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It’s National Save for Retirement Week, and it couldn’t have come at a better time!
A recent Ramsey Research report revealed that only one in 10 Americans are saving the recommended 15% of their income to adequately fund their twilight years. That means most of us have some major work to do.
The report also showed that 56% of people lose sleep thinking about retirement. But there is hope no matter your age or career stage! With a little self-discipline and help from your investing professional, you’ll be well on your way to a better retirement—and a good night’s sleep!
To get you started, we’re introducing an easy three-part retirement savings challenge to help you multiply the value of your nest egg.
So, are you in? Ready. Set. Save!
Step 1: Bump it up.
Here’s the first step in the investing challenge: Save an additional $300 a month for retirement. Yes, 300 smackers sounds like a lot, and maybe you’re wondering if you can afford to save that much. Well, we’re about to show you how you can’t afford not to! It’s easier than you think, so stick with us.
What you need to do right now is take a look at your monthly budget. And when we say look at your budget, what we really mean is to sit down with your spouse if you’re married and take out a magnifying glass to cross-examine each budget category. There’s an extra $300 in there somewhere. Can you cut cable? Can you switch cell phone plans? What about reducing restaurant expenses? Find that $300 and throw it into retirement savings.
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We know that kind of dough sounds like a lot in the short term, but you also need to think long term. Those who are on Baby Step 4 know Dave recommends saving 15% of your income for retirement. If you haven’t hit the 15% mark yet, this challenge can jump-start the process.
Step 2: Keep it up.
The next step in the retirement savings challenge is to invest $300 for 12 months. Obviously, saving for retirement is a long-term commitment, but start with a 12-month goal because it’s achievable, specific and measurable. From there, you’ll have the momentum to keep at it for the long haul. Consistency is key to retiring well. Keep up the habit of saving, then leave your investments alone to grow over time. Once you begin to invest, never borrow from your 401(k) or retirement stash.
Check it out: If you invest $300 for a year, you’ll end up with $3,960. Do it for 10 years, and you’ll have $63,000. If you keep the $300-a-month commitment up for 30 years, you’ll have over $650,000 in retirement savings! But here’s the best news yet: Of the $650,000, you only contributed $110,000. The rest—$540,000—came from compound interest! That means a 30-year commitment to save $300 a month for retirement yields over $650,000, and it only cost you $110,000!
Who’s busting out the touchdown breakdance now? The retirement savings MVP named y-o-u.
Have you caught the retirement savings challenge vision yet? If so, let’s look at the long-term outcome if you were able to bump up your contribution even more. What if you could save $500 a month? After a year, you’d have $6,600. After a decade, you’d have a cool $105,187. Keep it up for 30 years, and you’d retire with $1.08 million! Your total contribution would have been $180,000. The rest—$905,000—would have come from compound interest.
There’s a million dollars at stake here, so watch those “small” extra purchases that add up over time. Occasionally eating out with your work buddies is fine. But if you spend $10 a day at restaurants each week, you’ll use $200 a month that could potentially go to retirement savings. You don’t want to look back in 25 years and realize your hamburger habit cost you a million bucks!
Step 3: Talk it up.
The third step in the savings challenge is to talk with an investing professional who can help you get the most bang for your 300 bucks. Don’t have an investing professional? No worries—look for a pro in your area. Saving for retirement is an all-hands-on-deck approach, so take advantage of professionals who can help you stay proactive and engaged during the process. You’ve got this! So accept the challenge with confidence!