Sunwook Jin, CFP®, CRPC®, CMFC®

I imagine you read the title of this article and immediately thought, “Wait, what?  That can’t be true.”  Well… You’re right.  You fell for the clickbait.  In a perfect world, we’d decide to retire when we felt like it and if we couldn’t live the lifestyle we wanted, we’d go get this mythical retirement loan.  Unfortunately, banks do not offer retirement loans.

With no “retirement loan” available (or existent for that matter), the onus is on us to ensure we live the retirement lifestyle we hope for.  How do we get there, what’s the first step?  Start!  Just start! 

Should you plan for your specific retirement dreams… yes.  Should you meet with a financial planner… probably.  Should you care about what rate you earn and how you are invested… of course!  Should you hold off saving until you do all these things?  No!  Just start!

What do a 40 yard dash, a marathon, mowing the grass, and going to the moon have in common?  They all started by someone taking the first step.  It didn’t matter that the end goal was drastically different.  It didn’t even matter if the end goal wasn’t clear when the first step was taken.  What mattered is that the initiative was there.

If you still aren’t sure if you should start saving ASAP, let’s go with the math argument.  Two people, Proactive Pete and Procrastinator Paul, decide that they want to put $24,000 into their saving’s account (let’s assume they earn an identical 2%).  Proactive Pete starts immediately, saving $100/month over the next 20 years.  Procrastinator Paul skips the first 10 years and then decides to save $200/month for the remaining 10 years.  At the end of the 20 years both have contributed $24,000, however Pete has earned $5,528.82 to Paul’s $2,588.17.  Also, something to note, the higher the interest earned the larger the gap.  If both earned 6%, Pete earns $22,435.11 to Paul’s $8,939.75.  Check the table to see how starting early pays.

When you get to retirement you don’t want to think “I wish I could take a loan.”  Take the steps now to build the retirement you want.  At least take the first step!

Rate Pete – Total Growth Paul – Total Growth $ Difference Total Return % Difference
2% $5,528.82 $2,588.17 $2,940.65 12.25%
4% $12,799.72 $5,548.13 $7,251.59 30.21%
6% $24,435.11 $10,939.75 $13,495.36 56.23%
8% $35,294.72 $12,833.14 $22,461.58 93.59%
10% $52,569.69 $17,310.40 $35,259.29 146.91%

*this chart is a hypothetical illustration and does not reflect an actual client’s results

Securities and Retirement Plan Consulting Program advisory services offered through LPL Financial, a Registered Investment Advisor, member FINRA / SIPC. Other advisory services offered through Redwood Financial Network Corp, a Registered Investment Advisor and a separate entity from LPL Financial.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

All investing involves risk including the loss of principal.  No strategy assures success or protects against loss.


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