Retirement dream
We expect to be at least as comfortable in retirement as we are mid career. Retirement, after all, is the reward for hard work and stress of job and family. So was it ever an eye opener when I calculated that my clients, with two small children and over $100,000 in existing retirement savings, had to save 25% of their current salaries to retire in 25 years with only 3/4 of the income they have today.
Try the retirement calculator I used with your facts.
If you are not serious about saving for retirement today, resign yourself to less comfort and less security than you have today. It reminds me of a story a fellow lawyer defending a foreclosure case told me: his 70 year old lady client was taking her dogs to the park to practice being homeless! Develop a taste for rice and beans if you somehow think retirement is going to take care of itself. Or resign yourself to living with your children.
There must be an American gene for optimism as we always expect things to improve in the future. We’ll save later, when we’re making more money, when the kids are out of college, when we get the credit cards paid off. It will be awfully late at that point.
By the way, did you arrange to save the reduction in payroll tax withholding that went into effect this month?
For a long while in California and other Sun Belt states, we expected our homes to be a fund for retirement. No longer. Worse, we have a piece of real property for which there may be no market when we want to cash out, presumably to become renters.
Part of today’s income needs to be devoted to make possible the comforts we imagine when we retire.
The easiest way to save is to have the money withheld from your paycheck or automatically transferred from checking to savings. Since I’m self employed, the payroll withholding doesn’t work, so I’ve printed off a sheet of mailing labels with the address of the brokerage house that holds my IRA account. The first check I write each month in 2011 is check to me for retirement, in an amount larger than last year. A stack of envelopes with Forever stamps and I have no excuses.
If excuses or procrastination pop up, I’ll remember the client who needs to save 25% of this year’s income to retire in 25 years.
Image courtesy of Micky
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