By Kristi De Rycke, Registered Assistant
Have you ever been getting ready for work and see a commercial of retirees traveling, sipping coffee or gardening? Have you ever watched that and wished you weren't going to work that day? Have you ever thought about what you want to do in retirement? I hope you have! Planning ahead is the best way to make certain that you have the retirement that you desire. It is easy to think that it is so far off, so why even dream about it. Well, that is where you would be wrong. The sooner you plan for it the more likely those dreams come true. (Thanks to compound interest).
Take a moment to reflect on what your ideal retirement would look like:
Do you want to move to a smaller house or condo with less maintenance but remain in the same area?
Do you want to move to a new location?
Do you want to travel? Be specific. What places do you want to see? How often do you plan a trip?
Do you want to buy a boat and fish?
Do you want a new car or motorcycle?
Do you want to retire early?
Do you want to quit your current career and pursue an interesting but possibly lower paying job?
Do you want to volunteer?
Do you want to spend time with grandchildren?
Do you want to pursue new hobbies?
Here is the tricky part. You need to plan this out as early as possible. Compound interest can really work in your favor. Let's say that you want an $80,000 boat. How do you come up with an extra $80,000? You don't have to. The rule of 72 can work in your favor. The rule of 72: take 72 and divide it by the average annual interest rate on an investment. The result is how many years it will take roughly for that investment to double. So let's say that you pinched pennies and set aside $100/week for 2 years or $50/week for 4 years to invest $10,400. Let's say that you then take that money and invest it into a mix of mutual funds or EFTs that average a hypothetical 7%. Take 72/7 = 10.29. So that means that the $10,400 would double to $20,800 in roughly 10 years. Then in 20 years, it would be approximately $41,600. Add 10 more years for a total of 30 years and the money is now at $83,200 without adding another dime to it. Now you have your shiny new boat!
Need help defining your retirement and figuring out how to get there? We can help. We do offer a complimentary program called Money Guide Pro. Fill out this 4 page questionnaire, then call our office to schedule your free customized retirement planning session. We take care of inputting it into the computer. The program then gives the probability of meeting your goals. We can then adjust things to see how to get you on track if you aren't there already. Don't wait! The earlier you do this the more likely you will be able to meet your retirement dreams!
By Greg Johnson
Plan your work and work you plan. Saving for your future is no different than trying to lose weight or accomplish a goal. You have to start with your WHY in Kristi's case it's a boat, and then you need to do the work to accomplish your dreams. Compound interest can be a person's best friend or worst enemy depending on which side of it you are on. I see folks every day who have themselves wrapped up in credit card debt, college loans, or vehicle loans and they can't get started on their own goals. Let your money work for you instead of against you, and you will have a much better shot of living the life you have always wanted. Utilizing a financial planning software like Money Guide Pro can also be extremely helpful in identifying what your priorities are in life. If you are debating between a new car and saving for your kids college education, having a written financial plan will make that decision easier because you have identified what is most important to you. As with dieting or anything else, it still comes back to you having the discipline to follow through on what you say is most important.
The Rule of 72 does not guarantee investment results or functions as a predictors of how your investment will perform. It is simply an approximation of the impact a targeted rate of return would have. Investments are subject to fluctuating returns and there can never be a guarantee that any investment will double in value.