The Boomers Go Bust: What Can We Learn?

This started off as an email to a reader, but I thought that many other readers might find this of some value.

Recently, I received a long email from a very distraught woman (that I’ll call Mary) who has finally come to the realization that she will not be able to retire in seven years as has been her plan all along.

For the past twenty five years, she’s been contributing a regular small amount to her company’s optional retirement plan – about 7% of her salary. Her company has also chipped in about 3% on that savings, bringing her to about 10% of her salary each year in total savings.

She invested that money pretty conservatively – but it’s an investment plan that seems reasonable to me. Half of the money went into bonds – mostly treasury notes. The other one went into the S&P 500 as an index fund.

On average, over the past twenty five years, her plan has returned 7.5% – and that’s a number she’s become quite comfortable with. As her retirement age approached, she began to use that number to calculate forward from her current state – and this enabled her to plan for retirement in 2015.

Then 2008 came along, and at the end of the year, she received her statement. Her stocks had dropped 39% on the year, wiping out about 16% of her overall retirement savings. This one single year had dropped her annual returns from a 7.5% average to almost a 7% average.

The end result of that swing? Unless the stock market has a gigantic rebound over the next few years, Mary won’t be retiring on time.

For most of you, Mary’s story is pretty ho-hum. Almost every baby boomer is going through some version of what Mary is dealing with right now – I can certainly say that the boomers I know are working through what to do.

What intrigued me was that Mary didn’t want help for herself. She wanted to know what exactly she should have done in the past to not put herself in this situation. In her words:

My daughter just started a great job. We’ve talked a lot about this and she doesn’t have any idea what to do with her own money now. She’s worried about being stuck in my situation later on. What should she do differently than what I did?

Here are seven tactics I recommend for Mary’s daughter (aside from get started now).

7 Tactics for a Safe Retirement

Contribute a little more

If you’ve decided to contribute 7% to your retirement account, make it 8%. If you’re at 8%, consider bumping it up to 10%. You’ll likely not notice the difference in terms of your day to day spending, but bumping your retirement savings up from 8% to 10% gives you 25% more money to work with in your retirement account – money that might help you retire early, but might also simply help you survive another down year.

Don’t repeat the same formula when you’re 60

If you’re just starting out, going aggressive with your retirement savings is fine – you have plenty of years to recover from any early down years. However, don’t just keep riding with that same strategy because it’s comfortable and it’s worked in the past. Over time, you should gradually move your money into something more conservative – that usually means out of stocks and into something more stable, like bonds.

An easy way to do that is with a target retirement fund

Most retirement plans offer an option called a “target retirement fund.” The way it works is pretty simple – they do the gradual shift to more conservative investments for you over time, so you’re not caught holding the bag when it comes to another 2008.

Assume some bad years – and don’t be despondent when they happen

Over the course of a career, there will be some bad economic years. Know this up front – you can’t expect every single year to reward you with a big return. When the bad years happen, remember the good years – and if you’re getting close to retirement and realize you can’t afford a really bad year, make your retirement allocations more conservative.

Don’t be afraid to ask for help

Many people feel as though retirement planning is a burden they must carry themselves – and they often put it off or make bad choices simply because they’re unsure what they’re doing. Don’t fall into this trap – ask for help. Ask the person in your workplace who manages such plans. If you’re really unsure, ask a fee-only investment advisor for help. Don’t put it off simply because of ignorance – get educated and get going.

Don’t invest in something you don’t understand or seems risky to you

This is a great rule to follow. If you’re looking at your investment options and you don’t understand some of the options, learn more about them on your own. If you’re still confused – or if it seems overly risky – don’t invest. Everyone has a different level of risk tolerance, and you’ll only regret it if you exceed your risk tolerance, particularly in your retirement account.

Don’t plan for a “full” retirement

Assume that your retirement will contain some degree of activity that can earn an income. Many people after retiring seek out some sort of activity to fill their time and a part-time job or a seasonal job can be just the ticket. Instead of trying to figure out how you can possibly replace your whole income in retirement, focus on just replacing most of your income under the assumption that you’ll want to remain active in retirement.

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  1. Frugal Dad says:

    This is good advice, but I’m a little wary of target funds these days. I don’t think they scaled back to a conservative enough mix for most people closing in on retirement.

  2. CF says:

    Probably not what she’d want to hear after 2008, but I think she was too conservative early in her career. That 7.5% average probably would’ve been closer to 9% if she was more aggressive early on, when retirement was more than 15 years away. Her allocation of 50/50 now is spot on, in my opinion, but she missed out on greater gains early on. Her daughter should be aggressive early on and adjust as she gets within 10 years of retirement (which target fund would accomplish).

  3. Johanna says:

    In Suze Orman’s new book, she argues that if taking a 20% hit to your retirement fund (which is less than a 20% hit to your retirement income, once you add in Social Security and account for taxes) means you can’t afford to retire, then you were probably cutting it too close anyway. I’m inclined to agree.

    My advice to young people: Save as much now as you possibly can. Don’t stop at 10%. If you can max out your 401(k) and IRA, do it. That way, if things go well and you get good returns, you can afford to save less later in life. If things don’t go well, you’ll have plenty of time to save more.

  4. lurker carl says:

    Learn to live on 1/3 to 1/2 your salary NOW so you’ll be able to live securely when that salary is replaced by your savings.

    Put as much money as possible, preferably maxing out, into your 401k/403b and IRA. Then save even more outside your retirement accounts using CDs, individual municipal bonds, etc until you accumulate several years of living expenses. This is over and above your emergency fund and “mad money” savings, it’s a market crash retirement emergency fund to tide you over times like this after retirement. No one wants to pull money out of the market when it’s down, with a retirement emergency fund you won’t need to. Laddered CDs and bonds will be relatively risk-free and very accessible when the time comes.

  5. I’ll forward this to a few people I know. It’s come up many times.

    Thanks.

  6. Phil says:

    To some extent, this whole “put your money in the stock market and everything will be OK for your retirement” has been proven to be a sham. Look at the last 10 years – the S&P is basically where it was 10 years ago. The NASDAQ is at something like 1/3 of it’s peak in 2000. So the whole “you’ll have a few bad years but overall you’ll do fine in the market” idea is starting to show some cracks.

    I’m wondering if part of this whole financial debacle is in fact being caused by the generational shift we’re seeing. The boomers were encouraged to go all into the market for their retirement “and remember to take plenty of risks if you’re under 45″. Now the boomers are on the cusp of retirement. A large demographic bubble of people will need to sell stocks in order to fund their retirement. This will start happening in large numbers in 2010/2011 when the first boomers start turning 65. It’s already started for those who opted to get out at 62.5. There’s a lot of talk about Social Security being a ponzi scheme, but I’m starting to wonder if perhaps the whole 401K/IRA thing isn’t a Ponzi scheme as well? You need more and more people to buy stocks to keep values rising in order for everyone who finally gets to retirement to have enough money.

    Me? I’ve started putting money into iBonds.

  7. JB says:

    Hi Trent,

    This is completely unrelated to this post but personally I’d like to see more slow cooker or frugal recipes on occassion. I have enjoyed them from the past and slow cooking can be a great addition to a frugal lifestyle (dry beans, etc). I remember you had mentioned a cooking blog in the works, having a ‘sneak peek’ once a week could be cool.

    Anyways, love your blog keep up the stellar work!

  8. Faculties says:

    It’s great if people can supplement their retirement earnings with a part-time job or other income, but it’s best not to count on it — bad health could mean that a part-time job isn’t possible.

  9. The option I see ignored almost all the time is retiring and getting a part time job. My mom is a teacher and will retire in the next year or two. She’ll get a part time job,bit because ah has to but because age still wants to work. I plan to do the exact same thing whenever i get to that point.

    Thank you Trent for pointing it out.

  10. Elisabeth says:

    I agree with Faculties. I think people definitely shouldn’t rule out getting a part time job, but I don’t think they should count on it either. Not only because they might not be able to physically, but also because they might have a hard time finding a part time (or any) job!

  11. oneofnine says:

    I agree totally with the Weakonomist. My grandfather “retired” 30 years ago and hasn’t stopped working since! He is 93 and used his retirement to learn new trades. When he was 75 he started buying wrecked cars and fixing them, slowly and frugally investing in tools and even a lift. He still fixes and sells cars even at his age, for fun and for a little extra money.

    I hope to follow in his footsteps with his creative, inquisitive, and entrepeneurial spirit. I never plan on fully retiring. In my experience, the older folks I know who find jobs they enjoy or start their own hobby businesses are rewarded with long, sincerely pleasurable retirement years.

  12. Cathy says:

    My parents did all the things the experts said not to do. They bought a house, paid it off in full, and have lived in it for over 35 years. They lived frugally and saved their money in a bank. They used CD ladders and US treasuries. The money in their 401K was in cash funds for employer match. They have no debt. They lost nothing in the stock market.

    I’m following the same strategy. Maybe they didn’t get rich, but they are more than comfortable in their retirement through money they saved. I don’t have to worry about taking care of them in their old age – they pretty much have it covered.

    If I do invest anything, I will do it in years where we have a president that supports government oversight, and pull out in years of laissez faire presidents. That’s the lesson I have learned in the past 8 years.

  13. KC says:

    Add to it – live beneath your means and try to pay off your debts early (especially the house). Also find a job you enjoy enough to continue working at even after you are 65. It sounds to me like that is part of Mary’s dilemma – she doesn’t enjoy her job. If she really enjoyed it she probably wouldn’t be so distraught over not being able to retire on time.

    Most of us can’t afford that wonderful storybook retirement anyway. Retire early, travel the world, do anything you want. It just isn’t in the cards for the average person. Even fairly affluent people continue to work – it is a fact of life, especially since we continue to live longer and longer.

  14. Chris @ BuildMyBudget says:

    Sound advice Trent. I agree most should expect to work part-time in later years. Personally, I can’t see myself ever not working! Cathy, that’s quite an interesting strategy. If you look at your parents average rate of return, do you think you’ll be able to get by in your later years using that strategy?

  15. Bill P says:

    We started investing in 1999. Lost $130,000 in he tech bust and got out of this market in October after being down another $80,000. In just 10 years we lost just over $220,000. Seems as though all we have seen is bad years.

  16. GayleRN says:

    For those of you who think that Mary should have put more of her money into 401k, Iras and whatever earlier in her career, I would like to point out that us boomers did not have these vehicles available to us until we were in our thirties. The contribution limits were also much lower than they are now. I remember as a non working spouse only being able to contribute the magnificent sum of $250 to my first IRA. That’s why we now have higher limits so now we can “catch up”, which is a fallacy because the time value is lost forever. Lesson to be learned is that the rules can be changed at any time and it will probably not be to your benefit.

  17. almost there says:

    Johanna, it is interesting that Suze Orman gives investing advice at all. I see her as a person that latched onto PBS and gives simplistic advice. She rarly answers callers or viewers questions using it as an avenue to launch her advice. Having read a few of her books I see her as a person that gives advice to the simpletons of the world. She has come out and said that she does not trust the market, has no money in stocks and all her savings in money funds/ cds etc. Since she won’t put her money where her mouth is she should not give advice on the market.

  18. M says:

    Consider getting a second part-time job now, or doing a little something on the side maybe you can make up some of what you’ve lost. Why wait until you retire to look into other ways of making money. Take a second job and CD ladder the cash, and maybe you can still retire on schedule.
    My retirement dropped 38% this year, talk about sticker shock, but I haven’t stopped investing, I’m buying cheap and when things turn around maybe I’ll be in better shape then I think. I hope to retire in 8 years also, my house will be paid off and I’m living at what I’ll get in retirement now (not counting the house payment plus extra on principle).

  19. Amanda says:

    I respect Mary & her tough situation, but the S&P? It’s a dump if you look at the stats. I’m all for index fund, but not one that doesn’t grow. Better luck ‘Mary’!

  20. LTruslow says:

    This past year has been tough on the “target retirement plans”. Plans vary in their aggressiveness. Some plans from very reputable companies were hit as hard as the S&P 500 Index, when they should have been better off with bond holdings and asset diversification. Be careful with these funds; especially in the level of equities being held within five years of their target date.

  21. Troy says:

    This post and past year are perfect examples why no one should EVER “invest” in what they do not know.

    Just like trying to do a job you know nothing about, investing your money in something you know nothing about is foolish and you willbe exposed.

    Why do you get paid at your job? Because you know what you are doing. Same with investing.

    The great investors, like Buffet don’t invest in the “market.” They became great investors and continue because they buy great individual companies. The market has nothing to do with it.

    Most 401(k) and IRA investors are not investors, they are savers. Not investing in companies, but saving for retirement. The stock market is not for saving, it’s purpose is for buying (investing in)ownership in traded companies, and too many people do not understand the distinction.

    If you know about invidual stocks of companies you understand, by all means jump in, but if not, stay out. You will get burned again, because you have no control. Take a guess at how the real investors make money. They take from the guessers and the gamblers – the savers. That is what most of those who “invest” in their retirement are.

    Instead, invest in what you know about. Your career, your education, a side job,a better job, your own business, a hobby, classic cars, antiques, collectibles, homes, land, whatever. At least then you control your investment. Then it actually is an investment, and not a gamble or hope.

    IT is like building a home. IF you don’t know what you are doing, you will eventually loose your shirt. Stick with what you know. Keep your “savings” at the bank where it is guaranteed.

    If you think I am crazy, consider this. What makes you think the market won’t repeat itself. OR when? Using reasoning like a long time horizon only means you have more time, and more money invested, therefore a greater chance of another significant loss. It is timing the market, which is a proven losing strategy. Likely right about the time you need it.

  22. Carlos says:

    The truth is that you should save all you can. This accomplishes two things: it gives you less money to consume on an on-going basis, which helps keep your “needs” to a dull roar. If you’re eligible for a Roth IRA, fill it. If you’re eligible for a 401(k) match, put at least enough into your plan to receive the maximum employer match. Beyond that, putting money in a taxable account (savings, savings bond, stock, bond, whatever), is a good idea, if you can swing it.

    In my limited opinion, the best thing you can do is to marry/be with someone with similar financial values. In most situations I’ve seen, if you don’t have financial values congruence with your mate, you’ve got little chance of achieving your goals.

  23. SueM says:

    I believe it’s good to plan for multiple income streams as one gets older. It’s very simple to say have a part time job in retirement but it’s not something to count on as one’s health may not allow it. I see people getting setback by health problems in their 50’s when retirement is still a ways off: strokes, heart attacks, cancer, Parkinson’s. These health issues all make paid work challenging to fit into their life. It would be better to start early while still healthy to set up other income possibilities that didn’t require showing up physically for work fully functioning at a specific time at some retail operation or office and working a half day or full day on a regular basis.

  24. David says:

    If Mary was planning to retire in 7 years, her allocation of 50% in the index fund was way too high. 50/50 isn’t conservative at all if you are that close to retiring.

    Many of the boomers who are nearing retirement are in a similar situation, where they’ve kept the same allocation for years and never rebalanced.

    That’s the best advice for her daughter – rebalance annually and reset your allocations every 5 or so years. The closer you are to retirement the less exposure to the stock market, the better.

  25. CPA Kevin says:

    Stories like this are far too common these days, I’m afraid. However, like Troy said above, why was Mary investing in something she didn’t understand? 50/50 allocation, IMHO, is far too risky for someone that close to retirement. At that point she should be investing in income producing assets not “hoping” for future growth. If you have enough passive income coming in from your investments, what does it matter what the underlying stock price is?

  26. Nebula says:

    @Troy–You make a lot of sense.
    @Carlos–love the “financial values congruence” as per being necessary with your mate–truer words were never spoken!

  27. Lou says:

    I’m already retired. I had to retire 7 years early b/c of a head injury on the job that was “no-fault.” Long ugly story. Bottom line, I lost my last 7 years of income AND saving/investing. I had to start drawing from my savings 7 years sooner than planned. (Sidebar: Everybody needs long-term total disability insurance. If your employer doesn’t offer it, lobby for the benefit but meanwhile, buy it yourself),

    I had only done 2 smart things:
    1) I always had a payroll savings plan – before there were IRAs, there was a US Savings bond plan. From my first day of full-time work (I saved nothing as a student), I saved 5% of my gross. Never saw it, never spent it, never thought about it as spendable.
    2) once I was established in my career, starting somewhere in my 30’s, I directed half of every raise into my savings. If I got a 4% raise, 2% came off the top- into whatever saving plan was available through my employer.

    This hard knock to the market has cost me about 20% of my capital, but since I’ve been taking only 4% of earnings as a payout and reinvesting 2-5% every year, I’ll be okay.

    Save early, Save to an inaccesible location. Keep increasing the percentage of your salary that you save. Be prudent when you do retire about conserving capital.

  28. Kat says:

    Has Mary done the Your Money or Your Life program? It might make all the difference. I got out of debt (except for a small amount remaining on my mortgage)in Oct. 2007, have been saving like crazy, bumped my retirement contribution to 15% of gross last March (per Dave Ramsey)and am tracking every penny. House will be paid off in about 2.5 years.

    I don’t know how much my 403B (TIAA-CREF) has dropped (haven’t wanted to look since July) but I’m hopeful that between my frugality and a new administration where the adults are in charge that my timetable is still okay.

    I’m also an artist and while 2008 was lousy for painting sales, things have rarely been that bad in the past, so I have some potential for income there as well as doing workshops, etc. So, fingers crossed it will still work out. I have no interest in a jet-set retirement anyway. I’ll be meeting with the TIAA-CREF guy again in March and will get the scoop then. Like Mary, I now know I should have been much more aggressive in my early years.

    My hope is that since going to 15% of gross, I’ve been buying really really cheap and when the market turns around, I’ll be pleasantly surprised at the result.

  29. Rosie says:

    I put my 401-K rollover account in the hands of “experts” – Morgan Stanley. They made decisions on my account which put me in a loss situation.

    So, yes I agreed, but also believed they were looking out for my account. NOT.

    So, short of becoming the investment guru yourself, who do you trust.

    Really dollars in the mattress is a better idea than letting those outfits rip you off.

    First they are SALES people. They are looking to PROFIT off your hard saved cash.

    They will tell you, “do this and you will have what you need when you retire”. The person doing that is 23 years old with no liability to the fact that the investments were not in your interest but THEIRS.

    Don’t even mention Wachovia in your website – did they not belly up to be saved by Wells Fargo?

    Nobody has sound advice.

  30. At least she’s got something. We have no retirement at my job. My boss is 69 and a coworker that is 65 have no retirement and both have phenomenal amounts of debt. I think my boss’ retirement plan is to file bankruptcy… the coworker’s husband divorced her about five years ago because he didn’t want his retirement threatened by her debt. My mom has no retirement and is trying to live on $800 a month right now. Luckily her house is paid in full. All this retirement stuff is pretty scary.

  31. Fred says:

    Interestingly, the boomers that were all investing together will start withdrawing all together…
    Basics supply/demand economics – who is going to purchase the boomers “hope and pray” investments at the price they are hoping to get?

    Can somebody spell lemming?

  32. Oskar says:

    I am a big fan of saving through paying of your morgage, true it might not always be the most tax efficient way but no one is going to take that away from you. If you can live in your house/condo virtually free when you retire you don’t need very much retirement savings to live.

  33. Ken says:

    Great suggestions. I especially liked the one about be willing to work part time at something after retirement. The most unhappy retirees are those that just quit everything and sit down. Having a part time gig can allow you to postpone tapping retirement funds, thus allowing more growth. It also allows them a slower transition to retirement which can be a crisis the first year or two.

  34. Sheila says:

    @Lou, I have to echo your statement about having disability insurance. I ended up with an illness that doesn’t allow me to work, and I didn’t have disability insurance. After a few years, I managed to get SSD, which, if I was single, wouldn’t cover much of anything. So I tell my children (who may be at risk of getting the same illness) so always have disability insurance, and my DH, the sole wage earner, carries as much disability (and life) insurance as possible.

    Having been “retired” due to disability, I had to undergo the process of finding something to do with my life. It’s tough–so I hope people start thinking about it now whether it be part-time work (hard to find right now) or volunteering.

  35. todo es bien says:

    Even before the meltdown, if you studied the average net worth of individuals approaching retirement it became clear that most people would not be able to retire within the classic context. ( I believe I read a year ago that only 25% of people over 50 had a net worth over 250,000 and I would think that that percentage has dropped considerably since then) It strikes me that the great majority of people will need to work longer at least in a part time capacity – and that it might be quite difficult for the number of people who are going to need to work to find gainful employment. NOW would be the time to begin to think of how you might accomplish this. Personally, I will work as long as I am able, at least in a part time capacity. I think 20 years from now when we look back we will note that perhaps only 10% or so of the population will have been able to retire comfortably without working… Which is pretty frightening when you consider it. The rest will be either working at least part time or suffering rather badly trying to make ends meet, right at the point in their lives when it is hardest to change their circumstances.

  36. Dale Hanks says:

    Its only in the last 50-100 years that “retirement” meant “sitting on my behind until I die”. Thats nuts. Humans have worked less as they have gotten older but they never stopped working. I think that everyone should plan on doing something that brings in income until the day they stop moving.

  37. IRG says:

    It’s interesting to see all the commentators talking about getting a part time job after you retire. As if they would be available.

    Especially considering that many of us just a few years from retirement don’t even have jobs now because of the economy…and, because of our age and/or health, won’t be finding any new ones (A fact that is very hard to accept for many of us who WANT–not just need–to continue to work.)given the current economic situation.

    The jobs just aren’t out there and even those part-time ones that used to be available to “seniors” are now going to the way younger folks who wouldn’t even consider them before, but who are now desperate.

    All this talk about saving is great, IF you have an income to save from. Many people got let go in their 50s and 60s and are struggling to find jobs. You really can’t support a family on a minimum wage job in most major cities unless you’ve got one or more other incomes coming in. (and when you are single and self-supporting, forget about it) But that is what many who worked 35 or more years are now facing. It’s both economically and psychically devastating to not find work.

    For some of us, as one friend who is a college professor and who has always worked several other jobs, there is no retirement. We will, as he puts it, work until we die. But then the majority of us never thought that we’d be living la vida loca if we did retire.

    As one commentator noted, many of us will indeed be “working at least part time or suffering rather badly trying to make ends meet, right at the point in their lives when it is hardest to change their circumstances.”

    And again, people have to have money to save. Not everyone is making big bucks from which to have money to save. A lot of people just barely make enough to take care of their families. That includes frugal, careful and responsible folks who don’t have thousands in credit card debt, etc.

    You can’t save what you don’t have.

  38. steve says:

    I think saving 20% of income is probably a better basic guideline for young people to save for retirement. The 10% savings figure bandied about over the last bull markets assumed asset value increases that were actually due to asset value inflation, not increases in productivity, during the equity bull markets of the last 20 years. If you can find a way to save 20% of your income for retirement. If you have trouble doing that it could be viewed as a signal that you need to increase your income or expenses. A signal that, if you pay attention to it early enough in life, will make a big difference for you.

  39. steve says:

    My number one recommendation to Mary’s daughter would be to sit down with a financial planner and calculate how much money she would need, in today’s dollars, to support a given lifestyle after retirement at an age of 55 and shoot for that amount of savings.

    If it is not only a great job but a high paying job (which I would call anything earning over 50K per year) it should be no problem to save 30-50% of what she makes and just live like a person who earns 30K per year until she meets that retirement dollar figure.

    If after looking at it hard, she chooses not to do so, at least she is making a conscious choise. In that case she should pick another scenario and stick with that. Having a firm dollar figure (adjusted for inflation) for how much you need to save per year is better than a percentage guideline. But I do thing that mid-to-high income earners often don’t take good enough advantage of that income for their own future benefit.

  40. Roger says:

    Good advice, as always, Trent. Always nice to see the basics reinforced. All good suggestions (although, finding a target fund that starts aggressive enough, becomes conservative enough (but not too conservative) and converts from the first allocation to the second allocation at the desired speed is tricky).

  41. Ilah says:

    Like GayleRN mentioned 401Ks etc have not been available forever. My husband’s employer (US Govt) didn’t start offering IRAs until about 20 years ago. When he retired, we had a very modest amount in his account. We are able to choose from about 1/2 doz or so funds. Some are totally safe, usually lower returns, but you can not lose your principal — up to fairly agressive funds. For years we had the money split into safe, moderate and agressive. In July, Glenn Beck said the stock market crash was coming, so my husband said move it all into the safe funds. Did so and we lost zero dollars. With the small amount we have, we want to keep all of it. My even smaller IRA from a former job lost almost 50%. I have 10 years to get it back before I retire. We don’t plan on using our IRAs for month to month daily living, our monthly barebones budget does not include them. But, I sure want to have it around for some extras. My husband’s account will remain in safe positions, we might make less, but at least we will still have out principal dollars.

  42. Peter says:

    One thing I don’t believe was mentioned in this article is that you don’t have to hit these percentages first year running. For example, say you start with five percent and get a three percent raise the following year. Add a percent to make it 6 percent to retirement and keep two for living off of. Or maybe you pay off your car which was running $350 a month, add a percent to the retirement (say $40 equivalent take home), save the rest for some other important need. In essense, with a little thought you can get to the twenty percent level over a dozen years without feeling like you’re seriously harming your lifestyle. Sure, if you could start there it’d be better, but sometimes getting there in small steps is better than not getting there at all and taking a big chunk out of your salary when you’re just stepping out on your own can be a rough pill for many people to swallow.

  43. plonkee says:

    I think the key thing to take forward is *don’t cut it fine*. Be aiming for more money than you really need, and that’s especially as you get closer to retirement.

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