Looking to the Future

LISTEN TO INCREASE — LOOKING TO THE FUTURE

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Merry Christmas! This week, we celebrate the birth of Christ and I pray that you and your family experience his peace and generosity as you exchange gifts and spend time eating delicious food! If you’re anything like me, you live for the holiday deserts, so before everyone starts talking about New Year’s resolutions, enjoy that cookie or two! 

Today, we’re going to continue our conversation on laying a healthy financial foundation as we discuss step 6 out of 8 on our fuel gauge. If you’re just joining us and are looking for financial inspiration, visit www.trumbleagency.com/increase to catch up and begin your Increase journey. 

Step 6 is putting away 15% of our income for retirement. This money is not to be used for creating another stream of income for you right now. This money is not to be dipped into when you need a little extra for that special vacation. This money is not your savings account for a rainy day. This money, this 15% of your take home pay, is for your retirement, the years when you are no longer earning an income, or at least not much of one. 

Here’s the main goal, and I want you to hear this clearly:If you put 15% of your income away for 25 years, and earn a conservative average return of 8%, you will have enough money in retirement to live off the interest alone—without ever touching the principal.

That’s the goal. That’s the win.

Now, if you’re listening and you’re 50 years old and you haven’t started saving yet, that “25 years” might have just made your stomach sink a little. And I get that. If you don’t want to work until you’re 75, then yes—you’re going to need to increase your contributions. But—and this matters—you only do that after you’ve filled up your financial tank and completed all eight marks on the Fuel Gauge.

At that point, you sit down with a financial advisor, or you run the numbers yourself, and you figure out how much extra needs to go into your retirement account to get you back on track. The key is this: don’t panic, and don’t skip steps. A rushed plan built on a shaky foundation usually collapses.

Now, if you have 25 years or more, this principle is incredibly solid. Put away 15% of your take-home pay into a Roth 401(k), stay consistent, and you’ll be amazed at where you land in 25 years.

One thing that trips a lot of people up is confusion between the type of retirement account and the investments inside the account. When I say “retirement account,” that does not mean your money has to be locked into some risky mutual fund—or stuck in ultra-conservative bonds either.

The type of account we recommend is a Roth 401(k). But inside that account, you get to choose how those funds are invested. Your 401(k) administrator can show you the full range of options available, and I strongly recommend discussing your risk tolerance with them.

Remember—this is not about hitting home runs. We’re not trying to pick the next winning stock. Those strategies often come with big downside risk. What we’re after is steady, consistent returns over time.

In 2008, Warren Buffett proved this point in a famous bet. He wagered one million dollars that simply investing in the S&P 500 would outperform hedge fund managers who could invest creatively however they wanted. And guess what? Buffett won.

The S&P 500 is just the average performance of the top 500 companies in the United States. When people talk about “how the market is doing,” most of the time, they’re talking about the S&P 500. History has shown that for long-term investors with time on their side, this simple approach works remarkably well.

But as always—talk to your advisor or your 401(k) administrator before making changes.

Here’s what matters most:Once your consumer debt is gone, it’s time to start building your future. 15% of your income. 25 years. Consistency.

Do that—and you’ll retire comfortably, confidently, and on your own terms.

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Zach Santmier is the owner of Trumble Agency, Inc. and the author of the personal financial course, Increase. He focuses on helping families escape paycheck to paycheck living so they can freely pursue their ideal future.