We all have that blissful image of retiring on a remote island, spending our days lounging on the beach and sipping piña coladas. But the reality is that retirement is expensive. And it's not just that island that I'm referring to; I'm talking about critical expenses--healthcare (if you're sick, you'll want access to the best healthcare money can buy), children (if you miss your children, you'll travel around the world sparing nothing to see them)--the list goes on and on. In order to live to your personally defined greatest happiness, you need to be on top of your retirement funds.
Enter your new best friend: a Roth IRA. An IRA is simply a financial vehicle that allows you to effectively save for the future.
If you get in the habit of putting $150 per month into a Roth IRA for the next 45+ years, you could retire with hundreds of thousands of dollars (thanks to the amazing effects of compounding interest)! (Note: this does not take into account inflation.) In my role as CEO of LearnVest, a personal finance hub for women, many users have written to me because they feel like they simply can't spare any extra money from their living expenses (rent, food, transportation, etc.) to put away into savings. My advice to users? It's not so much getting out of the habit of buying that daily cup of coffee as it is getting into the habit of understanding and implementing the correct financial steps that will help you to maintain your own fiscal health.
So if contributing $150 per month to an IRA seems daunting to you, then start small. It's more about creating good habits! Begin by putting aside $20 per month. What's most important is that you're consistent. Even this small amount can help you create a cushion for those days on the beach, and it will help you realize that saving is actually possible. If you wait to do it whenever you feel like you can afford it, then you'll miss out on some of the best investment years of your life!
I can fairly say women have come a long way financially over the last three decades. Today, we make up half of the workforce and are earning the same salaries as everyone else. (My female mentors have amazing stories about years when they got paid less for simply being a woman.) Our average income has soared 63% in the last 30 years. However, according to a 2006 Prudential financial poll, nearly 80% of women say that they plan to depend on Social Security to support them in their golden years. And women are nearly TWICE as likely as men to retire in poverty. On the topic of IRAs, latest reports show that roughly 2/3rds of single women don't even have them! So even today--despite coming so far in many ways--too many women are still ignoring their finances. I was one of them!
What you need to know: when it comes to saving for retirement, starting early REALLY matters. Time and compounding interest are everything to you. The hurdle is to just stop being intimidated by your money, embrace your finances and start learning. If you're capable of hitting the elliptical while reading a book and catching up with a friend with your laundry running (standard Sunday morning, right?), you can definitely set up an IRA.
While I can't give you specific investing advice, I can help you with finding and setting up the retirement account that is right for you. If you want to be walked through the process step-by-step, check out the LearnVest checklist "I Want To Open An IRA" Still feel overwhelmed? Read up on Retirement Basics, including the Dos and Don'ts of retirement savings.
Being rich means different things to different people, so take the time to define your wealth on your own terms. What do you need to be happy? Once you know the answer, understand your finances so you can make it happen.
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Pamela Yellen: Bank on Yourself for a Retirement Plan You Can Predict and Count on
I've been contributing to my TSA for 20 years. I started with $200 a month and as I could increased it. Now I give $700 a month and have been for over five years.
When I retire, what will I be able to draw from it per month?
$500.
I won't be able to retire any earlier than I normally would with $500. If I'm lucky, that will cover my health insurance, which I'll lose when I retire.
I went out and started saving money. Thanks to Moss I hope to retire with a tidy little nest egg.
but think it's a scarifice to put that $150 toward their future instead. To have a future you will have to sacrifice now...
Look it up.
No fund fees (Yes there are fees... but they buy insurance. What do your fees buy in a Roth or a 401k?
your broker his new car...)
No market downside risk
minimal restrictions on funding levels
no taxes on distribution, no restrictions or penalties on distribution.
You create an immediate estate that passes tax free to your heirs with no probate.
it is an insurance contract and so much more regulated.
Play the market with money you can afford to lose, not with your future.
Believing the broker works for you is the same as believing the casino dealer works for you.
The market is the casino, the broker is the dealer. You... are the mark.
If you're not in good enough health to qualify for life insurance, or you're over 50 and cannot afford to fund it with 1k a month... go with a FIXED index annuity that PAYS a bonus for contributions. It can be a Roth even...
Wall Street has pillaged the wealth of this nation through these bogus retirement plan schemes.
Market adjustments are always in favor of wall street and the street makes money EVERY time you lose.
I want the flexibility to take distributions in a ratio that keeps my taxes low when I retire. I can't help but think that even people with modest incomes are going to be taxed more heavily in 15 years to pay down the federal debt; and Social Security payments may be, in part, need-based.
I'll pay my taxes today, thank you!
For the past year, they have paid no, as in zero, interest on any cash in brokerage, IRA, Roth or SEP accounts.
That's none. Zero interest on cash.
I don't expect to live another 40 years, and at the moment hold cash (dollars and euros) and some real estate (American and foreign). My plan for retirement is to sell my US property and live on my foreign property with a far lower cost of living.
The average inflation rate in the United States, averaged since 1800, is 6.9%. for sake of discussion only, let's assume this is 7%. Then the compound interest rate has to be 7% + 8%, or 15%. I don't know anybody who has ever demonstrated this average growth rate over 40 or so years.
this incredibly important subject. First, you'll see that I properly
noted that 1.) this illustration is to make a point and does not
include inflation (cited above in my article) 2.) your point about
inflation genuinely supports my conviction: it absolutely critical to
start SAVING EARLY. ESPECIALLY if inflation is high and interest
rates are LOW! If you do not save today for your future, your life
will not get ANY easier in retirement. Social security is no longer a
safe bet; the communal pot is quickly shrinking. We need to be
thoughtful NOW about the future (again, even more so as inflation worsens!) --
and if we do so, we'll essentially empower ourselves later on in life
by creating *options* that we would never have otherwise.
To think that with a population that ranks poorly educationally with similar countries, that those citizens can master the intricacies and legal requirements for investment success is absurd.
I am delighted by your article because it brought out many astute comments.
http://www.gather.com/viewArticle.action?articleId=281474977229538
That was 30+ years ago!!!
I now pay myself a small 3-4% pay-out.It is not enough to live on but it makes a big big difference,especially in times of crisis. Compounding is a reality!!! I have made most of my own investing decisions.One must become informed,at least as much as one would if they were buying a new car.
I won't take Social Security until I am 66 or 70.Let's face it,no one pays a better return than Soc. Security.Payments will increase 8% annually until I start to withdraw.We are living longer as a population and probably will out live Grandma by quite a few years! A little more money as one ages makes a big difference!
Investing at a young age is SMART!
A good percentage of the money you put away is a gift from Uncle Sam.
You will need the money to live,it could be the difference between just making it or living well!