VOL. 128 | NO. 16 | Thursday, January 24, 2013
Rays of Wisdom
Dana and Ray Brandon
You Can Still Save for Retirement
By Ray and Dana Brandon
Ray’s Take It may feel as if those gray hairs are multiplying faster than your 401(k). Or maybe your career or other life experience has thrown you curve balls that ate through your savings. Either way, it’s not too late to save for a more comfortable future!
Remember that old lesson about compound interest? Banks may not pay much now, but with the right investments that principal still works to your advantage. Invest $1,000 a month starting now and you could amass more than $450,000 in 20 years, given a 6 percent annual return. That is over $200,000 more than you actually put away. Work with a financial adviser to get the right mix of investments to balance growth and risk to get you where you want to go.
Think you can’t save that much? You might be surprised. Putting more money in your retirement plan can actually cut your tax bill right now, making the same dollars stretch further. If your employer matches any of your 401(k) contributions, that’s “free” money you can save that doesn’t take a penny away from today’s expenses.
If you’re past 50, you can save even more money – and further reduce taxes – with “catch-up” contributions of up to $5,500 on top of the $17,000 (in 2012) federal rules allow you to put away. That’s a good advantage for those who have delayed saving for retirement.
There are also numerous cost-cutting moves you can make: postponing a car purchase, downsizing vacation plans, shopping car and home insurance options, cutting back on cell or cable plans, and many more opportunities. The more you reduce your liabilities now, the greater your savings potential. You have more control over your expenditures than anything else, you just have to decide to do it.
However, you need to be realistic if your retirement savings are quite low and you’re already past 40. That magic age 65 may not be realistic and it’s very inconvenient to be old and broke. Adjust your spending and savings now – and your plans for the future – accordingly.
Dana’s Take I have a solution for parents who have not saved enough for their own retirement: spend less on your children. The kids may be frustrated at first, but you will all be better off.
In Sally Koslow’s book “Slouching Toward Adulthood: Observations from the Not-So-Empty Nest,” the author concludes that adolescence now ends around age 28. That is roughly 10 years later than in my grandparents’ generation.
One big difference between those generations is parental financial support. In the past, kids and teens had jobs. If they went to Europe at 17, it was with the Army, not on a class trip.
As parents, we are stunting the development of our children by doing too much for them. Take care of your own financial independence and your children will follow.
Ray Brandon is a certified financial planner and CEO of Brandon Financial Planning (www.brandonplanning.com). His wife, Dana, has a bachelor’s degree in finance and is a licensed clinical social worker. Contact Ray Brandon at email@example.com.