## Saving for Retirement

Let’s face it, saving for retirement is hard.  You just graduated from college, landed that first job, and now have a mountain of debt staring you in the face.  But given all that adversity, the first day on the first job is the best time to start saving for retirement.

#### Nothing But Time

If I learned one thing in math class, it’s the power of compounding.  And it’s biggest ally is time – the one thing you have before retirement.  Let’s just do some simple math using the Rule of 72.  Let’s assume you can make 4% on an investment.  It will take roughly 18 years to double your money.  Now let’s assume that you put \$1,000 into the S&P 500 right after you get that first big job at 22.  We’ll use 9% as the S&P 500 rate of return, even though it’s actually a little higher historically.  That means your money will double every 8 years.  So at 30, you’d have \$2,000.  At 38, \$4,000 and so on.  By the time you retire at 54, you’ve had 32 years of compounding and 4 doublings of your initial investment.  Now your initial \$1,000 is worth \$16,000!!!  Now let’s assume you don’t start saving until you’re 30, your \$16,000 just turned into \$8,000.   Just half of what you’d get if you started just 8 years earlier.  And if you start at 38… Yikes – only \$4,000 in the bank by your mid 50’s.  And remember, the initial investment of \$1,000 is the same in all these scenarios, only the time to compound is different.

Your company probably has a savings plan like a 401k.  The best tip I can offer is to start as soon as you can.  At a minimum, start with the highest amount that the company will match – 3%, 6% whatever.  Trust me, once you get over the initial pain, you won’t miss it but you will notice it every quarter when you look at your retirement account.

#### But I’m Broke!

If you’re reading this post, you’re not that broke.  You probably have debt – Car, home, student loans, kids, etc.  And you may not have much in the bank.  What saving for retirement really takes is discipline.  Get a new cell phone every year?  Say no and put that extra \$700 towards retirement.  \$120 per month cable bill?  Nope, there’s another \$1,440.  Starbucks every day?  No thanks – \$1,300.  Lunch out every day?  Another \$1,700.  It all adds up.