But there is a darker side of retirement that can happen if you don’t pay attention. A retirement where you are forced to work a part-time job or simply wait on the next government Social Security check to come in.
There are two retirements. Which one do you want?
The Worst Retirement: Broke
Imagine spending your golden years not at the beach sipping mai tais and daiquiris, but selling t-shirts to make ends meet. Not buying whatever you want at the mall or traveling where you want, but working a part-time retail job to make ends meet.
This is the retirement of the broke. A broke retirement is the result of a few critical retirement calculations, the primary of which is starting late in saving for retirement. It doesn’t matter what kind of astronomical rate of return you get on your investments if you only saved for retirement for 5 years.
In a broke retirement you don’t have a solid nest egg, if you have one at all. You either run out of retirement funds quickly or have to withdraw so little that it doesn’t really impact your monthly expenses. You have to cut back in ways you never imagined or pick up a part-time job. You’re still working, even in retirement.
Worse yet, what happens if you can’t work to earn a paycheck to get by? Your only source of survival at that point is Social Security. As nice as it is to have a safety net from the government, none of us ever want to be fully dependent upon it.
The Best Retirement: Well Funded
That retirement option above sounds pretty awful. When given a choice between the two, no one would pick a broke retirement.
But the time to choose your retirement is now. The choices you make today in regards to your retirement will dramatically impact what your retirement ends up looking like.
Here are a few wise choices to make:
Start Saving Now
The absolute bet thing you can do for your retirement is to start saving right now. Don’t delay another day. If you start today you are maximizing the amount of time your money has to grow before retirement. You’re letting compound growth work for you, not against you. Don’t wait a year or 5 years. You’re just shooting yourself in the foot. Start now.
Pick Low Cost Investments
Getting started is your #1 priority. Once you are started in the right direction you can start making adjustments. The first major adjustment is to avoid paying high fees and expense ratios to mutual fund companies. You can pick up index mutual funds for around 0.20% in expense ratio. Compared to the industry average of 1% for mutual funds (plus some that charge crazy 5% front-load fees) you are saving a ton of money. A 0.80% savings on your account balance every year may not sound like much, but over time it will really add a nice bump to your nest egg amount.