By Eric Reich
Last night, I was scrolling through Facebook, also known as the world’s biggest time waster. I came across a reel that explained that if you contributed a little over $19 a day to a Roth IRA, it would translate to over $1.2 million 30 years later at a rate of 10% annual compound interest. If you are married, and you both funded a Roth IRA then you can double that number to $2.4 million. That could translate to potentially $60,000 – $120,000 per year in income. Add in another $24,000-$70,000 a year from Social Security, and you can live more than comfortably in retirement. As someone who has done this for 28 years, I’m still in awe of the power of compound interest.
However, as with most things on Facebook, I just couldn’t help myself. For some strange reason, I felt the need to look at the comments. Now, I’m a long enough social media user to know that unless you want to get mad, you should never read the comments, but I did it anyway. Worse, this was right about my bedtime, so now I’m not only annoyed that I read them, but I now can’t sleep on top of being annoyed. The comments ranged from simply stupid, “It’s impossible to return 10% in the market”, to the merely uneducated about the topic, “At 9% inflation you’ll never get ahead”, to the upsetting one, “That’s easy to say if you have an extra $7,000 per year laying around.”
Let’s address them all in case anyone is thinking any of these things. First, the compound annual return for the stock market for the last 100 years has been 10.1% 100 years. For the last 50 years, it’s been even higher. So yes, that is a more than reasonable assumption. Next, while inflation has been higher relative to history, we only briefly hit 9% and now inflation sits at the historical average of 3.5%, though it is still above the Federal Reserve’s target of 2%. The last comment, and there were quite a few like this one, concerns not having the money to save.
Not being able to save for retirement is an age-old issue. Some of the comments were, I’m 30, broke, and can’t save. Well, guess what? Being broke in retirement is a lot worse than being broke at 30. Why? If you’re broke at 30, there is likely a lot more that you can do about it than you can later in life.
If you’re 30 and “broke” but you have a new iPhone, manicured nails, and go out for dinner or drinks three nights a week, then you aren’t broke. You’ve chosen to misdirect your priorities.
If you aren’t doing any of those things because you truly can’t afford to, then there is still hope for saving. First, if there are any expenses you can cut, go for it. If you can’t, then we need to find ways to increase your income. Can you turn a hobby or passion into a side job? Can you add working extra hours? How about adding a seasonal job? Can you rent out a room in your house or a space in your garage? People with classic cars are always looking for garage space to rent. Find any way you can to increase your income in order to start investing.
Lastly, don’t get hung up on the $7,000 a year number to fund your Roth IRA. If you can’t spare $19 a day, can you do $10? How about $5? Any amount of investing is better than no investing. The most important bill you have is the one to yourself. Never pay anyone before you pay yourself. The sooner you do, the better your future will be.
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Reich Asset Management, LLC is not affiliated with Kestra IS or Kestra AS. The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation. To view form CRS visit https://bit.ly/KF-Disclosures.
Eric is President and founder of Reich Asset Management, LLC. He relies on his 25 years of experience to help clients have an enjoyable retirement. He is a
Certified Financial Planner™ and Certified Investment Management AnalystSM (CIMA®) and has earned his Chartered Life Underwriter® (CLU®) and Chartered Financial Consultant® (ChFC®) designations.
