Who wants to be a millionaire?
Lets talk about retirement.
If you are planning on social security to fund your retirement – think again. Not because social security will be bankrupt before you retire. Social security is one of the most popular federal programs and likely needs only small tweaks to be solvent for a very long time. You’ll need to re-think your plan because social security pays on average $30k a year! So while you may not be spending your “golden years” eating cold soup living in a cardboard box, life isnt going to be comfortable on 30K a year! You need a new plan!
What if I told you that if you started saving a reasonable amount at graduation, you could have $1,000,000 when you retire? $1,000,000 in 2058 won’t be all the money in the world – but it will help you live more comfortably. More importantly, it’s not impossible. Lets assume you are 25 years old and about to graduate from veterinary school. As soon as you take your first job you save $503 a month and manage to earn 6% over the next 40 years. By saving a total of just $241,440 ($6,036 a year) of your money you can end up with a million dollars. How is this possible? It’s the wonder of compounding. Look at the chart below – the blue line is what you saved the red line is your savings plus your earnings. See how over 40 years, earning a reasonable 6% return turned $241,000 into a million dollars.
Its tempting when trying to save for a house, pay student loans and live a life to put off saving for retirement – don't do it! Lets look at what you would have to save to end up at one million dollars if you started at different ages.
Age Monthly savings Total amount you contributed
25 $503 $241,440
30 $702 $294,840
35 $996 $358,560
40 $1,443 $432,904
45 $2,164 $519,434
Someone will lend you money to send your kids to college, someone will lend you money to buy a house; no one will lend you money to retire. Unless you are planning to die in your boots, find an affluent spouse or inherit a large sum of money, saving must be your first priority. It’s not impossible to save a million dollars but each year you wait it becomes more and more difficult.
But how long will 1 million dollars last in retirement and how can I earn 6% a year – stay tuned……..