Retirement can be quite a daunting task to plan and think about. Today there are more options than ever to those looking at retirement plan options. You can invest your IRA into real estate, gold, private placements and more with a self directed 401k or IRA. With so many options out there that we can really benefit from why aren't we as American workers taking advantage of retirement saving? Retirement saving isn't something that you should mess around with. Heck there is a retirement crisis in the U.S. where more than half of workers are reporting less than $25,000 in savings while just over 1/3 of workers have less than $1,000 in retirement savings. What are we thinking? Do we really think that having $1,000 in our retirement savings is enough or is retirement just not as important as getting that new gadget? I don't know the answer to that question but I do know that more often then not we have excuses as to why we are not saving for retirement. Here are a few excuses that you must try and avoid as you plan your retirement. W
I have plenty of time to save
If you are in your 30's or even younger you are right that you do have a lot of time but why not start early and contribute a smaller portion of your check until you retire? Your retirement savings will thank you for the early start! The earlier you start the bigger positive affect you can have on your retirement. The earlier you start can exponentially affect your retirement savings.
In order to explain just how much time can affect your retirement let's look at some numbers.
- If you start saving at 20 and save $100 each month until you retire at the average retirement age of 62 you will have $304,370.73 in retirement savings assuming a yearly average return of 7%.
- If you hold off saving until 30 and want to have the same amount as if you would have started at 20 you will need to save roughly $213 each month and you'll have $304,251.55
- If you wait unitl 40 and want to have the same amount as if you would have started at 20 you will need to save roughly $487 each month and you'll have $304,202.43
- If you procrastinate until 50 and want to have the same amount as if you would have started at 20 you will need to save roughly $1,354 each month and you'll have $304,237.01
As you can see the earlier you start the more dramatic affect it can have on your retirement. Start today and save as much as possible. Time is one of the biggest assets you have with retirement saving. The more time the better! One thing that can really help is if you are consistent. If you decide you can fork out $100 a month to your retirement plan then do it. It is best done through an automatic deposit into the retirement plan that way you don't even have to worry about it and you stay consistent. You also don't really even need to think about that money. If you have to deposit yourself each month it becomes harder to stay consistent and there will be some months you will try and justify not doing it that month. Again, start saving today as time is a huge factor to make more out of your retirement.
I Have Too Much Debt To Save Now
It may make sense to address your debt before saving for retirement but typically that isn't the issue. Your spending is more of an issue than the debt. We tend to think about today and forget to think about tomorrow. Yes you may have a lot of debt and like I said you may need to address some of the nasty stuff before actually saving for retirement. What usually happens though is we just over spend. If you go back to some of my earlier advice and start automatically depositing to your retirement account from your checking account you will have less problems spending because you won't have that money to even spend. Again, every situation may be different but sometimes the debt we think we have is just over spending and unless we are neck deep in plenty of credit card bills and other debt issues we should still make saving today a number one priority.
It Makes Sense To Borrow From My 401k
One of the biggest reasons those with a 401k think that borrowing from the 401k is a great option is that the interest that they pay on the loan goes back into the 401k. This may be a decent thought but there are plenty of other issues that come with borrowing from your 401k that make it a VERY risky and honestly not wise option. First, there may be a 10 percent early withdrawal penalty if you're withdrawing before you are 59 and a half years old. This can be an expensive way to borrow and it hurts your retirement funds. Also, if you neglect to pay the loan back it would be considered a distribution, and distributions usually lead to taxes and other penalties.
Getting ready for your retirement is important. There are plenty of things you can do to really jump start your retirement and to make sure it stays on track. Start early and save as much and as consistently as possible. While you are at it make sure that you don't fall into using the excuses that many others use when neglecting their retirement plan. These thoughts and excuses only hurt your retirement and we want the best retirement that we can possibly get.
If you have any questions about retirement and more specifically about IRAs and 401ks and the possibility of self directing those accounts contact us as we are your self directed IRA expert.
Author: Nick Barker