Is Splurging on Coffee Really Jeopardizing Retirement?

In honor of World Coffee Day on September 29, let’s take a look at what we call “Late Meth”, or the misconception that spreading Late or Avocado Toast is causing a retirement crisis in the United States.

We’ve all heard it before: America has a retirement crisis. People are not saving enough for a variety of reasons, which is why Americans are saving Americans Conservatives do not meet retirement savings targets based on their age and income.. There is a problem. But what is the reason?

Do you have enough in 401k to retire whenever you want?

The myths of the retirement crisis.

There are a lot of retirement statistics. But some myths have also sprung up around the subject. Retirement savings. One of them is coffee.

You may have heard it before. Here’s how: One of the reasons people reduce their savings for retirement is because they spend a lot of money on “unnecessary” non-essential things, such as fancy lots. But is the spread of coffee really jeopardizing the future of American retirement?

Let’s look at a hypothetical example and subtract some numbers to see.

Susie likes to stop and watch her favorite barista on the way to work and orders a special convocation for which she is famous. The latte costs $ 5 and Susie buys it four days a week.

So, Susie’s total late costs are $ 80 a month. Now suppose that instead of buying lettuce four days a week, Susie gave the money to an IRA. If she earns 6% per annum, Susie’s IRA will be more than $ 54,000 in 25 years.

Of course, $ 54,000 would be a good addition to his retirement savings. But it is certainly not enough money for most people to retire comfortably. Therefore, suggesting that avoiding buying lettuce and other small, relatively ine luxury items is the key to resolving the retirement crisis is, at best, easier than wild.

To take practical steps.

Instead of worrying about risking your retirement by buying coffee, here are four practical steps you can take to increase your chances of a financially secure retirement.

1. Remember the “rule of 72”.

This is an important rule to keep in mind when saving for a long-term financial purpose such as retirement. According to the rule of 72, your amount will double the number of years equal to 72 divided by your return.

For example, if you make an average annual profit of 6%, your initial investment will double in 12 years. We say you contribute to your IRA every year as much as the law allows, which is 2019 6,000 in 2019 (for anyone under the age of 50). In 12 years, your $ 72,000 investment will grow to 7 107,292.83. Over the next 12 years, if you don’t invest more, your $ 107,292.83 could increase to 5 215,894.25. Converting 72,000 to $ 215,894.25 is nothing to smell! And if you continue to contribute $ 6,000. 24 years, You will have $ 323,187.07, which contributes 14 144,000 out of your own money.

2. Prioritize retirement savings – and automate them.

With so many quick financial priorities, saving money for a long term goal like retirement seems insignificant. But understanding the power of the 72 principle makes it easier to prioritize retirement savings.

The best way to implement your commitment to retirement savings is to automate your savings. If you participate in a 401 (k) plan at your workplace, you can fill out a form requesting that a certain amount be automatically transferred to your retirement account during each pay period. Go When you never see money, you never give it up.

Read more: Average 401k balance by age.

3. Take advantage of your employer’s match.

While they say there is no such thing as a free lunch, The employer receives a 401 (k) partnership. Freeing up money is the closest thing. For example, some employers put ڈالر 50 into employees’ 401 (k) accounts, which is part of employees. This is equivalent to a 50% guarantee on your investment, without risk a return!

4. Leave your retirement savings alone.

Tapping retirement accounts before reaching retirement age is one of the biggest mistakes to pay for retirement expenses. Not only does this reduce the amount of money available to withdraw at retirement, but it can also result in penalties and tax deductions for early distribution from the retirement plan.

But what about withdrawing retirement funds to cover a down payment on the first home? Some people justify withdrawing an early retirement plan for this reason, but there are other ways to raise funds for down payment that do not include taxes and fines. For example, you could start a separate payment savings fund or possibly borrow money from parents or relatives.

Read more: When can I waive my IRA or 401k penalty?

Our advantage: Enjoy this latte!

To save money for a comfortable retirement, you don’t have to deny yourself the luxury of being late for work. Instead, focus on the practical steps you can take to save your retirement and enjoy your guilt-free life!

Here are some tips to help you get your dreams back on track:

  1. Get it for free. Personal Capital Retirement Planner, An interactive tool in an award-winning suite of financial tools that enables you to determine how much money you should save for retirement.
  2. Consider talking to a. Loyal financial advisor For more detailed guidance on your retirement saving strategy.
  3. Download our free guide. 65 Smart Retirement Ways, A feature of financial advisors’ insights.