30 and Counting
Remember when turning 30 seemed impossibly far off? If you're turning 30 this year, retirement probably seems just as distant.
But while retirement remains an abstract concept for many on the edge of 30, it's essential to start saving early to ensure a comfortable life after leaving the workforce. That's especially true for today's 30-year-olds, who are a lot less likely than workers in their fifties to retire with a monthly pension check. Instead, they'll be counting on their own savings and investments to see them through.
Here's the most important thing for younger workers to remember: If you don't pay now, you will have to pay much more later to assure the same amount of retirement income. If you start setting aside $1,200 a year at age 30, assuming a 10 percent return on investment, at age 65, you'll have $394,847, according to financial planner Ric Edelman. Set aside the same amount 10 years later, and you end up with only $144,120 at age 65.
With that in mind, we've recruited three volunteers at that milestone age to tell us what they are doing to prepare for retirement. (Talking to readers about what they've done with their financial planning will be a regular part of this column.) We asked two experts, Dallas L. Salisbury, president and chief executive of the Employee Benefit Research Institute, and Tal J. Diekvoss, regional director of private client wealth management for BDO Seidman LLP, to analyze what our volunteers have done so far and, when appropriate, to recommend additional steps.
All three of our turning-30s are trying to balance repaying debt, saving for a house and saving for retirement -- not an easy task. And all three are short of what they need for retirement, at least according to Diekvoss, who thinks it is too risky to assume Social Security will be around 35 years from now. (In fact, current projections are that the Social Security Trust Funds will be exhausted in 2040.)
The demise of Social Security may be too pessimistic an assumption. But, if it's not, our volunteers -- and you -- still have time to make up the shortfall.