Friday, September 11, 2015

Financial Friday

For this month’s Financial Friday I decided to attack retirement savings. I am not going to lie just thinking about retirement savings makes me twitchy. It is one of those abstract things to me. We are in our mid-thirties raising six young children. The thought of retirement seems a long way off. It is also quite a confusing thing to think about. How am I supposed to know how much to save each month? What is my goal amount? How do I know that will be enough?  In an effort to answer these questions for our family I decided to read A Million is Not Enough by Michael K. Farr.

The title is quite depressing right off the bat. How can a million dollars not be enough?! It seems like this big giant mythical number when you are living on an enlisted salary raising six constantly hungry children. Turns out it probably won’t be enough when you consider we still have 30+ years till retirement. There are of course these lovely things called inflation and taxes to consider. Yuck.

While reading through the book A Million is Not Enough the author goes into detail concerning both inflation and taxes. He provides several graphs and charts thought out the book in order to help the reader better understand the concepts. There are also several formulas presented to help the reader calculate their own financial standing in terms of retirement savings. 

After doing the math I found that our family needs to save $2,500,000 by the time we retire in order to have $50,000 per year income. Did you get that?! After taking a break to fight off the nausea those numbers induced….okay, I took a nap…..I came back and reread the section. Yikes! I understand where the author is coming from and I understand that inflation is going to be killer over a 30yr time span. I did however calm down quite a bit when I realized we also have a good guy on our side: Compound Interest. 

We have been faithfully saving 10-15% of my husband’s salary for 10 years. It seems like an extremely small amount right now but we have compound interest on our side. Since we started saving in our 20’s that gives our money 40+ years to grow and work for us. I used the author’s formulas and calculated what our future contributions will turn into over the years. We are still way below the $2.5 million dollars the author feels we will need. We however will not always contribute the same amount we do today. My husband will get promotions and eventually retire from the military and move to a job in the civilian world. I will not always be a homeschooling mother. I do plan to receive my Master’s Degree and go back to work when the children are older. Our children will grow-up and leave home down the line (I am not looking forward to THAT at all!). 

The bottom line for me is that things will change over time. Will the changes go along with our plans? I have no idea that is up to God. I do know that we are aware that retirement is out there and sneaking up on us. We are making a conscious effort to save for our retirements and doing our best to attack the issue head on. I think the worst thing we could do is to turn our backs on the situation and give up before we even get there.
 We will continue to adjust the budget to cover not only our daily needs but our future needs as well.  I will say that reading this book was a helpful way to push ourselves to reach for a higher rung on the ladder. I am glad I read through this book even if it has been a bit scary to consider! After all knowledge is power as they say. 

I would love to hear about your retirement planning!

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