What if, when you were 25 years old, I hired you and said I’d pay you $26,000 a year? And I further told you that if you would promise to save at least 6% of that a year ($1560) that I’d give you an additional $1560 to encourage you to keep saving - if I told you I’d match the first 6% you saved dollar for dollar, in other words? And what if I told you that if you took me up on the deal and saved at the same rate until you retired at age 65 that the additional $1560 I gave you every year to reward you for saving the equivalent amount could be worth around $320,000 assuming a long term rate of return of 7%? And what if I explained that you’d actually have accumulated double that amount or around $640,000 since your own $1560 saved and invested annually could also be worth $320,000? Would you take that deal? And what if I told you that if you elected to save 12% annually instead of 6%, even though I would still only match your savings dollar for dollar the first 6%, that you would have almost 1 million dollars in your account when you turned 65 after spending your life earning roughly $13 dollars per hour? That’s right, having never gotten a single raise in your lifetime and making less than $15/hr you could be sitting on a cool million when you clocked out for the last time. If I told you all that, would you believe me? If so, what would you do?
Well, close to half of employers offer a deal something like my hypothetical one. But can you believe 1 out of 4 people typically don’t take the deal? Twenty five percent of the people who could don’t get every dollar an employer is willing to give to them. Crazy isn’t it? Now back to you. Maybe you couldn’t save 12%. Maybe you could save more than that. But whatever you do, for goodness sake, get the match! It literally is free money – potentially lots of it. And if you don’t understand the details of this stuff, get somebody that does to help you. It’s way too important not to.
Thing Two
Three Rules From Butterbean
Before the NBA made mega millionaires out of virtually all its players, Bob “Buttterbean” Love played for the Chicago Bulls. He actually excelled for the Bulls and eventually had his jersey retired. But a speech impediment and a lack of marketable skills left him woefully unprepared for life after basketball. At his post-NBA low point, he was bussing tables in a Chicago restaurant for minimum wage. Lucky for him the manager took a personal interest in him and help him get speech therapy. He eventually rejoined the Bulls organization as the Director of Community relations and he also became a motivational speaker. In his public remarks in that capacity he would always impart three rules to his audience:
1) If somebody passes you the ball, catch it.
2) If you drop the ball, pick it up.
3) Always listen to your coach
According to Synchrony Bank, the average 401(k) balance (in 2022) for someone between the ages of 55 and 64 was $256,000. The median for that same cohort - the number which half of the savers are above and half are below – was $134,000. And for savers over 65, the median amount saved was $164,000
Statistically speaking, someone who makes it to age 65 is likely to live almost another 20 years. That said, and given that the average social security recipient gets around $20,000 per year, a 65 year old with the median in retirement savings can expect an annual salary in retirement of around $28,000.
What’s the point? Well, ask yourself if you are tracking to do at least as well as the median retiree. If you are and that’s enough, great. If you are and that’s not enough, perhaps you have dropped the ball and you need help picking it up. If you do and you think you might need a coach, let us know.
Thing Three
Just A Thought
The first step towards getting somewhere is to decide you’re not going to stay where you are.”— JP Morgan
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