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The Alemian File: The Huge Cost of Procrastination
It's easy to fall into a habit of putting off your retirement planning. However, a look at the numbers shows you'll cost yourself a large amount of money by procrastinating.
Many people aren’t prepared for retirement because they got a late start to saving, which is caused in part by procrastination. Saving for retirement is one of the easiest things to put off for another day because it's way off in the future. You figure you have all time in the world, and you have other priorities. Before you know it, another year has passed and you still haven’t set up a retirement plan other than what you have to work. You already know your 401(k) won’t be enough, so you figure sometime soon you’ll sit down and talk to a financial advisor. You blink twice, and five years has gone by, but you think, “What’s the big deal? There's still plenty of time!”
Well, it is a big deal and here’s why: This morning I sat down with my computer and crunched some numbers using illustration software. I began with someone starting to save for retirement at age 45, and then retiring at age 65. I then ran the same numbers starting one year later at age 46, and the annual retirement income dropped by a whopping 10% percent. I then plugged in the numbers starting at age 47 and the income dropped by about another 10%. By age 48, the income dropped by an astounding 30%. Let that sink in for a moment... That’s a 30% drop in income in only three years. In other words, you could lose about 10% of your retirement income for each year you put off getting started. If you break it down into six-month increments, you’re losing 5% of your retirement income for every six months you wait. That’s a huge amount of money, but it doesn’t stop there, because while procrastination creates a dramatic drop in income, inflation is still driving up the cost of living. You can’t stop inflation, but you can stop procrastination.
Put saving for retirement at the top of your list of priorities, because the cost of procrastination is absolutely staggering.
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