Retirement excuses

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By Matt Frankel, Investment Planning 10 Silly Excuses For Not Saving (And why you shouldn’t use them) 1

Transcript of Retirement excuses

Page 1: Retirement excuses

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By Matt Frankel, Investment Planning

10 Silly Excuses For Not Saving

(And why you shouldn’t use them)

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May 3, 2023

1. “I’ll just live on Social Security…”• The average retiree

will need between 70-80% of their pre-retirement income to live comfortably in retirement

• Meanwhile, the average monthly Social Security benefit is just $1,172

Source: 401kcalculator.org via flickr

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• Additionally, keep in mind that the Social Security trust funds are expected to run out of money by 2033.

• Without congressional action, the system will only be able to pay out 77% of the current level of benefits after that time, so that’s all younger Americans should count on.

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2. “I’ll keep working my whole life…”• Not only do you not know

how healthy (or unhealthy) the job market will be when you’re older, but you don’t know if you’ll be physically able to work

• Health issues are the number one reason for unplanned early retirementSource: Flickr user Randen Pederson

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3. “My current expenses are too high…”• If your current

expenses are too high to set any money aside, you need to take another look at your budget.

• Saving for retirement should take priority over any unnecessary or luxury expenses

Source: flickr user Dan Moyle

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4. “I’m young – I don’t need to start yet…”

• This is perhaps the silliest excuse of all.

• Most of your retirement nest egg should come from investment gains, not from the money you save

• The power of compound returns is strongest (by far) while you’re young

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• Consider that if you start saving and investing $5,000 per year when you’re 25, it could grow to more than $2.1 million by the time you turn 65, based on the S&P 500’s historical average returns

• On the other hand, waiting until 35 would produce a nest egg of about $825,000, or more than 60% less – just because you missed out on 10 years of saving time

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5. “I don’t make enough money…”• Even if you don’t earn

much, something is better than nothing.

• Many 401(k) plans let you contribute as little as 1% of your income

• Better yet, you can literally start an IRA with just a few dollars

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• Plus, if your income is below a certain amount, the IRS could actually pay you to save money.

• If your income is below a certain threshold, you could receive a credit (known as the Retirement Savings Contribution Credit) worth up to $1,000 for your contribution to a retirement account.

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May 3, 20236. “I need to save for emergencies and other unexpected expenses…”

• This is actually a (somewhat) valid excuse.

• However, if you choose to save in a Roth IRA, you are free to withdraw your contributions (but not your investment gains) without penalty if you need to.

• So, you could set aside money for emergencies and save for retirement at the same time

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7. “It’s too late to start saving…”• While it’s definitely beneficial

to start when you’re young, it’s never too late.

• The IRS allows for “catch-up” contributions for those who want to aggressively save after age 50

• Those investing in an IRA can save an extra $1,000 ($5,500 is the normal limit)

• In a 401(k), the elective contribution limit of $18,000 is increased to $24,000

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• As an example, if you decide to save $6,500 per year in an IRA starting at age 50 (the maximum including catch-up contributions), you could end up with more than $200,000 when you’re ready to retire.

• This isn’t a million-dollar nest egg, but could make a significant difference in your post-retirement lifestyle.

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8. “I have too much debt…”• While it’s important to pay

down debts, don’t let debts such as student loans, car payments, and credit cards prevent you from saving.

• Instead, focus on lowering the interest on your debts by refinancing at today’s low interest rates and taking advantage of 0% APR introductory credit cards

• Then, use the savings to fund your retirement accounts

www.stockmonkeys.com

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9. “Investing is too complicated…”• Despite what many

people think, investing doesn’t have to be tricky

• 401(k) investing is basically automatic, and many plans offer guidance to participants

• In an IRA, you could invest in index funds to take the guesswork out of investing

Source: flickr user Derek Jensen

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10. “I don’t have a retirement plan at work…”

• If you don’t have a retirement plan at work, an IRA is relatively easy to set up.

• And, you can fund your account automatically.

• Self-employed individuals have even more options to save, including SEP-IRA, SIMPLE IRA, and Solo 401(k) plans.

Flickr user CollegeDegrees360

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• Don’t let excuses prevent you from achieving the retirement of your dreams.

• Even if you can’t save as much as you’d like, a little bit of savings now could make a big difference once you’re ready to retire.

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