It’s Never Too Late. Its Never Too Late Imagine getting out of high school and being faced with the grim responsibility of having to get a job. If youre one of the fortunate, you have the option to continue your education and postpone the reality of growing up. Now lets assume youve found that so-called dream job, paying your dues with hard work and late nights, not to mention weekends and holidays. After twenty to thirty years youre up for retirement and it sounds inviting.
Now most employers offer a retirement package that allows you to stop working and still bring home seventy percent of your current income. As stated, Five Steps to a Great Retirement (Money Magazine 1999), No matter how far you are from retirement, you know that the alternative to work is no longer napping on the verandah. Back in the days when it was, financial advisers routinely said you could retire comfortably on seventy percent your working income – figuring you were thirty percent dead. So how much money will you need when you retire? In the following pages there is some helpful information you will need to make the Golden Years truly golden. Education is the single most important tool in planing for your future, the earlier the better.
This is a validity supported by the facts stated in the article Saving is Fundamental (Black Enterprise 1999). As part of its 1999 Time to Save Education campaign, Merrill Lynch polled 500 boys and girls, ages twelve to seventeen, about how they obtain, save and invest their money. The survey found that seventy percent of them currently have savings accounts (up from sixty five in 1998) and eleven percent own stock (vs. seven percent last year). Nearly one third of the teens consulted parents or relatives for guidance.
Fifty six percent (vs. forty four in 1998) of the students had taken a class on saving or investing. The article also points out, Despite the fact that teens who take such classes are more likely to manage their money wisely, the number of states offering personal finance, dwindled from fourteen in 1989 to only seven last year.(See Diagram) 9 .(See ram) It is essential that children take these classes. Sixty percent of high school students have access to these personal finance programs but a meager twenty-one percent have signed up. Even though some schools offer these personal finance type classes, if you were to compare the kids who havent taken the classes to those who have, you would discover that they have the information needed, yet their spending habits, are very similar.
Considering that nearly thirty percent rely on credit card budgets, this could pose a problem. Considering that most of the card holders carry a debt from month to month. 9 As a direct result, Arthur Levitt, Chairman of the Securities and Exchange Commission, is sending regulators into classrooms nationwide to Get students and young adults excited about saving for tomorrow. Some find it hard to believe that one lecture from a expert will have any impact on the kids today. The kids want to learn but who is going to teach them? Hence, this is where parents must education their children.
What better way to teach your children then by example. We all know that kids learn more by doing rather than listening. Fortunately, there are some basic fundamentals you can teach your kids. In Kids and Money (Money Magazine 1999), by following these guidelines you can instill the skills so many Americans lack today. (1) Set a regular payday.
An allowance should come the same day every week to help kids budget. (2) A chance to earn more. Other than everyday chores to earn some extra money. (3) Set up a bank account. Many banks still have low minimum-balance passbooks accounts which allows your kids to see the interest grow.
(4) Room to stumble. Kids need to learn that money is finite. That is why, when they blow their budget, and they will, you need to be strong enough not to bail them out. In the article named Five steps to a Great Retirement by Lisa Really Cullen, Beverly Goodman, and Henry Weil (Money Magazine 1999). There is helpful information from getting started to withdrawing wisely. Let us take an overview of the suggested five steps involved in planning your retirement. Step one is to see where you stand.
To figure out where youre going you need to know where you are. Its not always easy to keep track of your retirement stake, even if you collect account statements like your kids hoard Poke`mon cards. It makes sense to add up your retirement assets once a year, no more, no less. The markets are volatile and your totals can jump from week to week. But obsessing over every blip in the market could drive you nuts.
All that you need to know is that your on course. The article goes on to explain, First, round up the accounts clearly labeled for use in retirement namely, your4O1 or other employer sponsored options: Individual Retirement Accounts and any accounts for self-employed individuals, add the stocks, bonds and mutual funds in accounts that arent tax protected but that youve earmarked for retirement. Furthermore the reading states, Despite all the scary talk about the system going bankrupt, youll probably get money from Social Security and perhaps from a traditional defined benefit pension provided by your employer. To get an estimate of how much your pension will be worth, ask your benefice office if you havent received a mailing detailing your projected Social Security benefit, request a copy of your personal earnings and benefits estimate from 1(800)772-1213 or on the Internet at www.ssa.gov. Finally, youll probably heard that fewer retirees are actually retiring these days according to the Bureau of Labor Statistics more than half of men age sixty two still work last year. Step two: Set The Right Goal.
Today the Bureau of Labor Statistics says that the more money you live on while youre employed, the more youre likely to spend when you retire. Once your free from the office, youre likely to spend more than ever on entertainment, hobbies and travel. Obviously, no single formula for planning a retirement budget works for everyone. Financial advisors report that nearly all retirees need to revise their budgets twelve months after the quit work what they had anticipated. Your best bet in planning is to start by figuring that youll need today.
Lets say you want your money to last for twenty years, which is the average life expectancy at Sixty five. If you keep earning an after tax return of seven percent on your portfolio while youre tapping it you can spend about nine percent of your initial stake every year. Step Three: Shape your strategy, the article goes on to say. You know where you are and where youre trying to go. Now all you need to do is figure out is how to get there, for road maps, look no further than the Internet.
Thanks to some new, easy to use online tools, the task of devising a retirement strategy has become much easier. If getting online ranks just under retirement planning on your list of things to do before the Next Millennium, sweat not– real, live financial planners offer similar services, as do brokers and many fund companies. One strategy used by many financial professionals use to help the average person for deciding where to put your money to obtain the full earning potential is to use the Rule of Seventy Two. This rule states that you take the average return percentage of your investment and divide that number into seventy two. This will give you the amount of years it will take for your money to double.
For example if the return of a $10,000 investment is at six percent, take that number and divide it into seventy two, you would end up with twelve. This means that every twelve years the investment will double to $20,000. At this rate, the initial investment will reach $80,000. Sounds good doesnt, not if you compare it to the return at twelve percent. Which will mean that the investment will double every six years.
Where the return after thirty six years is $640,000 on the initial $10,000 investment. (See Diagram Below) Rule of 72 72 DIVIDED BY THE INVESTMENT DOUBLING PERIOD = INVESTMENT DOUBLING PERIOD $10,000 ONE TIME INVESTMENT DOUBLING PERIOD YEARS DOUBLING PERIOD YEARS 6% RETURN 12% RETURN YR 0 $10,000 YR 0 $ 10,000 YR 12 $ 20,000 YR 6 $ 20,000 YR 24 $ 40,000 YR 12 $ 40,000 YR 36 $ 80,000 YR 18 $ 80,000 YR 24 $ 160,000 YR 30 $ 320,000 YR 36 $ 640,000 DIFFERENCE: $560,000 The article goes on to state that you must make your money work for you. When it comes to investing your retirement stash, youve often heard about the critical importance of asset allocation, the task of spreading your money among several different types of investments to increase your returns and reduce your risks. Only stocks can give you the growth you need to stay ahead of inflation and taxes. And while stocks are subject to wild swings, most retirement investors have the time to ride out market downturns and reap the long-term rewards that equities promise.
The article goes on to say that the last step is to spend your money wisely. When possible use cash instead of credit. This will allow you to use your money to accumilate interest rather than the credit card companies. To finalize what I have written, retirement is something that is a must! When we reach age 65 we must have enough money to live comfortably on. If we dont, we will end up in financial destitution.
Parents need to begin to take control of their spending patterns so that their kids will begin to learn the basic fundamentals of saving money. Once children begin to save their money as they earn, they will create a pattern in their mind that will continue on for the rest of their lives. When these children have children they will instill in their minds the same philosophy, save money for retirement! One of the most interesting quotes to substantiate this claim comes form the book The Richest Man in Babylon. It says proper preparation is the key to our success. Another quote from this great novel says a mans wealth is not in the purse he carries. A fat purse quickly empties if there is no golden stream to refill it.
People who work today and do not make it a point to save for tomorrow are digging their own financial grave. Suppose a family makes a great deal of money and have a high consumption lifestyle and no savings, the husband loses his job and now the familys income is cut in half. Because the family hasnt saved any money, they.