By Don Milne
Financial Literacy Manager, Zions Bank
Surveys show that it is not uncommon for a couple to spend $100 or more on flowers, candy, gifts, and dinner. Money spent to celebrate with your Valentine should not result in buyer’s remorse, but if you can afford to shell out $100, you should seriously plan for the Happily Ever After part.
Unfortunately, too many households are working on a Broke Ever After plan. USA Today reported last October that the average middle class family has only set aside $20,000 for retirement.
Since many 65 year olds can count on living another 20 years or more, it is clearly not enough Happily Ever After money.
When it comes to saving for retirement, young love is rich love. This is because the earlier you start investing, the longer you have for your investment to grow. If you wait to start when you are older, you will see much smaller retirement funds.
Let’s see how this works. Let’s say you decide to invest the cost of an average Valentine’s Day celebration of $100 each month and are able to earn an average of 8% return each year (a common rate estimate used by financial advisors, though no rate is guaranteed). What would you have at age 70? Start at age 55 and your Happily Ever After fund is around $35,000. Start at 45 and it is $95,000. Start at 35 and it is about $230,000.
And start at age 25 and it is more than $525,000. That can buy a lot of flowers and candy.
If you have a fairy godmother, now is the time to ask her to make you 25 years old. For the rest of us, we can’t change the past, but we can start now and we can encourage our children to start their retirement savings when they are in their early twenties.
If your employer offers a retirement savings plan such as a 401(k), you need to find a way to contribute, especially if there is an employer match.
If your job does not come with a retirement savings plan, you can still set up an IRA investment account. Consult your financial advisor for more information. You should be able to set something up so your $100 monthly contribution (or more if possible) is automatically transferred from your checking account to your IRA.
Have a happy Valentine’s Day this year, and a super happy Valentine’s Day when you have $500,000 saved up for retirement.