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Starting early for retirement can make all the difference

POSTED: June 26, 2008 5:00 a.m.

Whether you are just starting or you are nearing retirement, it is important to know how much money you will need to get there. Make sure to start saving now, save consistently and invest wisely. One of the great things about planning for retirement is that, if you start early enough, you don’t have to do all of the work yourself. If you choose good quality investments, they should do most of the work for you.

It is important to deal with a competent financial advisor when determining how to reach your specific goals because everyone’s goals are different, however; as a general rule of thumb, if you invest 10 percent of your income you will be headed in the right direction. I know that this is easier said than done, but it is definitely possible. Right now, most people are not accomplishing that goal. Unfortunately, according to the U.S. Department of Commerce, the national savings rate was less than 1 percent in 2007.

What that means is that there are a lot of people that will be in for a rude awakening one day. There are a lot of people who will get to age 65, after working their whole lives, and realize that they cannot retire in the way that they had hoped to. They may continue to work or they may choose to retire with much less money than they wanted, but they will not end up where they planned.

The good news is that you are not a statistic. You are a person — a person who can make choices today that will affect the rest of your life. You have been uniquely gifted by God and have skills that He has given you. If you use your skills wisely and exercise some discipline you can accomplish your financial goals.

Let’s take a look at a person who invested 10 percent of their income. Let’s assume they invested 10 percent of their income in a Roth IRA that grew at 8 percent per year. Let’s also assume that they started doing this when they got their first job at age 18 and continued doing so until they retired at age 63. Here is where they would end up: a person that invested $2,000 per year would end up with $834,852 when they retired. Not too bad for only putting in $2,000 per year. And a person that invested $5,000 per year would end up with $2,087,130 when they retired. That doesn’t seem too shabby either.

I do understand most people reading this probably are not 18 years old. I also understand that life gets complicated and that there are many places that our dollars go every month. But the bottom line is this — the people who invest money wisely and consistently end up with a sizeable amount of money. The people who never make it a priority to start investing, for whatever reason, end up with nothing. Money is no respecter of persons.

So sit down with your financial advisor and make a plan that works for you. Remember, just because the average American saved less than one percent of their income last year doesn’t mean that you have to do the same. You’re a person, not a statistic. And you can be much better than average.

The hypothetical situations described here do not take into account taxes or expenses, nor do they represent any specific investment.

Jeff Hupman is a financial advisor with Christian Values Investing. You can reach him at 748-9321.

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