A Spooky Statistic

As we inch ever closer to another Halloween evening there is a spooky statistic that I recently read about.  Business Insider recently published an article that today’s college graduate can expect to retire at age 75.  Yes, age 75, which was coincidentally the average life span of an American just 24 years ago.

Why age 75?

High student debt, rising rents, and social security viability are just a few of the reasons.

The average student loan debt sits just above $35,000.  As someone who graduated a mere 3.5 years ago who had just over $30,000, I can attest that a large portion of one’s income goes to paying down that debt.  And when you use the majority of your income to pay down debt what does that do?  Prevents one from saving for retirement.  Prevents one from saving to buy a house, thus subjecting oneself to the ever-increasing rents throughout the country.

By the time today’s graduating seniors look to retire, life expectancy could very easily be well into the 90’s.  Fifteen or so years of retirement might seem like a plausible plan for many.  There are ways to ensure that you don’t have to wait until 75 for retirement though.  It starts with budgeting, followed by saving and paying down debt.  Finally, it is followed up with living within your means and not succumbing to societal pressures to purchase all of the nice things.

Don’t be a part of the spooky statistic.

Budget Smart, Invest Wise

How Much Should I Save?

The short answer?  As much as you can afford.

Various articles will try to tell you what you need to save for retirement based on your age.  The conclusion of each chart though?  The earlier you can start off saving, the better.

Forbes has the following chart:

What this chart tells us is that the earlier you start saving, the less percentage of your income will be required to save in order to have a healthy retirement.  For someone who is 25 years old, saving roughly 15% of one’s income all the way up to retirement will produce the same level of retirement living as someone who starts saving when they are 40, but has to save 43% of his or her income.  In a nutshell, the earlier you start saving, the better.

Do I practice what I preach?  ABSOLUTELY!

I save 15% of my pretax income towards my retirement.  I don’t stop there.  I also save an additional 40% of my after tax income towards my future.  This includes a company sponsored 401k, a Roth IRA, and a taxable brokerage account.  I am still able to enjoy the money I make now through entertainment, going out to eat and travelling, but I have placed a high emphasis on making sure I have an excellent post-work life.

Don’t feel like you have to save every extra penny.  Find ways where you can maximize your savings and have a wonderful quality of life.

Make sure you are taking advantage of a company 401k plan if you have the opportunity.

Open a Roth IRA if you haven’t already.  I’m serious about this one!!!

Save first, spend later.

Budget Smart, Invest Wise

 

Video: How Even the Rich Go Broke

How can you have $400 million to your name and go broke?  I don’t know, ask Mike Tyson.  Star athletes going broke is not something new.  It has been happening ever since their paychecks began growing to astronomical amounts.  Although many of us will never have anywhere near the money that these individuals did, there is still a good lesson to learn from their mistakes.

They spent too much on things they didn’t need.  They didn’t budget.

They had bad investment advice.  Not one of them called Vanguard or Fidelity and asked a Financial Advisor what they should do with their money.

As the new DirectTV commercials go: “Don’t be like this Peyton Manning”.  “Don’t be like this Rob Lowe”.

Don’t be like these athletes.

Budget Smart, Invest Wise