Here's Something They Didn't Teach Us
In High School
Start when you're 18 years old. Save the 20 bucks a week that you waste. Heck, Social Security easily takes that much from you. And when you're 65 they don't hand you a half million bucks! But look at this:
Invest it at 8%
When you're 65 you have $471,016!
Make that 40 bucks a week and you have $942,032
Make that 20 bucks a week at 9% and you have $651,937
Or make that 40 bucks a week at 9% and you have $1,303,874
Now THAT's retirement money.
Look what happens if you wait until you're 30 to begin:
The 20 bucks a week at 8% only amounts to $117,814
The 20 bucks a week at 9% only amounts to $141,759
The 40 bucks a week at 8% only amounts to $235,629
The 40 bucks a week at 9% only amounts to 283,519
Moral of the story: Time is a powerful weapon in building a nest egg. The best time to plant a tree is 30 years ago. But the second best time is now. Besides time, there are two other weapons. One is your rate of return. Look at the difference between 8 % and 9 %. The other is regular, disciplined investing. You have to keep sending it in.
We sure wish we found this out in high school. A third of Americans have no savings. Another third has $3,000 or less. Don't you think that's a shame when you look at the numbers above.
Now, there is one more thing. The fantastic end results of all the saving that we illustrate above leaves out one thing: Uncle Sam. Every year he'll tap you on the shoulder and ask you for his cut. Well, he doesn't exactly ask. They say you should pay your taxes with a smile. We tried that but he still wants the cash.
Our illustrations above DO NOT factor in the terrible toll taxes would take on the results if they were in taxable accounts. But you can minimize the tax effect by investing the money in a qualified retirement plan, which would allow you to defer the tax consequences until it is drawn down upon retirement. So you must PLEASE set yourself up even a simple IRA. They are very easy to do. And now there is the new ROTH IRA which can be even better. There are also SEP-IRA's, and KEOGHs which are a bit more involved but make more sense for some folks. Of course many can fund plans like 401-K's through their job.
We hope this spurs you to take action. These plans are there for you to use. Get any one of a bunch of magazines that spell it all out for you. Catch it on those financial shows. Contact the big mutual fund companies. Do a bit of work and you'll be glad you did.
Why don't they teach us this in high school? Wouldn't you like a million bucks when you retire? Perhaps some of you are young enough to make it happen. A lot of us find out too late.
An important word on rate of return: Never forget risk. If you're a new investor keep in mind that usually the greater the "interest rate" you get, the greater the risk. Keep in mind your own personal risk tolerance. Your own personality and lifestyle will help you determine appropriate products in which to invest. NEVER FORGET that unless your money is in a federally insured account (FDIC) you can lose it all. And even then there are dollar limits. Not all investments are appropriate for everyone.
You may be better off in a bank account paying very little, but offering great safety. So here you go:
Start at 18
Put in 20 bucks a week at 4%
At 65 you have $138,263
One Final Point
Disclaimer: We're just passing on some friendly observations.
We are not licensed or trained to provide financial advice.
All of this information may be a real bad idea for you. Then just forget it.
We're not suggesting you do anything specific with your money.
We don't sell investments.
We don't sell advice.
We ain't financial planners, or accountants, or lawyers. We're just Flag Guys. So why would you act on anything we say without first checking it out. Read up on this stuff. There are vast amounts of information available on it in magazines, and from mutual fund companies.
In fact we don't even certify that our figures are correct. But run them yourself in Quicken. Even change the assumptions like the interest rate, or the amount you put in each week, or the age at which you begin.
We're passing along some general points about the virtue of regular saving. Heck, this is just the stuff that's been around since Aesop told the story about the grasshopper and the ant.
We hope this will make those of you who do not save aware of what you could start reading up on.
We're showing you what COULD happen with 20 bucks that you otherwise waste every week.