Do you know of someone that’s just beginning to think about saving for retirement, but they’re already in their 50s? I actually hear about this scenario quite a lot.
I’m currently in my late 20s and I don’t know too many people my age that are talking about their retirement plans. They are beginning to make some pretty good money, but have no intentions of putting any of it into a retirement fund. After all, they have plenty of time, right?
While they may have over 40 years before they retire, they are forgetting the one essential element in retirement savings: compound interest. Money doesn’t grow too quickly, but when you consistently earn interest over 40 years, your small contributions can turn into one huge lump sum!
If, however, you wait to contribute until later, the money no longer has the proper time that it needs to grow into that huge amount! It’s best not to have young ignorance.
Financial Help For Your Children
There are a couple of other scenarios that inhibit retirement contributions for parents as well.
(1) Parents feel like it’s their responsibility to pay for their childrens’ college tuition. In order to achieve this, they really skimp on their retirement accounts until much later in life.
(2) With the sub-par economy, the recent grad is having trouble finding a job. So, back into mom and dad’s house…. Rather than throwing a bunch of money into the retirement accounts, mom and dad are now providing their young adult’s food and clothing.
Both of these scenarios happen all the time! Parents believe that it’s their responsibility to take care of their children until they are 23ish years old! This sounds very caring, but if the proper funding is not going toward retirement, guess what? …Your children will be paying for your care when you are older, which can be a tremendous burden. Do not leave this responsibility for you kids.
So How Do You Load Up Your Retirement Account Fast?
Just like any budget, you must look at both the income and the expenses of your household. If you increase your income and decrease your expenses, you’ll have tons of money to throw into that retirement ‘jar’.
This can be tough in your 50s and 60s. If you have a job, you most likely aren’t climbing the corporate ladder anymore, and you might even feel pressure from your boss to retire. So, in this environment, how could you possibly earn more income?
I don’t suggest that you go out and deliver pizzas or mow lawns next door (unless your situation is dire). Rather, you should consider your hobbies. Working at your hobby won’t really seem like work at all, and if you can get paid to do it, you just discovered your extra income! This could be as simple as making crafts, building model airplanes, painting, sculpting pots, buying and selling gold coins, or maybe you’re awesome at playing the piano. All of these hobbies can be turned into money-making ventures.
Decrease Your Expenses
If your retirement savings is quite low, you may just have to face the facts and come to the realization that you’re never going to buy that 60′ yacht of your dreams. It’s just not going to happen. Rather than having your pie-in-the-sky fantasies, maybe it’s time to downsize the house and put the equity into a safe, interest bearing fund.
Also, you may need to change your lifestyle a little. Instead of going to that $50-a-plate restaurant, you might want to pack a picnic basket with sandwiches and head to the beach! Hopefully, you’ll learn that your happiness is not dependant on an expensive meal. It’s all about the company you’re with and the memories you create.
Do you know of anyone that may need to alter their lifestyle in order to retire on more than a few cans of SPAM a week? What do you suggest they do?
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.