What a strange question to ask. Don’t we invest in our retirement? What is all of this about buying our retirement?
I was recently explaining to my son the need to set money aside for his retirement now, while he was young. He does set some aside through a 401k at work, but the entire concept seemed a little too far out in the future for him to grasp. Like many young twenty-somethings, he is more focused on his needs now than his retirement 60 years from now. I asked him what kind of retirement he wanted. He talked about a nice house, travel, nice cars, active social life, lots of family around. When I asked him how he was going to pay for it, he understood … and a light bulb went off in my head. He needed to look at his 401k as though he were buying his retirement. He could get his head around paying for his retirement in monthly installments much easier than investing in his retirement.
I wonder how many other people struggle with the concept of investing in their retirement. It seems complicated and intimidating. On the other hand, making monthly payments seems easier to understand. We all make car payments, utility, rent or house payments. Retirement is just like any other payment in many ways.
There is one great big difference. The earlier you start making those payments and the higher the payments, the less your retirement will “cost” in the long run. It’s all about the magic of compound interest over time. I’ll save that part of the conversation for another time.
Apprisen has a great infographic that explains how much $1,000,000 will cost you based upon when and how much you start paying. Check it out.