This article is a take-off of a recent article which focused more on the total amount that you might need at retirement to enjoy the things you want to do during retirement.
This time the focus is more on how do you make that happen or more specifically how much each year or month should you be setting aside to get to your desired goal?
I heard a good analogy once on that. Imagine that you needed to drive somewhere 60 miles away and you had one hour to get there. I know that’s hard to do in Hawaii but bear with me.
If you had to get somewhere 60 miles away and you had one hour to get there, you need to drive 60 miles per hour on average to get there on time.
Now lets say that you put off starting for that trip and now started 15 minutes late, you’d have to drive faster than 60 miles per hour on average to get there.
But what if you procrastinated even longer and started 30 minutes late and still had to be there at the same time, you’d have to drive twice as fast.
However, if you knew what your destination was and had planned for it well in advance you could have left much earlier than one hour and had time to stop off for a bite to eat or a shave ice because you allowed yourself ample time for short stops and unplanned events along the way.
The destination is the age you choose to retire and stop getting a paycheck. Yes you could change that, maybe you could push that destination further out and not have to drive as fast, but what if life events happen and you cannot push that date out further due to an illness or an accident or some other life event?
So you can see how much you need to save monthly or annually is largely determined by when you start and what you want the destination to look like.
Those in the younger age range often look at retirement as maybe decades away and they’ll start later but when later comes they find themselves in a position of playing catch up. Some never do catch up. In fact surveys show that a significant number of Americans are significantly under prepared for the money they need in their retirement years.
You can see that the sooner you start and take advantage of tax deferred accounts and the power of compounding those who start early in life and are consistently setting aside will very likely end up in a much better place decades from now.
How soon is too soon? No set number, but what if you have a business and could hire your kids in it to get tax deductions? Now that they have earned income, have you created a Roth IRA for them?
Are you working somewhere and put off joining the company sponsored 401k plan for a variety of reasons? Maybe start small and increase your contributions each time you get a raise.
Are you self-employed or have a side gig? Have you started your own business retirement plan to both get tax deductions and also get started on the travel to your planned destination?
Is your tax preparer or financial advisor not talking to you about hiring your kids in your own business to get tax deductions? A good example of why I encourage having someone who can and will give tax planning advice.
If you’ve decided that it’s time to get started on that financial trip lets set up a call using the link below.
The information in this and other articles is intended to be educational in nature only. Not tax, legal or investment guidance for you specifically. Each person’s situation is unique and you must seek appropriate professional guidance that can address your unique situation.
808-954-6402
matt@vwshi.com