Many people have very high salaries
Retirement is something that is very far in the back of my mind. As of today I do not have a specific age that I want to retire at. My plan is to retire when I am around 60 years of age such that I have enough saved to retire. With the economy fluctuating and the social security threatened to collapse in few years when I do retire I do not expect to be relying on the government. Retirement will ultimately depend on money.
While I am working during my 20’s, 30’s, 40’s and 50’s I will accumulate a specific habit that my lifestyle will mirror monetarily. For this reason I believe that if it costs me around $50,000-70,000 to live each year then I would expect my retirement account to hold around $2,000,000 which would allow me to live on that money for up to 30 years after retirement . Since I will be retiring in about 50 years inflation may cause the number to rise and cost of living may also skyrocket considering the increasing world population will put monetary constraints to enjoy the types of lives we live in today’s world. The question rises of how to retire with that much money in my savings account.
My personal finance teacher in one of his lessons stated “Many people have very high salaries, but they have no money in the bank account”. It took me little bit of time to figure out the meaning of this statement, and I came to conclusion that making money will be important, but almost as important is the ability and the skill to retain that money. My plan during my work years is to save or invest certain percentage of my salary such that my money would accrue interest and eventually grow to be sufficient enough to retire from. 401k plan will be one of the more heavily used tools to achieve this, but another method I plan to use is mutual funds as well as low risk-high yield long term stocks. The main plan for my retirement will involve different types of investment and savings to ensure that there is no single point of failure in this plan, decreasing the risk of economic downturn negatively impacting the retirement accounts. While trying to accommodate for all of these different methods for saving I will try not to make some of the common mistakes when it comes to saving money.
As a seasonal job I work as an income tax preparer. In my job I see first- hand what happens when people do not take the time to save money properly and are force to live on $7,000 a year in social security income. The reason I bring up this example is because it demonstrates someone who has worked hard all of their life and the only thing they have now is $7,000 from the US government. Today many people make simple mistakes when it comes to money. Majority of people spend what they do not have. Credit cards are in majority of households, because of this people are tempted to buy items they do not have money for and this causes them to get stuck in a psychological loop. When a person wants something but can’t pay for it they buy on credit, when they receive their paycheck they pay off their usual bills and pay the very minimum on their credit card such that they have more money to spend. After using the leftover money for entertainment or other spending they are back to having no money and credit card debt. This mind set drives people away from taking those extra dollars and putting them into a saving account such as CD in a bank, or a 401(k) plan at their job which later leads to $7,000 a year from the US government. Overall, I hope to learn more about finances at an early age so that later in my life I am able to take necessary steps to ensure successful retirement.