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We all need to save more money. Whether it’s the result of not having enough disposable income, a tendency to outspend our paychecks, or simply the mental disposition of there’s-plenty-of-time-to-save-for-my-future, time has a tendency of passing us by at a rate of speed that seems far quicker in hindsight than it does when looking forward. And yet, in spite of the most genuine and adamant of intentions, people simply fail to save anywhere near the amount of money they must to retire in a financially comfortable manner.
Last year, CNNMoney posted the results of a survey which found that 54% of working Americans have less than $25,000 saved for retirement. Worse, 43% of Americans had less than $10,000 saved for retirement and, even more startling, 27% said they had less than $1,000 saved. As most of us will attest to, one thousand dollars in savings is essentially one un-forecasted mishap away from being forced to borrow money. You do not need a PhD in finance to come to the conclusion that we have a problem in this country; we do not save enough money. Saving for retirement is a progressive, cumulative endeavor that requires discipline to manage one’s own finances and the ability to see beyond next week. This is to say that almost everyone – albeit, surely there are outliers – is capable of saving some of their income, ideally 6% – 10% of their gross salary.
This year, the American Institute of Certified Public Accountants issued a report which found that 40% of Americans will never be able to afford retirement. Never! It’s a frightening prognostication and one that any person with decades remaining before reaching retirement ever really envisions as a possibility for him or herself. Remarkably, it actually now seems a fait accompli – the natural default outcome – unless proactive steps are taken to ensure this reality never comes to fruition. So start saving, early and often!
The video below provides an illustrative explanation of the extraordinary power of compounding interest. Although this approach alone may not be sufficient to afford you the opportunity to retire to Bora Bora by age 45, it should certainly position you well enough financially to retire comfortably by age 65.
John Brigantino is a graduate student in the Master of Science in Business Management & Leadership Program at the CUNY School of Professional Studies. He enjoys writing, non-fiction books, traveling and the many cultural and leisure experiences Manhattan has to offer.