Savings and Investment Plan

It’s that time of year again. The holidays are here, my eyes are already bigger than my stomach as I dream about turkey, stuffing and gravy (especially my wife’s cheese potatoes) in front of me tomorrow. Football will be on all day, these are fun times of the year. But this year, be thankful for one more thing – a savings and investment plan that will help you reach your goals.

I’m a member of NAPFA – The National Association of Personal Financial Advisors. They’re the largest group of financial advisors who’ve sworn off commissions, perks and benefits in order to work only for their clients. Many members of this group are pushing for 1% additional savings this month. I like the idea!

1% doesn’t seem like much, doesn’t feel like much, and will bring great peace of mind to any well constructed savings and investment plan. Especially in these turbulent times with soaring deficits and seemingly out of control spending – saving an extra 1% (conversely if you’re retired spending 1% less) can help you achieve your goals with less risk and heartache. It’s like your own austerity program.

Take for example John. John Saver has a savings and investment plan right now that calls for him to save 6% of his $70,000 salary each year. That’s $350 per month. John is 40 years old, and wants to retire at age 60:

Saving and Investing 6% a year

John has $236,000 in his taxable account – or as high as $318,000 in an IRA or 401k account! This is assuming John can invest and earn an average 8% return over the next 25 years prior to retirement.

But if John saved just 1% more:

Savings Investment Plan 7 Percent

John would have $275,000 or $370,000 in a tax preferenced account like an IRA or 401k. Pretty powerful stuff! Just 1% more means a big difference in the total savings.

Of course we’d recommend John bumps his savings and investment plan up to 10%. 10% seems like a great place to start, however in this economy something is always better than nothing.

That 1% austerity program for John can do wonders to his financial goal realization. His savings and investment plan will be stronger than ever, and he’ll retire more comfortably because of it.

On a personal note – more from my Las Vegas financial planning experiences – I hear a lot of worry and concern over recent market events, specifically the election results. I’ve long said the markets will do what they do regardless (there’s no market timing that works), and I’ve posted several blogs and articles on the topic showing that it matters not who controls the White House, the House or the Senate.

But if you’re at all concerned about the election results, maybe it’s time to be self-reliant by 1% more, and build your savings and investment plan faster than normal! It may just bring a great deal of peace of mind ALONG WITH helping you realize all of your financial goals!