If today’s economy has taught us anything it is the simpler the better. I don’t think many folks today have a couple extra hundred dollars a month to throw at their retirement. My question is, “Can you spare $50? a month?” There is one caveat here: You must have a $1000 emergency fund before doing so. Why? You don’t need to fund retirement before being ready for the financial unexpecteds of life. Retirement funding before emergency fund is putting the cart before the horse. If you need help starting an emergency fund, I have previous posts on the topic. Once you have your emergency fund, begin setting your $50 aside in an automatic savings account. Example: www.ingdirect.com. I want you to do this consistently until you reach $1000.00. At that point you can begin shopping for solid mutual funds to start a ROTH IRA. For information on Roth IRA benefits, consult my previous post. You may wonder if it’s worth the effort. What can $50 a month do for me long term? I’m glad you asked.
A 35 year old invests $50 a month for30 years getting 7% return = $17,872 (after inflation)
A 45 year old invests the samefor 25 years at same return = $11,872 (after inflation)
I think this tells you that a little can become a lot. If you desired more you could increase your contributions to get more. Investing in stock mutual funds (long term) can bring returns higher than 7%.
You have to start somewhere. The journey of a thousand miles begins with one step. You have to decide if that time is now or later. Maybe you can’t come up with $50.00 a month. My next post will give you several suggestions.