Tuesday, November 15, 2011


Today’s tip is one that I imagine many of you will laugh at or blow off. It’s about why to save for your own retirement.

The point is that if you start saving for your retirement when you are young—in your 20s—you will have much more money in your Golden Years fund when you reach retirement age.

Here’s an article to read: http://www.kiplinger.com/features/archives/retirement-savings-tips-for-new-grads.html

A quote from the article can give you a sense of why: “To illustrate, imagine that you invest $2,000 a year for 20 years and it earns an average of 8% per year. Over 20 years, you would have invested $40,000, but due to the magic of compounding, your pot of money would actually be worth close to $100,000.” (To make this more understandable: $2000 per year is $166.67 per month.) In other words: even if the next 20 years are worse than average in terms of how well the stock market and other financial products are doing, you can expect to at least double your money—if you start young.

Age 67 may seem a long way off for someone who’s 20-some-odd years right now. It sure did to me when I was in my 20s. I guarantee that perception will change as you get older—your 20s will seem like “almost yesterday” fairly soon.

If you don’t have a job as soon as you graduate (and an employer-sponsored retirement plan to which you can contribute), get yourself to a reputable bank and start asking for advice. Shop around a bit and compare. Ask relatives. Go online and do some searching. And plunk a few dollars into retirement each month, even if it’s not much. Yes, I know—there are school loans to pay off, cell phone contracts to feed, and so on.

But the handwriting is pretty much on the wall that if something does not change radically, Social Security as we know it today will not give you even the poverty wages it doles out today to retirees trying to live only on that source.

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