Beginners Guide: Retirement
Do you know that the eighth wonder of the world (according to Albert Einstein) is compound interest? We're talking free money here people!! But I have to warn you that it is not a sexy topic. In fact I bet I lose half of you before the next paragraph just because it sounds like a boring article about banking.
Hey, you’re still with me! You know what is even more ‘not sexy’ than talking about saving money and compound interest?? It's growing old and living with your kids because you didn't pay attention at a young age to the power of saving and free money. Boom. (That was me dropping the mike!)
Yes, we need to drill it into our kids to not get into debt AND to get started on retirement savings when they get a job (see my last post on this topic here). BUT, we need to stop focusing on our kids for a bit (collective gasp) and take care of ourselves first. It’s not too late to start saving for retirement! No matter how old you are!
Here is a quick way to figure out how long it will take to double your invested money. It’s called the ‘Rule of 72’.
The rule of 72 is a shortcut to estimate the number of years required to double your money at a given annual rate of return. The rule states that you divide the rate, expressed as a percentage, into 72.
For example, if you are receiving an interest rate of 8% your investment will take 9 years to double in value. (72 ÷ 8 = 9)
“But where”, you ask, “can I find interest rates that are that high? The bank interest rates are so low.”
Great question, you! The banks are not the answer for investing. For that, you need stocks, bonds, CDs, ETFs, and mutual funds. And, someone to tell you what is what and why you should care.
The best gift you can give yourself this year is to find an awesome certified financial advisor. This person must be someone 1) you like to talk to; 2) doesn’t make you feel dumb; 3) wants to educate you on how to invest; 4) will listen to you and and will adjust their advise based on what matters to you 5) is passionate about investing in stocks, bonds, CDs, ETFs, and mutual funds. Find this person ASAP!
If you don’t like your financial advisor (that you currently have or when you interview a new one) - go interview someone else! If they talk over your head and want to make it obvious that they are smarter than you with investing - go interview someone else. If they went to Ohio State and …. (ha just kidding)! But, seriously, make sure that you like your advisor and feel that they like you back. The quality of your future life hinges on your retirement planning now so it is immensely important that you feel comfortable with this person.
We found our advisor, Brad Lineberger, through a Dave Ramsey endorsed local provider program, that is now called SmartVestor.
Brad is the President of Seaside Wealth, in Carlsbad, CA and has been an integral key to helping our financial wellness.
When we started to pay off our huge debt (110k) back in 2011 we were completely overwhelmed with the idea of getting down to zero debt. Our repayment plan stretched out 5 years ahead of us - and that did not include paying off our mortgage!
We had some money saved up for retirement but we really didn’t know how to figure out if we had enough or even how to get our heads around the idea of not having an income at some point in our future. So, trying to be diligent and following a financial checklist, we looked for an advisor, found Seaside Wealth, and scheduled an appointment.
Frankly, I was afraid going into the meeting! I hate not knowing things and was coming face to face with the reality that I had dropped the ball on something that I should have, as an adult, paid attention to earlier.
So we went into the meeting, and (spoiler alert) I came out like a new woman! I was SO relieved after facing the numbers and KNOWING our future. It was much scarier NOT knowing than actually knowing.
Brad was able to take our information and forecast how much money we would need in retirement, advise us on the best investments and provide encouragement for us to pay off our debts while enjoying our money. We liked him as a person, enjoyed talking to him, and trusted that he had our best interests at heart. I hope that you can find someone ASAP to help you with your investing who is just as great as he is!
I told Brad that I was going to post a blog about this topic and he encouraged me to tell you this….
“Starting early has its benefits…
Susan started saving $100 a month at age 25. After 40 years and an 8% average growth rate she saved $ 322,107.93 for retirement.
Larry decided to wait 10 years longer but doubled his contribution. He started saving $200 a month at age 35. After 30 years and an 8% average growth rate he saved $ 281,710.12. This means Larry has $40,000 less than Susan after contributing double the amount each month.
There’s a cost to waiting and if you’re not earning compound interest then you’re paying for it.”
Do you know what your retirement portfolio looks like and what that means for you? Call Seaside Wealth if you want help, or check out the Dave Ramsey SmartVestor page.
Brad Lineberger, President CFP, ChFC, CWS
James Conole, CFP, CWS, MBA
Seaside Wealth Management
6154 Innovation Way
Carlsbad, CA 92009
T: (760) 730-8120
F: (760) 681-5667