You need to set up an IRA!
I wrote in a previous article about what an IRA is. Today, I want you to read this article and have one thought:
You need to set up an IRA, and you need to consistently fund it until your retirement years.
Most people don’t start thinking about retirement until it’s too late to save much money. Imagine being able to quit your job and volunteer, fish, or spend all winter skiing rather than spending all of your time at work! Like many areas of life, the best way to fund these dreams is slowly over time.
For most people, the $6,000 you can put into an IRA every year is a hefty sum. Asking someone in their 20s or 30s to fork over that amount at once every year is definitely daunting, so instead, you should build a monthly contribution into your budget. This lets you smooth out the contribution amount by breaking it into smaller chunks, and gives you the incredible power of dollar cost averaging. To illustrate the concept, we made a table to show you what happens when you build retirement savings into your budget.
If you open an IRA, put the monthly contributions on auto-pilot, and expect below-average returns (because we’re trying to be conservative), you will end up with the numbers above after 10, 20, and 30 years. By saving less than a dollar a day, you will have around $30,000 in 30 years. Just one of these:
If you max out with $500 a month, you’ll have $600,000 dollars per IRA as you reach the age most people look to retire. Another way to look at this is that by spending $180,000, your money will make you $432,000 over 30 years. Would you spend money to make that much back? We would too. The results look something like this:
There will come a day when you need options. Maybe you want to retire completely and spend time with your family. Maybe your health issues keep you from working any more. Maybe, just maybe, there’s a passion project that you want to chase. Putting money away now will give you options in the future, and the more you save, the more choices you’ll have.
If you would like help opening an IRA (or other investments), building a portfolio, and rebalancing it according to your needs, we’re happy to help. If you want to do it yourself, or use another firm, that’s fine too. Frankly, we’re much more interested in people being prepared for the future than anything else. Please, please, please, take the time to start saving now. You’ll be glad you did.