Retirement: The Best Time to Start was Yesterday

Retirement is something that everyone looks forward to. As the book of Psalms 128:2 states, “You will eat the fruit of your labor; blessings and prosperity will be yours.” But the main problem a lot of people face is, how do you start saving for retirement? A successful budget should be able to be optimized to the point that saving for retirement is feasible. And if you cannot find margin within your budget, it sounds like a budget review needs done, which is something I do offer to people if they send me an email. There is a small fee, but I believe it is worth it.

If you were to ask Dave Ramsey, he would tell you to not invest into retirement until all of your bad debt is paid off. Bad debt would include credit cards, personal loans, and a car payment. Basically, any debt besides a mortgage he would want paid off before investing in retirement. While this is a great idea, some people have a lot of debt and have little to no retirement and are not getting any younger. Very few of us want to be working our whole lives.

The problem with not investing until debt is paid off is your 20’s and even your early 30’s are your best years to lay a great foundation for your retirement to grow off of. I want to show the importance of compound interest for people at different age brackets. In the below chart, I am assuming someone invests $200 into a Roth IRA, every month, at 8% return, until a retirement age of 60 years old.

Age	Annual Addition	Years to Grow	8% Return	Total at Retirement
20	$2,400	40	8%	$671,474
25	$2,400	35	8%	$446,645
30	$2,400	30	8%	$293,630
35	$2,400	25	8%	$189,490
40	$2,400	20	8%	$118,615
45	$2,400	15	8%	$70,378
50	$2,400	10	8%	$37,549
55	$2,400	5	8%	$15,206

As you can see, the earlier you start investing, the better.

Most full-time employers offer a 401k plan where they will match a certain percentage of your contributions. One of the employers in my life offered a very good 401k program where they matched dollar for dollar up to 3% of my 401k contributions. Then the next 3% they matched up to 1.5%. This means that every 6% of my paycheck that I put into my 401k, my employer matched 4.5% of my paycheck as contributions into my 401k. So 10.5% of my paycheck value was being contributed into my 401k each pay period. 

I would recommend if your employer offers a 401k program where they match your contributions, do that before you invest into a personal IRA. I recommend this strictly because getting free money invested additionally into your retirement should be a no brainer. Below I want to show a chart similar to the chart above. The same years and rate of return, but this one will be a 6% contribution with a 4.5% match. In this exercise I am assuming the person is making $50k annually and never gets a raise (which is highly unlikely).

Age	Employee Contribution	Employer Contribution	Years to Grow	8% Return	Total at Retirement
20	$3,000	$2250	40	8%	$1,468,850
25	$3,000	$2250	35	8%	$977,036
30	$3,000	$2250	30	8%	$642,315
35	$3,000	$2250	25	8%	$414,510
40	$3,000	$2250	20	8%	$259,470
45	$3,000	$2250	15	8%	$153,952
50	$3,000	$2250	10	8%	$82,138
55	$3,000	$2250	5	8%	$33,263

Once again, the earlier you invest, the better. But this also shows that utilizing the company match is very important. And realistically, someone is probably going to get raises year over year; their salary will not stay at $50,000.

If you want to play with these calculations for your own income situation(s), go to moneychimp.com and use their calculators and see what your potential retirement could look like.

I really want to stress to people, I do not want you working as a Walmart greeter at 65 years old. That is not to put down people who have to work post-retirement, because some people like to work or they just want to stay busy. What I do not want is someone having to work into their late 60’s and longer because they do not have enough money saved. Saving and investing today will pay dividends, literally, for future you to be able to enjoy the fruits of your labor and live the life you want to live, not forced to live.

God Bless

Bubba Miller