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[The following is a partial transcript of this episode of The Scott Alan Turner Show. Listen to the full episode to hear this story, listener questions, money hacks, and inspiring stories of people that are changing their financial lives. Subscribe to the free podcast on iTunes or Google Play]
Story from Sunshine: The Husband and I are in our early 50’s and we bit the bullet last year and paid off the last $100K of our mortgage. Including our $400K home equity, we are now debt-free and have a net worth of about $2 million. I want to share this story to encourage other people with a child on the autism spectrum. I started saving at a young age, and got The Husband on board when we got married 26 years ago. Due to the health issues of our son, we became a single income family but continued to save diligently in the 401K and IRA’s. I did a few part-time jobs when opportunities arose, to keep us on the path to meet our goals.
The reality is most people are not prepared for, and not preparing for life after work. Fellow personal finance guru Suze Orman was in the news recently with the comment you should have at least $5M to retire. Thirteen years ago when we first met with a financial planner and said we wanted to retire at 50, he said we would need $12.5M.
Those numbers are incredibly discouraging for most, if not all people. It’s no wonder people think they will work forever.
But then we have those great stories about living abroad on just $200,000 of retirement savings. That’s not for everyone. I have no desire to retire to the island of Guam. You probably don’t either. Hawaii yes, we’d love that but the frugal reflex in me isn’t going to be happy spending $8 for a jar of peanut butter.
What can people expect?
The average American salary is $56,516. If a person or a couple
- starts at age 25,
- saves 15% of their income,
- gets a 5% match from an employer in their 401(k)
they would be saving over $900 a month. At a very conservative 8% return a year, in 30 years they would have over $1 million dollars.
Those are realistic numbers, not the pie in the sky fake math you may have heard elsewhere.
Fidelity has a 401(k) contribution calculator you can try out for yourself.
And WOW! do you know how good that is? Because it’s nothing fancy, and it leaves out a ton of money:
- social security
- working more than 30 years
Did you ever think the average person is going to earn over $2M over a 40 year career? That’s average!
Do you realize a fast food worker will earn close to $1M flipping burgers making $10 an hour for 40 years.
I believe everyone should retire rich, and it’s an option available for everyone.
I know this because we share story after story on the show showing ordinary people doing extraordinary things.
Ordinary people doing ordinary things can lead to extraordinary results
Level One: of the retirement money pyramid, and this varies by country, it government provided money. In the United States its Social Insecurity. It’s not thriving, it’s surviving.
People can make it work. My mom makes it work. She is very happy, healthy. She also has a pretty good backup plan that she probably doesn’t think about – five successful kids, any or all who could provide support.
Level Two: retirement savings and pensions. Most people are going to be loaded up at this level. If it were the food pyramid, this level would be the grains and cereals, the milk, the cheese.
Level Three: there are fewer people here, but anyone can get there. This is after maxing out the retirement accounts. What would happen if you tried:
- some rental homes.
- work at some fun job part time
- put some money into a separate investment account.
- buy and sell rare comic books.
This is excess money you don’t even know what to do with you’ve got so much.
Do I buy the red one, or the blue one. Heck, let’s just buy them both. We can afford it. And why don’t you buy all the accessories and upgrades for it while you’re at it.
What if someone things they are too old, don’t make enough, starting over, just starting, too many obligations.
It’s really hard to believe if you’re not wealthy yet. YET. But here’s what I’ve learned from going from nothing to something and all the people I’ve gotten to know who have gone through the exact same thing. When you start learning how to handle money, saving what’s coming in, and increasing what’s coming in, things start changing. When I did that I had money. And money is like a magnet, it just seems to attract more money. Which it does, you put it to work through investing.
You and I both know a lot of income is going to flow through your hands. So what are we going to do with it?
What’s kind of pyramid are you building? One that reaches to the clouds? One that looks like the great pyramids of Giza?
Hopefully you’re not relying on the aliens to come back and build you one.
Are you going to build a super shiny, but smaller pyramid like the Luxor casino in Vegas who’s light shines into outer space? That’s a cool pyramid.
Is the pyramid unfinished? Maybe someone has the base layer in place, but needs to get to work and add some more levels. That’s normal. Everyone has to put down the foundation first, and build the walls before the capstone goes on.
Someone in their 20’s may not have even found a decent place to build one yet. That’s ok, keep surveying the land for a good spot.
$1-$2M will pass through most people’s hands during their working careers. And the good thing is nobody has to save $1M. Invest that money, let it grow for you.
Think big. Build your wealth, and you’ll build your levels, your legacy, and your loot.