do so. If history is our guide, what do we see large groups of American’s typically do when they feel they deserve something that others have but they themselves do not? They ask the government for it! And among all the people in a given election year who vote, who are the most loyal and dedi
cated voters? The older generations! Politicians, who depend on votes to get elected, are all too eager to please a huge section of the public in exchange for votes.
This will be a burden on younger generations. Higher taxes and lower standards of living will be the inevitable result and is no way to run the future. The Baby Boomers started much of this problem with flourishing attitudes of selfishness and entitlement, but it’s their children, the GenXers, GenYers, and now the Millennials who have taken the match lit by Boomers and turned it into a Burning Man bonfire. If the Boomers’ selfishness and entitlement can be thought of as ‘keeping up with the Joneses’ today’s selfishness and entitlement is ‘keeping up with the Kardashians’.
The younger a person starts investing the less money it actually takes to fund a retirement goal. I teach this simple concept to my high school students in a Dollars and Sense class. If you were to start saving $25 a month (even high school students can afford that) from the time you are 18 years old to when you are 70, you could have over $37,000. That is assuming only 3 percent growth (equal to the long-term rate of inflation) on investments and also never increasing the $25 amount. The thing is that $25 will not get you to retirement, but if you start the habit young, and as your income increases you increase your savings amount, that $37,000 could easily be $750,000 or $1,000,000 which, for some, might be enough to fund their retirement. An investment of $100 a month from age 18 to 70 in a portfolio with average annual returns of around 8 percent, will easily reach that cool-million mark.
So if it is so simple, why haven’t you done it yet? For people with extenuating circumstances like, prolonged unemployment, unexpected medical bills, or other pressing adversities we can all empathize with your plight, but for others who have been blessed with stable employment and good health, what’s your excuse? Why not try and make investing a routine like paying the mortgage, the phone bill, or cable bill?
A Certified Financial Planner can assist in helping you set realistic and achievable goals about your future finances. The process is painless, and the rewards, tremendous!