Why Having Retirement Plan Is Really Fucking Important. Make deposits now for your future self.

What’s a Retirement Plan?

Your basic retirement plan is an account (or multiple accounts) you put money in for future-you (or your family) to enjoy.

Whether it’s a Traditional IRA, Roth IRA, SEP IRA, 401(k), 403(b), or even a hunk of cash under your mattress (jk, don’t do that), your retirement plan consists of strategically saving money, in investments, to cover your ass when you need it most. It’s an act of self-care.

Why Should You Care About Saving for Retirement?

If the thought of not having enough money in retirement doesn’t scare you, it should. (We hope you know enough about us by now to know that we are not fear mongers, so for us to be saying you should be scared well, lol, yeah.)

Saving for retirement is so important. I know it seems like it’s far away, but that’s why it’s even scarier. There are so many unknowns.

Shit can happen over the next several decades that you cannot possibly anticipate at this moment. Which means you may need to dip into your retirement savings. This is why it’s important to save as much as possible for as long as possible.

Compound Interest is the G.O.A.T. of Saving for Retirement

This post is not all doom and gloom and fear, no, we’re about to introduce you to our savior: Compound Interest.

What? The 8th wonder of the world? Yeah, buddy. Compound interest essentially turns money into money, and then turns that money into money, etc. You can start with a little bit and it grows and grows and grows.

It’s honestly almost impossible to even save enough money for retirement without compound interest. It’s needed. This is why you have to make sure that you’re not only saving, but your savings are invested and earning compound interest.

Example of Why You Shouldn’t Wait to Save for Retirement

Back to the doom – now that you know compound interest is a thing, you need to know that each day that you don’t save, you’re costing yourself. Let’s say the following situation exists:

• Age: 25
• Retirement Age: 65
• Current Salary: $40,000/year
• Annual Savings: 10%
• Inflation: 3%
• Return: 7%

If you wait one year to start saving and start at 26, your savings at age 65 drop by about $82,000.

You lose more than two years of your current salary by waiting one year to save $4,000!*

*Of course, this assumes you save 10% every year and your salary increases by 3% each year.

We know, we know – you think that down the road when you’re more established you will be able to save and it’ll be fine. We promise that’s a bad idea.

In order to meet the amount of funds that you will need in retirement to avoid living in a car and eating cat food, you have to put away a certain percentage of your current salary.

Each year that you wait, that percentage will increase to make up for lost time. Eventually the percentage gets so high that it’s impossible to even live a normal life after you’ve set aside your retirement savings.

Let’s fast forward to a more-established you. Yes, you will be making more money, but:

• You will also have a more refined taste (a.k.a. you will be spending more)
• You may have a mortgage and maybe some kids (read: expensive AF)
• Your own student loans will most likely still be around (they don’t ever really go away, do they? No seriously…do they?!)

Now you’ll be trying to catch-up on years of missed savings while spending more money everywhere else.

In this scenario, instead of comfortably putting away 10%, you will have to put away 15% or even 20%+ of your salary to make up for lost time…and you might never be able to really catch up. Womp womp.

By starting your savings earlier, you can save a smaller percentage of your income each year and still meet your goal, all while living comfortably.

Just do it. Even if you feel like you can’t save anything right now, it doesn’t need to be a lot, it just needs to be something. Even $10/month is better than nothing. Don’t miss out on that compound interest.

So, How Can You Start Saving for Retirement and Earning Compound Interest?

The sooner you start, the less you’ll have to save thanks to the GOAT.

If you’re ready to get started:

1. Open a retirement account
2. Put money into your retirement account
3. Buy investments within your retirement account
4. Repeat

To figure out how much you should be contributing to hit your savings goal, use this retirement calculator. Even if you feel like you can’t save as much as the calculator is suggesting you should, it’s okay – save whatever you can.

Making and executing the decision to support and love your future self is powerful.

Questions?

Please reach out, we’d love to help!

This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. Countless assumes no liability for actions taken in reliance upon the information contained herein.