A: Free Money!
B: Immediate ROI

With that said, it is gravy and always will be.

No you wouldn’t.

Check your math. This time, remember that your salary increases with inflation.

Of course, you can tweak the rate of return to get the result you want. If you’d used 12% instead of 8%, then you’d have been correct. But at 8%, the 35 years of saving 15% of a salary that increases with inflation will easily overcome 8 years of saving 15% of the lower salary.

Best of luck to anyone looking for such exciting work to last for many decades. Few folks ever find it.

Just from watching the behavior of my own social circle, it seems to me that those who are heavily in debt are the same people who either 1) haven’t saved much toward retirement and/or 2)tend to cash out their 401k as they leave jobs.

These friends of mine are in their late 30s/approaching 40. They haven’t yet had their epiphany and decided to get out of debt, or seen any reason to contribute meaningfully to retirement savings. Once they do finally come to their senses and possibly spend years digging themselves out of debt, it seems to me that they will have to put away a whole lot more than 15% in order to make up for all the years they have lost.

Retirement planning should be somewhere in the mix but to reduce it to a math equation can make life appear more scientific than it is.

I’m old enough that I’ve seen people who lived there entire lives worrying and planning for retirement, and you know what? They reach their goals and retire with a bundle, but they can’t turn off the money worry, so they take it to their graves.

In all things, balance!

However, one of the smartest things I’ve done is regularly put money away in a dividend re-investment program. I’ve had it for 8 years and have not liquidated it. At first, seeing my first dividend check for $9.50 seemed like nothing, but I realized that it was money coming to me.. without having to work for it. My money WAS working for me instead of me for it, however small the amount was. I then imagined how much I would have if I had more invested over time… I was hooked. I have consistently invested over the 8 years or so, gradually increasing my contributions from $50 a month to $750 a month. I now make close to $800 every quarter!

My income increased during that time span, and it came to a point that I don’t even miss the $750 per month. I do have more bills compared to 8 years ago, but I’ve learned to live on less. I can choose to have a check made out to me instead of having the dividends re-invested, but it is such a joy to see my statements with the dividends buying more shares, which will in turn by more shares. It’s like planting a seed and watching it grow.. sometimes painfully slowly; and then one day it won’t need nourishment anymore because it is self sufficient, and will reward you by bearing fruit or providing nice shade.

Also, there is an issue of balance. Being financially independent early is great, but how much will you have to sacrifice for it now? I have a friend who died at the age of 38 from Lymphoma. None of us knows how much time we’ll have. IMHO – we need to consider both possibilities: living a long life or dying young and try to save/spend in a way that we have no regrets in either case i.e. not running out of money too soon and not thinking “I wish I’d done that” if we are find out tomorrow we have a terminal illness. Think about it as diversification only instead of diversifying money across different classes of investment you are diversifying between how much you save and how much you spend based on different possibilities.

BTW – I am 50. Could I retire tomorrow? Maybe – depends on what kind of retirement I want. If I move to a cheaper state, probably, but then I need to consider possible high inflation or high medical costs. Do I consider myself financially independent – nope, but I’d imagine there are people that have less and consider themselves independent. But… I am perfectly happy with the idea of working for another 10 years or so, and I have no regrets for having traveled and having done things I like. I’ve never bought anything I couldn’t afford, actually I routinely spent less than I could afford, I’ve never had debt problem,I’ve never carried balances on my credit cards and I’ve always saved money. But I’ve never went overboard with savings…

BTW – I have a question for women out there. Do you really want to tell people you meet “I am retired”? Don’t you think it’ll make you sound old?

Ever notice how when you are given a shorter deadline, you do more and often reach the goal?

Being financially independent is my goal by 40, what about yours?

Rgds,

RB

Rich By 30 Retire By 40

What I would consider, though, is adjusting the value of 401K as well as any tax deferred account for taxes. After all, not all of this money is yours, a large part belongs to Uncle Sam and your state.

#2 – Lisa, if you have a good grip on your finances you don’t need Dave Ramsey. He is really good for people who are in debt – even if his method results in lost money, but he is NOT an investment expert, so his opinions on investment are just as good as yours and mine. In fact he was claiming just a year ago how one can get 12% average return in the market; he was even advising a 60-year old to put all of his money in the market and find some mutual funds (not necessarily index) that give you 12% a year. This is just my humble opinion, but I am yet to meet a single Dave Ramsey fun who has never had a debt problem.

BTW – I don’t consider 401K and Roth (if you are eligible) the only option to save for retirement. Granted Roth is great, but the amount of money you can save there is limited and if your income is high you may not be eligible. 401K is great if you have a good company match and/or your 401K gives you good choices. Mine happen to have both, plus I really need to take this money off my taxable income; until last couple of years it was the only thing that allowed me to contribute to Roth as well.

But if your 401K doesn’t have a company match and if it doesn’t have good choices, why not just invest money after taxes? Same if you don’t have Roth option on 401K and if you think you’ll be in higher bracket in retirement. After tax investments even if they aren’t marked specifically “for retirement” are still money you can use in retirement. Half of my money is outside 401K and Roth. Just because I have unrestricted access to this money doesn’t mean I planning to spend it all on a new Ferrari (or most or part – I have no idea how much a new Ferrari costs).

“You should do something with your life that lights your fire and lets you use your gifts. ”
One problem for most people is what lights your fire is not necessarily what you are gifted in. I am gifted in math. I love opera. No amount of money will enable me to sing at the Met and yes, I did have lessons, but my tiny soprano is just not good enough or strong enough. So I do computer science instead and I am very good at it too… Nope, it doesn’t light my fire, but this is what I am gifted at and this is what pays my bills.

-Gen Y Investor

Thanks

It would serve most folks best to save as though there is no one else to rely on in the future. If there is someone(s) to rely on, even better, the extra savings can go a long way to make life more enjoyable. However, the scope of the savings should really be more narrow, save for self sufficiency whether or it pans out that way.

The company match is usually not a guarantee and varies across companies, since most of us are unable to hold on to jobs at companies for decades on end these days. It can take years before the company will provide a match when starting a new job not knowing if the job is stable or not. There are too many pitfalls in relying and saving based on how much the company is willing to match.

And 15% before an employee’s contribution is good.