As we begin a new decade, it might be a good time to think about your financial goals for the next 10 years or more. When saving for retirement, our approach must be a long term approach so we can properly invest the money and generate additional funds through investment in the market. For some of us, retirement may be coming in the next decade and others retirement may be more than a decade away. Either way saving for retirement is important no matter where you are in your savings journey.
Let’s say you are going to retire at the beginning of the next decade in 2030, and you haven’t saved any money towards your retirement as of today. It’s not too late to save, but you are going to have to be diligent with your savings and increase it regularly. If your salary is $50,000 annually, you begin saving 5% of your salary and increase it by 2% or more each year until you retire, you will be able to accumulate in excess of $100,000. However, it will take a large portion of your salary and significant increases over the next decade.
If you have more than a decade before retirement, the necessity to save is still present. However, you have more time to save the amount you need. So, the amount you need to save and the amount of your regular increases to achieve the same amount of funds will be less. For example, if your goal is a little over $200,000 and you have 20 years to save that amount with a $40,000 salary. You would need to begin saving 4% of your salary and increase by 1% per year until retirement. However, if you only had 10 years to save that same amount with a $50,000 salary, you would need to begin saving 12.5% of your salary and increase it by 4% per year each year.
So, saving and saving early is key to being able to accumulate enough resources for your future retirement needs. As well, as a LAGERS member, your need to save is less the longer you work for your employer because your benefit grows larger each month you continue to accumulate service credit. So, if you’re later in your career and have not saved much yet, start saving and know that your LAGERS benefit will be a strong financial foundation towards financial security. If you’re early in your career, start saving, increase it regularly, and continue to work in LAGERS covered employment to achieve financial independence.