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Be an Everyday Saver

You’ve waited your entire life to enjoy the freedom and independence that comes with adulthood. Then reality sets in. In today’s economy, you could be facing a competitive job market, high costs of living, paying off student loans or debt, or other challenging situations. As you find your footing and work on your career and financial goals, make sure you aren’t shortsighted. It may seem like retirement is in the distant future, but your youth is one of your biggest advantages for developing a successful retirement plan. And, if you start now, having time on your side could help your retirement savings grow exponentially. In this blog, we’ll cover tools you can use on your path to financial freedom.

Time is money. Compound interest is less about how much and more about how long. It means that you earn interest on your interest at a basic level, which allows your savings to snowball over time.

According to Nerdwallet, a good estimate for an average annual return on investments is 6%. Using their compound interest calculator, you can change the criteria to fit your situation. In the example below, if you were able to start a retirement account with a $5,000 initial investment and commit to contributing $200 per month for 20 years at 6%, what would be your future balance? What if you invested the same amount longer? If you used the calculator, here’s what you should get:

Investment Period Monthly Contributions Total Contributions Estimated
Future Balance†
10 Years $200 $29,000 $42,039
20 Years $200 $48,000 $109,431
30 Years $200 $72,000 $232,052

 

As you can see, by having the opportunity to save for a longer period, you could see a larger estimated return because of compound interest.

Make more, save more. As you grow within your career, so will your income. Which means your monthly contributions should increase. How much to contribute will be determined by your personal situation, but a good rule of thumb would be 10-15% of your annual income. In the chart below, you’ll see how investing 10% at different income levels throughout your career affects your estimated future balance.

Starting Balance Investment Period Annual Income Monthly Contributions Estimated Future Balance†
$5,000 10 Years $24,000 $200 $42,039
$42,000 10 Years $50,000 $400 $142,302
$142,300 10 Years $85,000 $700 $374,211

 

The example above shows an increase in monthly contributions every ten years, but if your income increases more often—or you have the flexibility in your budget to increase more often—you could see an even larger return.

Financial Freedom. The word wealthy could invoke images of an older individual wearing pocket squares or pearl necklaces or a famous person sporting expensive clothes while jet-setting around the world. However, an everyday saver is someone who remains disciplined and consistent as they move closer and closer to their goal of financial freedom.

To learn more about retirement planning, check out this Achieve Financial Success playlist. If you’re ready, our CFS* Financial Consultant, Shanel Dubique, can guide you through your decision process and help you develop a plan to reach your financial goals. To get started, contact Shanel at Shanel.Dubique@atriawealth.com.

 

*Non-deposit investment products and services are offered through CUSO Financial Services, L.P. (“CFS”), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. The Credit Union has contracted with CFS to make non-deposit investment products and services available to credit union members.

†Calculations based on monthly compound frequency

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