The Price of Procrastination
When it comes to procrastination, most people focus on the danger of getting a late start on saving. You can also put your retirement in jeopardy by putting off certain key tasks in the years just before retirement. And the cost can be just as devastating as procrastinating earlier in life.We all know by now (or should) that putting off saving for retirement comes with a high cost. For example, a 25-year-old who earns $40,000 a year, gets 2% annual raises and contributes 15% of salary to a 401(k) or similar plan each year, earns 5.5% a year on investments and follows that regimen for 40 years would end up with a nest egg of roughly $1.1 million. Where that same hypothetical 25-year-old to wait until age 30 to start saving, his projected nest egg’s value would drop to $875,000. And it falls to $680,000 if he procrastinates until age 35.
But procrastination during the home stretch to retirement, or even after retiring, can also be costly too, although it may be harder to put a specific number on.
Many people don’t transition early enough from investing for long-term growth to creating a portfolio more geared toward generating income that will support them throughout retirement. Making such a shift doesn’t mean you should dump stocks wholesale or load up on “income investments.” Rather, it’s mostly a process of refining your stocks-bonds mix to be sure it reflects the level of risk you are comfortable with as you enter retirement. Failing to go through such a re-assessment could leave you with a stock-heavy portfolio that, in the event of a major market downturn, could significantly reduce the amount of money you can safely draw from your portfolio each year and lower the chances that your savings will last as long as you do.
If Noah had procrastinated building his ark, where would the world be today? The same is with your retirement.
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No matter what your retirement situation is, a Roth IRA can improve your portfolio. There are many factors that lend to the importance of a Roth that will effect you now and later. Look at a Roth IRA as a gift from Uncle Sam to you (possibly one of the only gifts). This government gift allows your retirement savings to accumulate absolutely TAX-FREE and is one of the most flexible accounts because you can add to it whenever you want.
In December 2015 Dolph Janis contributed to an article on Safebee.com the article is titled:
“How to Plan For Retirement if You Don’t Work”
Setting aside money for retirement is easier when you have a great job. But what if you don’t? If your spouse works while you manage the house, a premature death or divorce could leave you struggling to save. If you’re disabled or just can’t work regularly, building up a nest egg on your own could likewise be a problem.
Start making plans now so you’ll have a financial cushion later in life.