Q. I just started working and don't have enough money left to save for retirement. What should I do?
A. Here is the advice you might expect from most financial advisors when it comes to save and invest for retirement:
The above are all truths, for example, if you use this free online calculator (plug in your investment amount, number of years, expected annual gain), you will find you could become a millionaire easily after a few decades of saving and investing.
That sounds great! Except ...
Problems Of the Conventional Advice
Except the problem is, like you described - for people who just started working, there is little money left to save for retirement.
For other people in other phases of their saving for retirement journey, there could be different problems.
For example, when your retirement portfolio reaches certain size, annual saving will only have a small effect because the annual growth from the portfolio will be the driving force.
Another example, if you are near retirement age, the concern of saving for retirement will be replaced by the concern of preserving the years of savings.
All these problems tell us the simple saving mindset is not adequate to serve the retirement saving goal, we need a new framework for saving and investing for retirement.
We will discuss this new framework in our next blogpost.
A. Here is the advice you might expect from most financial advisors when it comes to save and invest for retirement:
- Start saving for retirement as early as possible (ever heard of Rule of 72?)
- Keep investing regardless market up or down (ever heard of dollar cost averaging?)
- Compound growth and time are your best friend (did Einstein ever say Compound growth is the second wonder of the world?)
The above are all truths, for example, if you use this free online calculator (plug in your investment amount, number of years, expected annual gain), you will find you could become a millionaire easily after a few decades of saving and investing.
That sounds great! Except ...
Problems Of the Conventional Advice
Except the problem is, like you described - for people who just started working, there is little money left to save for retirement.
For other people in other phases of their saving for retirement journey, there could be different problems.
For example, when your retirement portfolio reaches certain size, annual saving will only have a small effect because the annual growth from the portfolio will be the driving force.
Another example, if you are near retirement age, the concern of saving for retirement will be replaced by the concern of preserving the years of savings.
All these problems tell us the simple saving mindset is not adequate to serve the retirement saving goal, we need a new framework for saving and investing for retirement.
We will discuss this new framework in our next blogpost.
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