Today we are releasing the Beta version of our Student Retirement Calculator. If you are one of the 10,000+ in my live audiences on campuses across America in the last four years, you probably have seen it. 90%+ of those attendees wanted it. Today, it available for free at LearnEarnRetire.com (or at the link right here). See what your retirement could look like by inputting variables YOU pick. It is transforming!
If most of us vividly saw and understood what the outcome would be for us at retirement, we would:
- Start contributing to retirement early on in our career
- Be consistent in contributing
- And would have a long-term plan that we understood for retirement so we would take better steps; We would not squander our 20’s; Moreover, if we could compare the impact of starting early to starting late, we would do better.
If we did those things, we would behave differently. The Student Retirement Calculator solves this problem. It was created for students and early employees (the twenty-somethings).
When you go to work, you will most often be offered a chance to participate in a 401k plan (a plan sponsored by an employer that lets workers save/invest a portion of their earnings, before taxes are taken out; Taxes are not taken out until the money is withdrawn years down the line). Some other plans do similar things in different employment sectors like a 403b and a 457b. And, a few lucky souls will be offered pensions (BEWARE: these plans are not what they used to be so you will have to save supplemental amounts. It was not always like that).
By and large the days of employers taking care of this for you are over. In the late 70’s, with the birth of 401k’s, employers pushed the retirement planning and investment on the backs of their employees. Problem was, those employees had no personal finance training. So what happened? The Baby Boomers are now struggling and many will either never be able to retire, or retirement will not look like what they thought it would when they were in their 20’s. IF THESE BOOMER’S HAD UNDERSTOOD THE BIG PICTURE AND THE MATH, THEY WOULD HAVE BEHAVED DIFFERENTLY. They wish they had now. Hence the calculator.
YOUR 4 STEP 401K PLAN TO A MULTI-MILLON DOLLAR NET WORTH
Some advice. When you become employed:
- Know your initial 401k percentage: When you get to your first job, you will be asked if you want to direct some portion of your earnings to your 401k. YES. You need to know that amount. AT MINIMUM, you MUST take full advantage of any funds your employer will match (EX: some employers will match say 100% of the first 6% of the earnings you put in. That is free money. You MUST do this).
- Know your goal percentage: Over time you need to have a goal as to what your contribution should be to your 401k. When you start, you can’t afford to put the maximum of $18,000 per year in. Never the less, you should have a goal. Most of the personal finance experts say you need to put between 12-15% of your earning away. Shoot for 15%.
- Will you hold your lifestyle flat for the first number of years? OK, you start at say 6%, and on average you will be getting an annual raise of say 3%. Would you even notice on payday if there was another 3% in your paycheck? Probably not (EX: $45,000/yr x .03 = $1,350/yr divided by 24 pay periods = $56.25). BUT, if you kept your lifestyle flat and lived on your first year’s take-home pay, and diverted every raise for the first 4 years toward your retirement, you would get to your 15%. Then, every other raise for the rest of your life, 85% goes to increasing your lifestyle and, of course, 15% goes to retirement. Try running that calculation on the calculator. Try starting at 22 years of age or starting at 35 years of age and see how it effects the outcome.
- Will you take the pledge? This pledge is by you, to you, but it is very serious. I want you to raise you right hand and say: ‘I will never divert long-term assets to near-term expenses.’ IF you run your credit cards up, you solve it another way. HANDS OFF these long-term assets are for a beautiful landing at the end of your career.
Hey, talk to anyone who is later in life and asked them, if you could do it all over again financially, would you do anything differently? 100% of the time the answer is yes.
Bill Gale, of the Brookings Institution was quoted in the Chronical of Higher Education regarding student financial wellness. He said, “…another key is keeping the material relevant. It’s just hard to get a 22-year-old interested in when they are 70.” Well, the calculator is relevant and it shows a twenty-something how they might look at 70.
Long-term and specific goals are important. But even more important on the path to progress is the identification and removal of conflicting goals.
Finally, I invite you to share the calculator with others. Remember, the key to networking is to build, nurture, and serve your network. Sharing the Student Retirement Calculator will help and serve others. Your generation can, should, and must do better than the preceding one. My ambition is to help.
This is a Beta version that we will refine over this next year. If you have any input or suggestions, just let us know.
One day you will either look back and be glad you did, or wish you did, financially. For your sake, we are trying to inspire ‘glad I did.’
Good luck, now get moving!