Invest for Future Wealth

"The best time to plant a tree is 20 years ago. The next best time is right now."

-Ancient Chinese proverb, maybe

Regardless of your income and your time horizon, you're not going to save your way to wealth; you'll have to invest. And while the amount of time you have left before retirement is a huge factor in your total investment returns, if you have not previously been investing there is absolutely nothing you can do to alter the past. The time to start investing is now.

Whenever you hear or read anything from Maritous about investing, we're not talking about doing things that are risky. Instead, we're talking about consistently putting money into proven mutual funds or index funds over a long period of time. Such funds offer diversity of investment, which greatly reduces risk. The S&P 500 is perhaps the best-known stock market index, tracking the stock performance of 500 of the largest publicly traded companies in the U.S., and since 1957 the S&P 500 has had an average annual return of more than 10%. That's a long enough track record where it's safe to say: you can pretty well count on averaging 10% growth on your investments.*

Among Americans 65 and older, the median balance of 401(k) retirement accounts is $88,000. You can start taking steps immediately to get way ahead of that number. (Note: When you read statistics related to account balances, remember that the average includes all the people with a gazillion dollars in their accounts, which, of course, skews the number higher. The median, on the other hand, is lining up everyone from smallest to largest balance and finding the person right in the middle. Median is a much more accurate representation of how the normal person is doing.)

We can look at some real possibilities...

Let's assume a married couple (or an individual) earns the median household income of $80,000 and starts investing 12% of their income into a retirement account. That would be $9,600 per year, or $800 per month.

If you're 35 and plan to work another 30 years, investing that $800 per month at 10% annual return means you will have...$1.6 million in your retirement account.

Won't be able to work another 30 years? How about 20 years...that will put you at $574,000 when you reach retirement.

Maybe you only have 10 years...that's $159,000. Still a lot better than the $88,000 the normal 65-year-old has.

This is just a starting point. Imagine if you grow your income well above the median, or you invest a higher percentage of your monthly income. Or both.

If you're thinking there's no way you could invest $800 per month, I wonder if you're currently paying that much (or more) in monthly debt repayments. The average loan payment for a new vehicle is $737; that sounds like some potential investment money, which is why Maritous recommends working toward the elimination of debt. We'll discuss this further in a future post.

The primary factor between those who retire with a pile of money and those who don't is simply whether or not they ever started investing. So, start. You can do it.

-FB

*Mutual/index fund investments are not guaranteed. Maritous does not sell or recommend specific investments.