The Power of Savings
For most of us retirement is just a word or an event sometime in the future. Maybe we worry about it, maybe we don’t. According to the US Census Bureau, the average savings of a fifty year old is under fifty thousand dollars! Why is this? We believe most American’s have not heard a good explanation about how interest compounds small amounts of regular savings into a big amount over time.
If your current annual budget is seventy five thousand dollars ($75,000.00), at today’s interest rates of two percent (2%), that means you would need $3.75 MILLION in savings at retirement to live on interest alone. Now interest rates are unlikely to stay that low (average annual interest is right around seven percent over the last fifty years or so), but even at a seven percent (7%) interest rate, you would still need just over $1 million dollars in savings. Just thinking about saving that much money can feel overwhelming.
It doesn’t have to be that way. If you begin saving ten dollars ($10.00) per day at age 25, you conservatively invest that money and earn an average of seven percent (7%) per year you will have $1.12 million in the bank when you retire at age 70. It really is that simple and within the reach of anyone with a middle-class salary.
If you’re married and you and your spouse each put away $10 per day, that number doubles to $2.24 million. What happens if you are a late starter, and don’t start saving until you hit thirty? As long as you fund your IRA to the maximum (currently at a rate of $5,500 per year) you would still end up with $1.17 million. And if you’re funding your IRA, those savings are tax deductible.
Spend a couple minutes today and automate your savings to fund your future. Now you have a plan to retire comfortably.