This is National Retirement Planning Week – conveniently wedged between National Beer Day (April 7) and National Tax Day (April 15). I’ve already done my taxes and filed my return for 2018. Notwithstanding the necessary beer (or three) just to get through, it was – as it always is – a sobering process.
It helped me focus, again, on a simple concept of financial planning. Every week should be about on retirement. Heck, every day should be about retirement. It may seem far off. You might not be set to retire for 20 years, or even 30… maybe more!
But, as the wise Taoist elder once said, “A journey of a thousand miles starts with a single step.”
Thirty years from now might seem like a thousand miles away. But we can start with a single step. Today. Before you know it, that thousand miles will have been traveled. You’ll be on retirement’s doorstep.
Are you prepared to make it a pleasant experience?
Sadly, most of us are not.
According to the Government Accountability Office, the median retirement savings for folks 55 to 64 is $107,000. That’s not enough money. It’s not even close.
Most of us aren’t saving nearly enough. According to Vanguard, only 13% of people are maxing out their 401k… just 13%. You might think that it’s only high-wage earners who are stuffing their coffers with pre-tax savings. But only 40% of those making more than $100,000 a year max out their 401(k).
That’s right: Even the high-wage earners are neglecting their futures, living high off the hog.
This is where my head explodes… I just want to grab people by their shirt-collars and shake them up.
Not maxing out your 401(k) is turning down free money. I don’t know about you, but I like just about anything “free,” especially money. That’s the simple reason why I max out my 401(k) each year… and my IRA too.
All in, if you pay 50% in taxes, that’s a 100% return on your investment. That would take years – if not a decade or more – to recoup invested in the markets. Millions of people are neglecting an easy way to chip away at retirement goals.
Where do you “find the money” to do it?
Well, in the spirit of the season, I recently did a bit of “spring cleaning” of my financial situation. I found a very easy way to save thousands of dollars. It took me about five minutes to edit out a lot of distractions.
I’m talking about frivolous subscriptions. Look, there are plenty of “smart” ways to spend money on subscriptions… including ones that might help you make up that gap if you’re late in your own retirement planning…
But I found that I was forking over money here and there for a little bit of this passing amusement and a little bit of that internet sensation. It added up to a lot of money… but not much else in the way of furthering my goal of financial freedom.
I’m sure you’d have the same experience with many of your own subscriptions…
In our effort to “cut the cord,” we add Netflix… Hulu… AppleTV… Amazon Prime… and a host of other stuff. The average person thinks they’re spending about $80 a month. It’s actually $240.
That’s a big difference. And most of us don’t even know what we’re spending. Put a cost – and a value – on it. Then it should be an easy place to cut back.
My own spending was about $200 a month. Not anymore. I took an axe to it. No one cuts fat like I do. For example, I just ditched Amazon Prime. I wasn’t using the app much to watch crappy entertainment. I can live without free two-day shipping. Jeff Bezos probably isn’t going to miss my $119 a year very much. So, it’s gone.
Nearly every day, I ride a spin bike at home. For a while, I subscribed to an app that allowed me to follow along with live or recorded workout sessions. It cost me $20 a month. It’s gone. I still ride the spin bike. Now, I listen to music for free on YouTube. Who knew that Pitbull could work you into such a sweat?
A bunch of other stuff is gone, too. I cut 75% of it.
The only thing left is American Express. I’ve already paid the annual fee, so I’ll chop up that card by the end of the year. They’re not going to be happy when I cancel their card after 15 years. But the truth is I don’t get the same benefits out of it I used to. I travel less for work. I eat out less. (That’s another way to save beaucoup bucks.)
It’s just not worth it. There’s no return.
In less than five minutes, I cut a bunch of expenses that didn’t really matter to me. I wouldn’t call it “wasteful” spending. But it certainly wasn’t worth the dollar cost in the context of my real goal.
I should be able to save about $2,000 a year. That money will sleep well – very well – in my retirement account.
(I will, however, take $10 and have another couple of beers…)