The last two weeks have been fun looking at ways to overcome those financial myths taught to us by our parents and grandparents.
In the first week, Myth # 1
, we learned money really does grow on trees, and we don’t always get what we pay for. Shopping generic is just one way to make your money go further. Have you done your blind taste test yet?
In the second week, Myth # 2
, we talked about how carrying a balance on your credit card isn’t the only thing involved in improving the strength of your credit. It’s equally important to live within our means and pay our debt on time.
This week, our final week, let’s talk retirement.
Myth # 3 – “I’m young – I really don’t need to start saving for retirement.” And, “I’m old – it’s too late for me to start saving for retirement.”
“The question isn’t at what age I retire, it’s at what income.” George Foreman.
No age is too young or too old to start saving for retirement. However, it’s important to understand, the younger you are when you start saving for retirement, the better! It just makes sense. If you save longer, you’ll have more money when you retire.
As a mother of four and a career banker, it’s always been important to me for my children to understand how to save and why. Long before they ever started college, my husband and I started talking to them about the importance of starting to save for retirement as early as they could and to increase their savings as often as they could. “Do the math!” we tell them.
When you do the math, it just makes … “cents” … and lots of it! Here’s the example they grew up with:
If you start saving $5,000 a year, at the age of 21, and your rate of return is 5 percent annually, by the time you’re 65 you will have been able to save $798,392.42. WOW! That’s a lot of money!
However, if you save that same $5,000 a year with a rate of return of 5 percent annually, but you don’t start saving until you’re 40, by the time you’re 65 you will have saved $248,131.13.
The difference … $550,261.29! So, save early and save often!
Let’s face it, retirement can be expensive. Yet, according to the U.S. Department of Labor, fewer than half of Americans have calculated how much they will need to save for retirement. In 2012, 30 percent of private industry workers with access to a 401(K) plan chose not to participate.
What can you do to get started saving today?
- Even if you have to start small, just start! Pay yourself first and as your income grows, make sure you increase the amount you are saving.
- Know your retirement needs. To maintain your standard of living when you stop working, experts say you will need 70 – 90 percent of your pre-retirement income. Don’t be caught off guard by not understanding early your retirement needs.
- Contribute as much as you can to your employer’s retirement savings plan, if they have one. This is important especially if they match any portion of your contribution. Why not take advantage of the free money? Also, the automatic deductions from your payroll make paying yourself first easy and convenient. If you’re not familiar with your employer’s retirement savings plans, contact your Human Resources Department. They will be able to answer your questions.
- Make sure you know your Social Security benefits. You may contact them directly with your questions either through their website* or by phone at (800) 772-1213.
- Ask questions! It’s important to have a trusted and experienced professional to ask questions and to develop and review your retirement plan. Arvest Asset Management Client Advisors can answer your questions and help you create a reliable retirement plan. Give them a call at (877) 278-3781.
Being financially prepared for retirement doesn’t just happen. No matter your age, it takes making saving a priority, planning and commitment. Pay yourself first and you’ll be able to look forward to your retirement years. You’re never too young or too old to get started saving for retirement. Just get started!
I hope you’ve enjoyed uncovering the truths behind some of those financial myths. Maybe the next time you come across a financial myth you’ll take another look at it and contact an Arvest associate to start your path toward improving your financial strength!
Remember, money does grow on trees!
Links marked with * go to a third-party site not operated or endorsed by Arvest Bank, an FDIC-insured institution.