Golden Years

Maybe you’re in your twenties, and settling in to a new job. You party plenty and spend money to make sure you look good and play hard. After all, you have lots of time to save for retirement, right? Or perhaps you’re in your thirties, with a young family, childcare needs, private- school bills. What with paying your Fairfield County mortage and the money you spend on your well-earned vacations, there’s barely any left to put away in Junior’s college fund, never mind your retirement. But you know you’re at least supposed to fund your 401(k), so, to your credit, you set one up and add to it each month, and don’t look at it much beyond eyeballing the balance every now and again.

Maybe you’re in your forties, with college bills kicking in. Add in the BMW payments, the country club costs, the ski trips and boat fees. You love a nice bottle of Burgundy with dinner—who doesn’t?— and don’t know what you’d do without your personal trainer. It’s not like you’re living large, like the Joneses down the street, but still, the costs add up. Even if you wanted to throw a little more money into the retirement pot, you don’t seem to have any extra. Besides, your broker has other ideas for your money. Retirement? That’s a ways down the road. You can save more later, when you find some extra money.

Does any of this ring true? It’s all too familiar to retirement expert Julie Jason, who is the founder of Jackson, Grant Investment Advisers in Stamford and the author of The AARP Retirement Survival Guide. She says it’s not unusual for someone to “wake up in twenty years and say, ‘I wish I had saved more.’” Take note of her counsel: “Unless they’re already retired, everybody’s approaching retirement, even if they’re in their twenties.”

If you haven’t already done so, and Julie’s thinking you haven’t, she wants you to envision what kind of lifestyle you’ll want, and how much it will cost. She suggests that you project far beyond what you consider retirement age. She wants you to imagine life (and its annual costs) at age seventy, eighty, ninety. “You need to think of the short term and the long term—that’s part of the complexity of the exercise that one has to go through.”

Many investors, with help from advisers and planners, have an amount in mind that they hope to accumulate by retirement age, and they set out to reach that number. They figure that once retirement occurs, the growth and accumulation phase will end, and the withdrawing begins. But that eliminates decades of potential growth in a portfolio. “People need to appreciate the fact that the lifespan of investing is multiple decades beyond retirement, that they can own a piece of the market for the lifespan of their investing,” she says. “Every person has access to a thirty-, forty- or fifty-year chunk of the market and needs to take advantage.”

In other words, growth and accumulation should continue well beyond the magic retirement age. Julie recommends setting up mini targets—outcomes desired when you’re sixty-five or seventy-five or eighty-five, for example—and creating separate investment plans for each. Perhaps you can start investing now for your eighth decade, for example. “Always underspend your income,” Julie says, and stash away the savings, no matter how small. Over time, they result in big wins in your portfolio.

Little changes in saving and investing now can make a big difference down the road in retirement.

“It’s the power of compounding,” says Julie Jason, founder of Jackson, Grant Investment in Stamford. If starting at 30 years old you invest $100 each month in an account generating 6 percent a year, at 65, you’ll have put in $42,000, but the account could be worth $142,000.* At 75, it could be $254,000. At 85, your looking at $455,000 or more. Up that ante when you’re 30 and the compounding gets compounded, as it were. Say you’re 40 and decide to stash cash for when you’re 75. If you sock away $100 a week in an investment earning 6 percent a year until age 75, your account should exceed $600,000.

*Note: While the S&P 500 has averaged more than a 6 percent return since 1926, past performance does not guarantee future results.

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