Have you started retirement planning yet?

Here’s a short speech I did on retirement planning. Hopefully I’m able to convince more of you to start saving early!

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Would you be working if you have enough money to retire? Wouldn?? it be nice to be having your morning cup of coffee on the beach instead of inside your cubicle? What can we do to retire comfortably? For most of us, early retirement seemed fairly far fetched. Look at me, I?? 27 years old, and if I retire even at 60, that is 33 years away.

Some of you must be thinking at this point that I?? a little nuts. I can just see this little cloud over your head that says ??his guy is 27 years old and talking about retirement? You have got to be kidding me!?? Well, let me just tell you that it?? never too early to start! Let me give you an example. Let?? say Person A invests $5000 a year when she was 35 until she was 45, then not a penny more. Assuming that she earns 11% every year, she will have $364 thousand dollars by the time she is 65. Not bad right? But consider this, Person B invests $5000 a year when she was 25 years old until she was 35. Assuming her money compounds the same 11% a year, she would have $787 thousand dollars by the time she is 65. More than twice as much money even though they both put in $50 thousand dollars. Are you still thinking that I think about retirement too early? Let me just say I won?? be paying for your coffee when I see you at starbucks in the future.

But what if you are 45 and you haven?? saved anything for retirement yet? There?? another saying that goes It is never too late to start! Let me tell you a good place to begin, your company?? 401k plan. Most employers match your contributions in this type of plan up to a certain limit. For example, my company will match half of my contributions up to a maximum of 6% of my salary. So say I make $50 thousand dollars a year and I put $3000 into my plan, my company will pay $1500 on top of that. That?? free money folks. I bet if someone offered you money with no strings attached, you will take it, but yet not everyone has a 401k plan. This is simply throwing money away! Did you also know that money you put into the 401k are not taxed until you withdraw? That means that the money in your 401k can keep growing tax free until you take it out. Here?? another example. For simplicity, say you make 100k a year and you are in the 35% tax bracket. This means that you are roughly paying 35k in taxes a year. If you contribute 10 thousand into your 401k this year, you only pay taxes on remaining 90k this year, saving you taxes which can be used to compound your interest. The other major benefit is more of a subtle one. Because the contribution is deducted before you receive your paycheck, you are always able to save. This automatic savings guarantees that you put some money aside before you even have a chance to spend it. No checks to write, no monthly reminders, and not to mention no paper cuts on your tongue while sealing the envelope.
For those of us that already started saving for our retirements, how do we know if our money will be enough? A safe measurement is to take your total savings, and assume you will withdraw 4% a year, creating your yearly income. Why 4% you may ask? This is because studies have shown that a “safe” withdrawal rate ranges between 4% to 6%. Research has also shown that withdrawing over 5% a year dramatically reduces the chance that your money will last more than 15 years. Yikes, we don?? want that to happen.
I know saving money for retirement is hard because it means giving up purchasing power you have now, but this is your own future we are talking about here. Is eating out for lunch every day really worth it? You can certainly pack your own lunch. If you do some calculations, saving that money every day might actually turn out to be worth the dream car in 10-20 years if you have it invested. We are living longer and longer, which means we have potentially more years to spend money with after retirement. In order to have enough money saved; do you actually want to work longer? Some scientist said that people might need to work until they are 85 years old by the year 2050 to cope with the extended life expectancy. I sure hope I don?? have to.
Do you have enough money to retire yet? Buy that house by the beach you always wanted? If the answer is no, just remember, it is never too late and everything starts with you. The earlier you save, the easier it is to accumulate wealth. Don?? delay, start saving today!

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