October 2015 DC Update
On the Hunt for Savings
We recently visited MOSERS' PreRetirement seminars to see what advice those nearing retirement had for newer state employees. Here's what they had to say.
State Employee 1: Join deferred comp right away and start putting some money away even if it's a very small amount.
State Employee 2: Retirement is so important, so you really need to plan ahead. Don't wait until you're 40 or 50 to decide you want to retire because you're just going to find out you just don't have enough time or money to start saving.
State Employee 3: Start saving your first day and save as much as you can.
State Employee 4: Do not wait. Put yourself at the top of your priority list and pay yourself first.
State Employee 5: Put in as much as you can. If you can max it out, max it out.
State Employee 6: I would say start now, as soon as you sign up to take on your new job, and save at least 5% of your take home salary.
State Employee 7: Join deferred comp right away and start putting some money away even if it's a very small amount.
State Employee 8: For new employees you've probably heard this one thousand times, start saving today. If you need to look at some charts showing the results of saving now versus waiting until later.
State Employee 9: So many times, so many of us, we haven't tuned into the long-term effect and it is important to look at all your options, everybody has a different situation.
State Employee 10: Start whether you're married or single. I started out with only $25 per pay period and we were only paid once a month back then. It was a very good investment, so invest, invest, invest.
State Employee 11: Start from day one saving. Put as much as you can aside, because you're going to need it.
The advice to start saving early is certainly wise. In fact, the sooner you start saving something, anything, the better off you will be. For instance, if you could save what one of these (holds up a fast food bag) costs each week for thirty years, then you could have about $53,000 in retirement savings*. That’s fifty-three thousand reasons to see what changes you can make now to start contributing to a retirement savings account. Once you make that decision, the enrollment process is easy. Simply go to modeferredcomp.org and click the big, red enrollment button. If you're still not convinced, consider what some of our retirees had to say about their retirement plans.
State Employee 12: I hope to retire and keep working somewhere, whether it would be volunteered or paid.
State Employee 13: I'd like to travel all over the world.
State Employee 14: I want to ride the Katy Trail and enjoy the outdoors.
State Employee 15: I have a master's in History, so I'm going to substitute teach.
State Employee 16: Well I want to do something I like. I don't want to have to work again or get another job. When I retire I just want to retire and maybe travel and enjoy life. I don't want to be a retiree that has to go back to work for some reason. I mean after all the years I worked; when I retire I want to stay retired.
The decision to keep working in retirement isn't unique to Missourians. In fact, a recent CareerBuilder survey found that 54% of workers age 60 and older will work after retiring from their current career – up from 45% in 2014. Of this group, 81% say they'll most likely work part time, while 19% plan to continue working full time. While retirees continue to work during retirement for a number of reasons, many do so because they simply need the extra income to get by. When put in that context, beginning to save for retirement at a younger age is a no-brainer. Think about it this way, if you invested about $75 each semimonthly paycheck – or around $150 each month – in the deferred compensation plan over a 30-year working career, that would create $866 of monthly income for 25 years in retirement**. That amount, $866, just happens to be what you'd earn each month by working 20 hours per week in a job that pays $10 per hour. In other words, if you knew that saving $150 each month while you're working would save you from 20 hours of part-time work each week in retirement, wouldn't you do it? Of course you would.
Employees nearing retirement have wisdom that is forged from life experiences. On the flip side, newer employees have something just a valuable as wisdom. They have time. Putting that time to work for you is the wisest decision you can make today. Using the State of Missouri Deferred Compensation Plan as your tool to do so, is just as smart.
*Assumes annual savings of $520 (or $10/week) for 30 years, earning a 7% annual rate of return on investments.
** Assumes savings of $150/month and a 7% annual rate of return for a 30-year working career, with a 3% annual rate of return and total account depletion after 25 years in retirement.
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Thanks for tuning in to the October video edition of the DC Update. For important plan updates, be sure to follow us on Facebook, Twitter, LinkedIn and YouTube. Whatever your preference, social media ensures you'll be the first to know about important Plan events and news. Until next time, this has been Brooke Rowden from the State of Missouri Deferred Compensation Plan, your smart, simple savings solution.