Early Retirement: The truth about saving 10% for ten years
Saving 10% percent for ten years could help with early retirement if you are using an investment advisor who capitalizes on good investments. But the plan doesn’t yield much interest if investments are only in bank savings accounts.
TopOfBook recently rated King Financial Coporation in Concord, NC and Durso Financial Planners in Charlotte, NC as the top two financial advisors. But what about those of us who are starting from the beginning?
Here’s what to do if you don’t have enough money to hire a financial advisor
Retirement planning is a strategic discipline practiced by CFP™ practitioners and financial planners with the ability to create an investment portfolio with your long-term objectives in mind. Investors need to be realistic, but they also need to be aware of unique investment opportunities which could yield higher interest.
How the plan works
For an individual making only $36,000 per year, which calculates to around $3,000 per month of untaxed income, a ten percent savings plan will raise $300 per month not counting interest earned. If you’re lucky a bank will pay .05% annual percentage yield. This interest is essentially free money handed to you as a reward for keeping your money in the bank, but the amount is minuscule.
Using the above strategy, this ten percent savings plan will levy $3,600 in the first year plus an additional $18 in interest. In the second year using the annual 10% savings plan, the individual will place 9% of his income into the savings account. Assuming no money was taken out and his income remains stagnant, the savings account will bolster to $6,858 and an extra $34.29 will be rewarded as interest.
With each passing year, take one percent off of the amount of income you save, which would equal to a principal amount of $19,800 after ten years not counting the interest. With the interest earned, this individual made an extra $705.00 using a bank savings account. After ten years of skimping and saving with the 10% for ten years, he makes a grand total of $20,505, or over a half year’s worth of income.
That’s not enough to retire.
The early retirement 10% savings strategy paired with wise investing practices could yield 4% returns.
Regardless of how low the interest rates are, saving money now can help down the road for an emergency or perhaps for an education fund for a child. Saving is an underestimated practice.
Bank savings accounts don’t pay enough interest to help with early retirement–but saved money comes in handy.
If you are just now starting to save your money, a simple plan such as the 10% savings for ten years is a good place to start. But for those who are determined to find a realistic date for early retirement, talking with a financial advisor who will evaluate all your bills, debts, liabilities and assets can help determine the best financial planning strategies for each individual.
According to the UC Davis Center for Poverty Research, 14.5% of the American population fell below the poverty line as of 2013. That is 45.3 million people in the United States. After the financial markets collapsed in 2008-9, many individuals could not afford to save money, and those who do are afraid of risky investments. A financial planner can help aleviate much of the stress and concern with where to invest money. While there is risk in any investment plan, experienced financial advisors will help you navigate the complexities of financial markets while finding an investment strategy that you feel comfortable with.
Benjamin Franklin said, “A penny saved is a penny earned.” This is why saving just ten percent of your income can make a huge difference when it comes to security–but early retirement requires a little more planning that.