There isn’t much in the book, Personal Finance, Turning Money into Wealth that doesn’t touch on retirement.  Not only is Chapter 16, Retirement Planning devoted to retirement, much of what we do when we discuss investments in Chapters 11 through 15 is really talking about investing to meet your retirement goals.  Why is that?  That’s because according to the National Endowment for Financial Education survey, “Redefining the American Dream,” saving for retirement is the number one goal for Americans.  Unfortunately, most Americans aren’t making the kind of progress they would like to make.

So, how do you make saving for retirement work?  The answer is to start early, but how early should you start?  That’s an important question, because “when” you start saving for retirement determines “how much” you must save – obviously the earlier you start to save, the less you have to save each year.  In addition, the longer you wait until you retire, the less you have to save each year – and, of course, the higher the rate of return on your retirement investments, the less you have to save each year.  That’s clearly the lesson from Chapter 3, Understanding and Appreciating the Time Value of Money.

The Center for Retirement Research at Boston College recently released a study, “How Much To Save For A Secure Retirement,” that was profiled in the Fox Business article, “Retirement Planning in Your 20s: A Must Do.”  A quick look at the article shows the impact that a 10-year delay in beginning to save has when they examine how much young Americans should save if they start at age 25 or at age 35.

Discussion questions:

1. Before examining the article, what percent of your pay do you think you would have to save annually in order to retire at 62 if you started at 25?  How about if you started at 35?  How do your numbers change if you want to retire at age 70?  What do you feel you will be able to afford to do?  Take a look at the Fox Business article, “Retirement Planning in Your 20s: A Must Do,” and be prepared to discuss in class your opinions in class.
2. If you want to save 11% of your income each year for retirement, how would you go about it?  Be prepared to discuss in class.