The excuses have all been heard before when trying to put off your savings for retirement. When is truly the "right time" for you to do so? Honestly, the "right time" to invest was probably years ago. But there is still hope. If you were to take a collapsible ruler from 1 inch to 60 inches, near the age of retirement, you can pin down when you should invest. At the age of 18, you probably have just gotten your first full time job where they offer you a 401K plan. But you are only 18, and you may not make a lot of money, and you probably want to spend it on personal items. You really don't have too many expenses compared to an adult, but you want to take advantage of that. So you can fold up the first section of your ruler.
Now you are 20 to 21 years old, and you have met someone nice in your life. You plan to propose and you will need any bit of extra money you can get to pay for the wedding expenses and to afford the new life the two of you will share. You put off investing once again. After the wedding, ahead a few years, you are now around the age of 25, but you are ready to take it to the next step and have a baby. With all the baby expenses, you cannot really invest in retirement right now, either. You can fold up the second section of your ruler.
Around the age of 36, you begin thinking about your child's future, what colleges you can afford to send them to, any extracurricular sports or expenses they may have. You need to save for things like this, without a doubt. You may say, "I'll invest when my child goes off to college and starts living on his or her own." So you have to fold up the third section of your ruler. Now you only have 2 sections of your ruler left, compared to the 5 sections you had in the beginning, but you just haven't had the "time."
Near the age of 48, you only have one section left in your ruler, and your children are finally out on their own. You can invest now, but you haven't had the time to really "live" or "splurge." You may put off investing for a few more years so you don't strain your finances, but you only have from 6 to 12 more years left to invest in your plan. When you do sit down and make that decision, the most you can invest at this time will only leave with from $12,000 to $24,000 in your 401K plan. If an 18 year old had got the 401k investment advice and started to invest, he would have about $84,000, investing the same amount or even less than you during each pay period. This is quite a significant difference, and the 18 year old will already be 100% vested, meaning they can walk away from their job with every bit of money that their company matched them at, while you will still need to continue investing for years before this happens. While incomes decline and rates of inflation rise, any extra bit of money during your retirement is needed to supplement the monthly income you are no longer receiving from a full time job.
401K investments come out of your paycheck tax free, and often do not even make a noticeable difference in your income. Because less of your paycheck is being taxed, the amount you invested in your retirement plan will often be larger than the amount that you are missing from your paycheck. While it is easy to argue that you need every bit of money you can spare to pay for your expenses or change of life events, the truth is that you can actually afford more than you think.
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