A Ruined Vacation Or A Saved Future

The Nielsen Family recently returned from a delightful short vacation getaway to Disney’s Yacht Club. While on vacation, I spent most of my time submerged in water at the Yacht Club Pool or the Typhoon Lagoon waterpark.

In the wild, I am pretty introverted and enjoy the peace and solitude of quiet moments.

At the pool, a 49-year-old accounting executive from Chicago named Chad introduced himself to me.

I assume he felt comfortable talking to me since I wore a Chicago Cubs bucket hat.

He told me he was turning 50 next month and it was time to “get serious about investing for retirement.”

Getting serious about retirement at age 50 is not an uncommon behavior.

There is something about turning 50 that turns a light on the reality of retirement or the fact that I may not be able to work together.

I told Chad, “Happy early 50th; what is your plan to get serious for retirement?”

Chad replied, “I will start maxing out my retirement plan, including the matchup.

That seemed like a seemingly great endeavor.

I may have ruined his vacation, but I saved his future with the following string of questions:

  • Do you know your number? [i.e., how much you need to retire]
  • How much do you need to save monthly between now & the day you need to retire to reach that number?
  • What combination of accounts do you need to be investing in to minimize taxes over the life of your plan?

As you might imagine, the answer to all three questions was “no.”

Without a written plan, you are, at best, “winging it” when funding a three-decade-plus retirement.

Hypothetically, let us assume that Chad needs to accumulate an additional $1,000,000 between now and age 65 [15 years]; what does he need to do?

Assuming a 7.8% annualized return, Chad must invest $2,941 monthly. Over the next 15 years, Chad will have contributed $529,455.

What if Chad would have received the “wake-up call” at age 40 instead?

Assuming the same 7.8% annualized return, Chad would have needed to invest $1,086 per month or $325,843.

The cost of hitting snooze on developing a sense of urgency came at a cost of 203,612 [$529,455 minus $325,843].

Think of the additional wonderful family memories that could’ve been created with that $203,612 instead.

When you procrastinate, it causes those you love to suffer.

If you or someone you’re close to could use help aligning their finances and establishing a financial plan, please reach out to us, we’re accepting new clients and eager to help.

Cheers,

Nic

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