Don’t wait, start Retirement Savings Now !!
It is important to realize that planning for retirement and saving towards a goal is critical if you ever want to be able to achieve financial independence. Some may be thinking that it is too late to begin accumulating retirement savings because they have never been able to save and they are approaching their 40’s or their 50’s. I am here to tell you that it is never too late and every minute you wait is making it harder, but not impossible.
First a little background ….. I like to keep track of my Retirement Savings, Dividends, and all other aspects of my money on a daily basis. Every day I get up at 6 AM and look at what I have, how I did the previous day and find different ways to display my projections for when I think I may be able to retire. This has been part of my daily routine for nearly 7.5 years. I am just about to turn 48 and my record keeping has been going on since my financial awakening in 2010. Before that, I hadn’t done much in the way of saving for retirement. At that time, I was in serious financial shape with very little in a regular savings account, almost nothing saved for retirement, and no plan on how to get there. Everyone knows, time is your ally when it comes to saving and mine was running out, or so I thought.
My mother died at 57 years old and this was something that I thought about when the subject of retirement came up. She never got to enjoy her hard work over the years. She was not in good financial shape when she passed and even if she was still with us, she may still be doing the daily grind out of necessity. In 2010 I started to give this more thought and determined that I wasn’t going to put myself in a bad position for myself or my family. No one knows when your time is up and I wanted to be done with work obligations as soon as possible. I had a good job and the only thing preventing me from realizing the dream of retirement was planning and commitment. I have to admit, I thought it was a bit late for me to start but I was determined to give it a go.
I did not want to wait until 65 or 67 to retire. That makes no sense to me. Why wait until you are too old to enjoy yourself. Is the purpose of life to punish yourself? I have been working since I was 13 years old in some form or another. I am tired of it to be honest. Haven’t I put enough time in to be able to start relaxing a bit more and be able to do activities I enjoy or find interesting? This is the driving force for me when I discuss retirement. When I tell people that I want to be done before 60 years old, they snicker and often tell me that is naive or not attainable. I refuse to believe this. The more someone tells me I can’t do something, the more I want to do it. I think it is my stubbornness that is responsible for this attitude but it pisses me off. Just because you aren’t prepared doesn’t mean I can’t be.
My philosophy is simple: We aren’t put here to be miserable or to never enjoy life’s pleasures. You put your time in working hard and then you are afforded the opportunity to take a break and smell the roses. At least that is what I think should be the case for everyone. I realize I hit the ovarian lottery and was born into a country where we have incredible opportunities and life is good for most. I don’t for a minute forget that. I look at some places around the world and those poor people have no chance for a good life whatsoever. I am extremely lucky and really do appreciate my lot in life.
Now that you understand where I started and where I want to go, I want to share how I have been doing over the last 8 years and to illustrate that while difficult, it is not too late. I started saving in earnest in 2011. I had saved a very small amount previously, but it didn’t amount to much. Look at the chart below to see my contributions starting in 2010.
This chart shows all my retirement contributions (IRAs & 401(k)s along with company match) for me and Mrs. P & P. As you can see, I started out slow in 2010 and then ramped it up every year. Last year was a step back as I lost my job to a lay-off and was out of work for 2 months. We also downsized and incurred some big initial expenses as a result (see Downsizing ). I fully expect things to return to normal this year. Theoretically, between the wife and I, we could be eligible to contribute a lot more. If we looked at what we could do, it would break down as follows:
There is still a lot of money left on the table here that I could be contributing. I am pretty maxed out however as far as ability to keep socking it away. I may be able to cut back on a few things and bump it up a little but I am basically at my maximum contribution level. My wife works part time and it is very unrealistic that she will be able to up her contribution amount. If I had waited a few more years to start saving, I would have had to increase the yearly amount pretty significantly to reach my goal. This is why it is critical to start as soon as possible. Every year you wait has a tremendously negative impact your ability to reach your goal. You lose out on dividends, price appreciation and time in the market. All of which are crucial to saving.
I am not going to sit here and tell you it is easy to put a large money away every year but it is possible with commitment and drive. I started getting serious about this late in life at age 40-41. I also am not completely maxing out my contributions. I am expecting based on my projections to be ready to retire by age 58 or so give or take a year. This is also assuming a pretty good lifestyle with travel and possibly two homes to move back and forth between (one in the Northeast and one in Florida). If I decide to skip the second home, I may be able to achieve this in 7 years at age 55. I am not expecting this but it is possible if I continue on with the pace I set and keep the expenses low. That would be about 15 years of saving to achieve retirement. That is ridiculous when you think about it. I live in a really expensive part of the country and base my projections on this locale but if I moved to the south full time, there no telling how soon I could achieve my goals.
If there is one thing I want you to take from this post is that it is time to start saving NOW. Don’t wait, start small if you have to as I did. As your totals grow and you reinvest and make contributions you will see the yearly amount increase exponentially. The last 5 years savings produces much more in gains than the first 5 years. Once you get past 60% of your target retirement total, expect the steamroll to be in full force and gaining faster than you thought possible.
Getting Started ….
Now that I have shown how quickly anyone can achieve their retirement goals, it is time to take action. These are some tips that have really helped me. I am a big believer in focus and persistence:
- Get Started NOW – don’t wait, just start small and don’t stress about the amount. You have to crawl before you can walk. I guarantee when you see the retirement savings totals start to increase you will get a rush of adrenaline to want to keep going and increase it. For me, it is almost an addiction.
- Don’t listen to Naysayers – There are always people who don’t think you an do it. Don’t listen to them. Be methodical and refuse to accept failure. It will happen if you want it to.
- Track your Progress – Keeping track of my progress may be the single biggest reason I am on my way to Financial Independence. It is extremely helpful to see where you are and how you are doing. I can’t stress this enough.
- Don’t get Discouraged – The market goes up most of the time, but it does go down as well. Remember to stay patient, focus on fundamentals and don’t panic. John Templeton made his money after the big drop in the Great Depression. It is easy to get discouraged when the “noise” is all around you.
- Do Projections Regularly – Projections are a great way to see progress and see where you could be in 5, 10, 15 years. I do this fairly regularly to motivate me to keep going. See my Resources page for a great calculator from T Rowe Price.
Remember it is never too late to begin your retirement savings I am living proof that you can get there. I am getting pretty close and barring a catastrophe, I should get there within 10 years with a lifestyle that I want. No one knows the future but you can prepare as best you can and try to anticipate any situations that arise. You will have unexpected problems but I would rather have resources to help get through it and regroup than suffer a bad scenario with no savings. I will be posting several articles detailing my progress over the next couple of months. I hope it gives you some small measure of motivation to keep going as many other bloggers have done for me. I wish you luck!