A reader question I answered recently brought a small avalanche of mail, mostly from readers who were aghast that I would suggest they save such significant portions of their paychecks for retirement. It was money they just didn't think they could afford to save. I can imagine that for people who save nothing, my suggesting they should be saving thousands every year was shocking. Here's just one of those messages:
Dear Mary: I am a 34-year-old college grad. My school debt is approximately $46,000. My car loan totals $8,500. I have a chronic medical condition that costs me thousands each year. I was reading an article that you wrote in which you told a reader that she needs to save approximately $15,500 a year for retirement, plus save an additional 10 percent of her net income in her emergency fund. I am barely making it right now, though I work full time as a teacher and make approximately $65,000 a year. What do you suggest I do to start being able to save that much? — Heather
Dear Heather: I recall the article to which you refer. Reader B.H., as she identified herself, is a recently single mother with two college-aged kids, barely surviving because she is putting the financial support of her two adult children ahead of her own financial care. She's in a difficult position. I recommended that she immediately shift to taking care of her own financial future now that her children are old enough to be on their own. I went on to point out all of the ways she needs to be crash-saving for her retirement because, at this point in her life, she is all she can count on. She must begin to take care of her own financial future.
I responded to B.H.: "You need to make sure that you are contributing the maximum of $18,000 each year to your employer's 401(k) or 403(b) retirement plan. Once you reach age 50, you can increase that amount to $24,000 per year, and you should." Of course, she is not required to contribute any amount to her employer's retirement plan, and she can contribute any amount up to $18,000 per year. At this point in her life, however, it is important that she push hard to reach that maximum.
You may believe that you cannot save because your debts are high. Or you may believe that despite the fact that you make a decent income, you just do not make enough money to save anything at all. Wrong. How much you save has little to do with your income. It has to do with the choices that you make.
Even with your large student debt and car loan, at $65,000 a year there is no doubt that you have — or should have — some discretionary income. It all comes down to what you choose to do with that money. You can choose to spend it now, or you can choose to save it. Even if all you can save is 5 percent, do it. Start now. Then start looking for every way you can stop spending so you have more money to save.
The sooner you start the more time your dollars will have to grow. The choice is yours. And for my readers who only wish they'd started when they were 34 years old, I will tell them they cannot change the past. It's only too late if you don't start now.
Mary invites questions, comments and tips at [email protected], or c/o Everyday Cheapskate, 12340 Seal Beach Blvd., Suite B-416, Seal Beach, CA 90740. This column will answer questions of general interest, but letters cannot be answered individually. Mary Hunt is the founder of www.DebtProofLiving.com, a personal finance member website and the author of "Debt-Proof Living," released in 2014. To find out more about Mary and read her past columns, please visit the Creators Syndicate webpage at www.creators.com.