Anything for our children
Having two young children I have fallen into a trap that I used to think was impossible for a Certified Financial Planner® to get caught up in. I don’t necessarily spend to much on them, but I am more willing to spend on them without weighing the costs vs the value the way I do most purchases. There aren’t a ton of Chopra lineage playing in the MLB, but that doesn’t stop me from spending hundreds of dollars on lessons for my son, AJ, to get better at fielding, throwing and hitting. He is 7 years old by the way.
This can snowball, and often times, with good intentions, parents forgo saving for their future. This is just one reason people get a late start on retirement, perhaps you had bad luck in your career, or had poor financial role models growing up. Of course, bad personal finance habits or a lack of knowledge about money management are also big factors in getting a late start, or thinking saving is impossible. It isn’t, impossible, and here is what to do if you get a late start.
The best time to start saving money is 10 years ago, but the second-best time, is today! Don’t despair or give up if you find yourself in this position, you aren’t alone. Only 56% of workers across both private and government sectors participate in a workplace retirement plan.
Getting started later does have some advantages that you need to be sure to capitalize on for success. Many times, you are in your peak earning years or just entering them, and the children are often times older and potentially out of the house, or soon to be. This will directly result in having more money to funnel aggressively towards savings. If you have paid off your mortgage already, there is now even more money to redeploy towards the end goal of retirement.
Starting late means more risk, right?
Planning and helping people build wealth is my career, and I love it, so it also makes me very biased. Find a professional to help you. Don’t fall in to the top google article trap of thinking because you have started late you need to gamble all of your money in high risk, high leverage investments. The same principals I preach to a 25-year-old are even more important for a 45-year-old. Savings rate will ALWAYS matter more than investment returns. Everyone focuses so hard on trading stocks, or how to increase your investment return rather than focusing on ways to make more money, and save more money. The below chart gives you a better visual of what I mean. Even if you double up your investment return % you are still better off just saving more.
Hit the ground running
Most retirement plans, whether through your employer like a 401K or through your own IRA offer some sort of a catch-up provision after the age of 50. For 401Ks this year you can contribute an extra $6,500 and an extra $1,000 in an IRA. Utilize what is given to you to push towards success, but don’t think that it’s impossible.
Many people find themselves in a position where they feel like they are starting late, and they will never get to their goal. Not the case, all it takes is a plan, and not thinking your 7 year old might one day pitch for the Yankees.
So how does this impact all of you?
- Starting late isn’t the end of the world.
- Take advantage of catch up provisions available in retirement plans.
- Stay the course, and make sure you have a course to stay on. Make a plan.
Stock market calendar this week:
Wednesday March 31st:
ADP Employment Report @ 8:15AM
Thursday April 1st:
Initial and continuing Jobless Claims @ 8:30AM
Friday April 2nd:
Non-Farm Payrolls and Unemployment Rate @ 8:30AM
Most anticipated earnings for this week