Savings Still Key to Financial Freedom
If you want to retire at age 67with as much income as you had from working, experts have moved the goal post a little further out.
That’s right. Because of the low rates of return in the current economy, a major financial firm has increased the target savings from 8 times earnings to 10 times by age 67. Interim targets include 1 time annual salary at age 30, 2 times by age 35, and 3 times by age 40. Obviously, many people are failing to achieve these targets. However, these goals, while ambitious, are achievable with an early start, a constant savings habit (We recommend 10%), and the long term effects of compounded investment yield.
Then again, perhaps the idea of retiring at age 67 is just not good for you. So says Warren Buffet, who says that working past retirement age keeps you sharp, lets you benefit from your years of experience, and gives you a buffet in a down stock market. In fact, the Federal Bureau of Labor Statistics estimates that 25% of workers will be over age 55 by 2020. If you start late in life, say at age 40, you could still save 10% of your income for 30 years which, when invested in a historical market average of 6% yield, would produce an income stream equal to 70% of wages.
Even so, savings is a critical component of your family’s plan for financial freedom. Sadly, many people fail to save because they are too focused on their debt. You must be saving even while in debt, just as our hero Abraham Lincoln did. He suffered a financial reverse in 1837 but bought a house with his savings in 1844 before paying his debt in 1848. Like Abraham Lincoln, you should build your life before you pay your debt. Yet we find that many seniors are carrying large debt burdens because they did not develop a debt relief plan when they were younger.
Don’t let your creditors take your financial future. Remember, saving is still the key to financial freedom.