How Hard is It to Save a Million for Retirement?
With the recent woes of the American economy and even worse, the tepid returns of the typical blue chip stocks that usually offer a totally reliable return, it’s getting much harder for me to reach my goal of having a million bucks in the bank by the time I retire.
To put some perspective on that statement, I am 35 years old, and I plan on retiring when I’m 65, or perhaps earlier, when I finally hit that million bucks. I’m not even 1/10 of the way there though, and that’s what concerns me, especially since I’ve been saving a lot of the money I make for at least five years now, more than I probably even need to.
Because of the lukewarm returns I’ve gotten on my money thus far, I may not reach that million dollar mark 30 years from now unless we have a big secular bull market again. So what does that mean for those of us with fairly lofty retirement goals?
Well, it means that you basically have to save a lot more since the big interest earnings aren’t there any more – at least for the time being. It used to be that you could easily make an 8-10% return on your money, but now that is all a question that is up in the air, and it’s really hard if not next to impossible to “guarantee” that type of great return on your money.
Hence, the power of compound interest is something that it’s a lot harder to get to work for you. Compound interest is the most powerful asset you have when you’re saving for retirement.
Therefore, you should start saving as early as you can for retirement. Ideally, as soon as you hit the market place of jobs, you should be socking money away in your retirement account, whether it’s a 401k or some other form of retirements fund that is tax sheltered.
Better yet, you should maximize your contributions so that you can maximize both your tax savings and any matches that your employer may be offering to donate to your account.
If you can get both compound interest to work for you by starting to save and invest when you’re in your early twenties AND you can sock away more money yourself and have your employer contribute as well, and of course providing you make good, solid investment choice, you are golden for the future. And another important point is to DIVERSIFY.
This way, you don’t put all your eggs in one basket and risk losing them all to any investment that totally flops, something that has happened to far too many people.
