Every December, I used to write a recap of my financial goals: what I accomplished that year, what I didn't, and what I hoped to do in the year ahead.
I still do this privately (and track it in my beloved tool – TRELLO), but I thought now would be a perfect time to talk about a goal I've always struggled with (and still do to this day) –saving for retirement.
Instead of “saving for retirement” — I did other things that felt like more of a financial priority at the time. I became a homeowner at 26, spent most of my money on an extensive renovation, and started working for myself at age 28. Between these financial goals, there wasn't much leftover for shoring up my retirement.
And while I don't regret those financial decisions, retirement is always in the back of my mind. And that whisper of, “you should be saving for retirement,” becomes louder and louder with each birthday.
A few years ago, on my 29th birthday, I decided to get serious about catching up on my retirement contributions. I knew that if I was going to catch up, now would have to be the time, especially in my pre-baby years.
My plan was a modest one. I wanted to save the amount I WOULD HAVE saved had I been saving 10% of my pre-tax income since the time I entered the workforce at age 23.
(Ten years ago now, yikessss time flies.)
I took my annual pre-tax salary off of my tax returns and then took 10% of that number. I won't share exact numbers here because I'm trying to get better about that kind of thing now that I'm doing real estate full-time, but for the purposes of this article, I want to show you how I did the math.
- The income off of my tax returns did average out to $60,000 annually over the last ten years.
- 10% of that annually would be $6,000. This includes the year I made $12,000 as a working actor, the one where I made over $100,000 as a receptionist in Manhattan, and the blogging hey-day years where I earned six figures and took home about half after investing back in the business. (P.S. You can see my blogging income numbers here!)
- I also added in an average rate of return for each year of 7%.
Back-ending the numbers with the compound interest calcuator, I added up that this means I should have these amounts in retirement:
- $68, 986.42 in 2019 (year nine, age 32)
- $78, 807.47 by the end of 2020 (year 10, age 33)
- $89,315.99 by end of 2021 (year 11, age 34).
Actually, in thinking on it, these numbers very closely mirror the ones from this CNBC piece which states I should have $87,750 at age 33.
How I'm Doing with Retirement
Thanks to the large windfalls I received from selling my first home and the sale of this website last year, I was able to max out my IRA accounts in 2018 (a total of $12,000) and a self-employed 401k 2019 (around $17,000.)
At the end of 2019, I was really excited. Really excited. If I could put in around $18,000 in both years, I'd be all caught up and maybe even a little bit ahead.
But between the pandemic, a maternity leave, and starting a brand new house flipping business, I was only able to max out the IRA in 2020 and put about 10% of the maximum allowed into my self-employed 401k.
I am bummed out I didn't hit my goal and that I don't have a big “retirement win” for the end of this year.
Still, I persist, and I don't let these things get me down. I know retirement is a priority, but I also know that a) every little bit that I can do counts and b) the important thing here is the consistent investing for retirement habit.
I haven't been making yearly contributions or received the benefit of an employer match for most of my 10 years in the workforce (my husband on the other hand, has). When I can afford to do so, I prioritize paying into my retirement rather than using the money for other things. I wasn't able to get to it this year, but I have hope for 2021 and beyond.
My retirement “pie” isn't a cute, beautifully baked thing. Rather, it's like a chicken pot pie: a mash-up of a lot of things thrown together that make up the total.
Don't misunderstand me: I'm not saying this is a “best practice” approach or that you should blow off contributing to retirement because you'll “do it later.” I'm merely sharing this article to illustrate that I'm not perfect and that catching up on retirement is a worthy financial goal and completely possible.