Paycheck Chronicles

Recipe for Success: Save Now For Retirement

Warm apple pie awaits. Your anticipation grows as you race toward the kitchen door —you can almost smell the aroma, but as the door swings open … nothing! Absent the pleasant olfactory assault, you rush to the kitchen only to find an empty pie pan sitting on the counter. Talk about a letdown.  Unfortunately, there are plenty of Americans setting themselves up for a similar experience in the race toward retirement.

I began this series on taking charge of your finances by using a pie-baking recipe analogy. My thought was to explore the ingredients required to secure your financial future. As I mapped it out, the ingredient “save now for retirement” was to be the butter-sugar mix that’s heated and drizzled over the apples—the sweet spot of securing your financial future.

However, after reading the latest findings from the 2016 Employee Benefit Research Institute Retirement Confidence Survey, it’s clear that a lot of folks need to stock up on the right ingredients. The survey reported a whopping 54% of U.S. workers had less than $25,000 in total savings and investments. That’s a whole lot of folks moving toward the front door to retirement with no pie waiting or even the makings of one.

Here are three retirement savings tips to consider as I follow through with the retirement/pie-making analogy.

Start Now

Skinning, coring and cutting up a dozen Granny Smith apples is a chore. In fact, the mere thought of it has caused me to delay the pie making process on more than one occasion. It’s the same with saving for retirement. There’s always a reason to put it off – kids’ activities, existing debt, upcoming purchases, you name it.  Frankly, if you wait until everything is perfect to launch your savings efforts, you’ll never begin. So, get started today. Even a small foothold in the retirement savings game can be exploited with time. What’s that look like? Maybe it’s just a 1% contribution to an employer retirement plan. The first step is the hardest, start now.

A Little Goes A Long Way

Whenever I’m doing presentations and show a chart that demonstrates the power of compound interest, folks are impressed.  Much like a dab of cinnamon in apple pie, a small amount of systematic retirement can be a game changer. Are you in your early 20s and struggling with the idea of investing for a goal four decades off? You don’t have to revamp your entire life to start building your retirement nest egg, just commit a little. At seven percent per year over four decades a mere $50/month will grow to $131,241. And just imagine if over the years you periodically increase that $50 with each pay raise or promotion. Wow. That’s the cinnamon concept, taken to a whole different level.

Let Uncle Sam Help

I like the atta-boys that come with a well-prepared apple pie. But I have to admit, I’ve yet to do it all myself. Whether it’s enlisting my wife to help with the lattice crust or even the apple preparation, a little help makes things a lot easier. Thankfully, when it comes to retirement, Uncle Sam stands ready to help in the form of tax incentives. There are tax credits and deductions for savers, tax deferred growth, and even the potential for tax-free accumulation through Roth savings vehicles. I won’t go into all the details here, but let Uncle Sam lend you a helping hand by utilizing tax advantaged retirement savings vehicles like the Roth IRA, Thrift Savings Plan and for those in the civilian sector, 401(k).

If you’re already well on the way towards a retirement masterpiece, keep up the good work. On the other hand, if there’s not even a whiff of retirement security in the air, get the ball rolling today.

Posts in this series include:

Introduction:  A Recipe For Financial Success 

Part One:  Preparation:  A Key Ingredient in Financial Progress

Part Two:  A Tried and True Money Golden Rule 

Part Three:  Building A Base:  Emergency Funds 

Part Four:   Save Now For Retirement (this post)

Part Five:  No Fighting for Leftovers 

Part Six:  Tying It All Together 

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