Baby Step Four: Invest 15% For Retirement
*Baby Steps 4, 5, & 6 are all in order of priority but happen simultaneously.*
Once you’ve finished paying off all of your non-mortgage debt and built up a fully-funded emergency fund, you are now ready to move on to Baby Step 4 - which is putting 15% of your [gross] household income into retirement accounts.
I want you to dream for a few moments…about what YOU WANT your retirement to look like.
Close your eyes and picture (very clearly) what it is you will have. Write it down. Create a vision board. Tell your spouse or family. Are you going to travel? Will you be a blessing to an organization, family, or individual? Could you open that business you’ve always wanted to? Make your dreams visual, so you know what it is that you are chasing.
Ask yourself what it is you really, truly want.
Roughly 50% of households age 55 and older have no retirement savings at all. None. Across all age groups, the average amount saved for retirement is less than $100k. While this might sound like a lot of money, this is not enough. On average, a couple will statistically spend $200k on medical expenses alone during retirement. Planning for retirement needs to be a priority. We won’t be able to live out our retirement dreams if we are expecting someone else (like the government) to take care of us. The average payout of social security was $17,652/yr in 2019. This is not enough to live your dreams on.
Before moving forward, click here to see the power of time and compound interest (pay special attention to the graphic in the middle of this blog): https://www.daveramsey.com/.../how-teens-can-become...
It’s time to accept that your retirement is in YOUR hands. And knowing doesn’t make a difference. Doing makes a difference.
“You don’t get to live out your dreams without a plan.”
There are two major worries people have about retirement: 1) Running out of money 2) Becoming a burden to friends and family
However, if you plan right for retirement, you will have more of these two things: 1) Time 2) Money
The recommended amount to save for retirement is 15% of the gross household income because it allows room in your budget to also work on Baby Steps 5 & 6 (kids’ college and paying off the home early), which happen simultaneously. It is good to be reminded, though, that saving for retirement is the most important of these three steps. We need to take care of ourselves first, because that is how we are able to conquer the two biggest retirement worries while also allowing us to live our dreams and be a blessing to those around us.
Here are some common mistakes people make when investing: 1) Trying to perfectly time the market 2) Not getting started early 3) Investing in the wrong things 4) Putting all your eggs in one basket 5) Doing nothing
I recommend investing in one of two things: 1) Stock-based mutual funds & index funds 2) Paid-for, income-producing real estate
The goal of our investments is meant to eventually replace our income. We do this by remaining consistent in our investing. And a financial advisor can help us do that. From the most comprehensive study done of millionaires in America, 68% of them use an investment professional. When looking for a financial advisor to work with, you want someone who talks TO you, not AT you - you want someone who teaches you.
A financial advisor will statistically make your investments more money. If you’re still unsure about whether or not to hire an investment professional, take a look at these two articles: https://www.nytimes.com/.../why-you-should-hire-a... & https://www.chrishogan360.com/.../why-you-need-a...
But how much do we need for retirement?
This is a great question! And the answer is…how much do you want to have? I would recommend using the R:IQ tool - the Retire Inspired Quotient. Here is the link to use this free tool: https://www.chrishogan360.com/riq
The purpose of this tool is to think of retirement as a financial number, not an age. This tool will help show you exactly how much you should be investing each month to hit your desired retirement number.
Dare to dream! And dare to dream BIG!
For most, the investment world is uncharted territory. So make sure you are asking a lot of questions and staying intentional with what it is that you want. Remember, you are ultimately in control of your own destiny.
Here is an article on how to start investing: https://www.daveramsey.com/blog/how-to-start-investing
Here is an article discussing some basic investing techniques: https://www.daveramsey.com/blog/daves-investing-philosophy
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Kyle is the founder and certified financial coach behind Financial Flippers. You can learn more about Kyle and what he offers by visiting his website: www.financialflippers.com
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