( reading time: 5 min 15 sec )
Retirement was something that didn’t exist, and then it was a long-term employee benefit. Now, it is about personal investments and hoping social security doesn’t slip into the pages of history.
The first goal at any age is regular, steady progress until the goal is reached or exceeded. We also want to continue to enjoy life while we make progress on financial freedom. Delaying progress on this goal should be rare, but the delay is sometimes the right choice. We also don’t want to aim at opportunities that are more of a gamble than an investment.
Those goals are quite the mix of objectives to achieve all at once. We will show how, at different ages, progress with a positive mindset is within our reach and worth the investment.
Short Review of the History of Retirement
According to the Social Security Administration, Germany became the first nation to set the precedent for adopting an old-age social insurance program. (https://www.ssa.gov/history/age65.html) A quarter of a century after it was founded, the age was lowered from 70 to 65.
In America, around 1900, the Fiduciary Group Investment Managers reported ( https://www.tfginvest.com/insights/the-history-of-retirement) that the average life expectancy was around 31 years. With advances in medicine, sanitation, and working conditions, the modern age has risen to over 70 years. They cite the establishment of the Social Security system under Franklin D. Roosevelt in the mid-thirties.
Companies began offering retirement to employees who worked there for most of their careers, 25 years or so. It used to be culturally shameful to move to multiple jobs. People would move around a little but settle in and work a job until retirement. The technological age, transportation, and modern financing pooled together to change people being more mobile where they lived and worked from one season of life to the next.
This economic boom created a situation in which many people with low incomes in America have more than the middle classes of many countries worldwide. It also created the foundation for younger workers seeking retirement before turning fifty, some before forty.
The new retirement target
What started as financial security for older people has transformed into an expectation of a well-funded permanent vacation. The dream of that vacation has drifted from age 65 to the point where some younger adults live extremely minimal lifestyles to reach it by age 35. The goal at large includes the security of ages past, but now it assumes many of us should expect to achieve very comfortable retirements.
We are not pushing that as a goal in this article. Our target is a more universal target of making progress that fits the opportunities of each reader. This means each person’s hopes should be based on their reality rather than the options of others. It is far better for most of us than most of human history.
We all need to ask, what about me? Without sacrificing our joy in the journey, we should be gaining ground on that brighter future. My wife and I did not get the traction we should have. We fit the statistics on the wrong side of long-term success. Others we know in our circles did better here.
So, what do we do? It is too late to progress in the past, but there is still time to progress today and in the future. Financial circles call that sunken costs. Staring at a sunken ship won’t prepare us for the future. What is good is that we wake up today and engage by investing in our future.
The positive mindset
What is a positive mindset? Does being positive mean we ignore the consequences of our current choices? Is the positive thinker the one who adopts the motto, eat, drink, and be merry, for tomorrow we shall die? Positive mindsets align with reality in the present and prepare for the future.
A negative mindset tries to capture all the attention and resources in the present or future focus, but not both. If we want today to get all the planning and funds, we have a negative mindset about the future and a negative season ahead.
Today must teach us about ourselves and our relationships and inform us about changing times. Neglecting to live today will leave us uninformed about the decisions we make for tomorrow. Regular, steady progress is the surest path to success.
Retirement, Prefer the Long Game
If the long game is an option, choose it. We are going to say this over and over because too many young people decide to wait. Those who wait often find their goals are no longer possible once they are ready to prioritize these objectives. The long game is the best; yes, compounding interest works best with more time.
If the long game is not an option, we want to remind you and ourselves that progress still improves the situation. Learn from the missed opportunities that investing pays over time. Money saved is better than money wasted on things that don’t matter. Investing, of course, is better than saving. Having nothing or less in time of need isn’t our destiny; it is a choice we don’t have to make.
Reinforcing the Practice
Again, regardless of age, we should figure out what we are shooting for within the scope of what is currently possible. In the future, we may have more or fewer resources to invest.
If you invested $5,000 in a fund that averaged 8% for 40 years at age 25, you would have your original 5K plus an additional $95K for over $100K. This is the power of compound interest.
If you waited until age 55 and invested the same amount, it would still be worth the investment, but the return would only double your investment. It is still a win but a missed opportunity that cannot be recaptured. It is costly to try to make up the difference with higher future investments.
What if we invested $5K a year for ten years in a row? The results would be amazing if we started at age 25 and waited 40 years. In addition to the $50K investment, we would build over $750K in compound interest. If we waited until 55 years old and made the same $5K a year investment, it would still be worth it. That would pack in over $80K. Still, if you are young and make the same investment earlier, you can target over $800K with the power of compound interest.
Knowledge is power if we use it. Know your target, and remember that this is average growth. Don’t be discouraged if the markets shift up some years and down others. They are going to shift. Watching the future become stable, where you could live off the interest of your investments, is a fantastic way to get peace of mind. Even late investors realize having $80K available is better than a few thousand.
Closing Tips
The path to investing is money from our budget. Getting better at budgeting and enjoying life without purchasing all the paths to happiness will make room for most of us to invest at any age. Creativity takes more effort than buying happiness, but it does more than save money. It also changes how we feel about ourselves. This will make both our journey and our destination more pleasant.
That said, the money spent today that we should have spent on retirement may cost us more than retirement resources. When we lose creativity, we also lose self-awareness and personal affirmation we could have achieved. Chasing the moment should not impact the many moments ahead in a negative way.
Creativity and personal investment are powerful allies on our journey. Remember to live today and prepare for the future. Some seasons will focus more on today, and others will focus more on the future. Don’t procrastinate because you think today’s start is too small. Remember to review your investing and let time take care of the compounding.
