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# How to Avoid Ruining Retirement

Wealth seems to be everyone's dream; the ability to relax a little more, to not stress so much about finances and to enjoy the "good life." So often it is believed that wealth is only attainable by those with large incomes. Those with smaller incomes may not put anything aside, assuming such small savings won't make enough of a difference in the long run. In my experience in the financial services industry, there were several times when I would help an elementary school teacher or janitor with their sizeable 403(b) account. Obviously for them, small savings over time made a big difference. In the same category are those who have large incomes and assume they always will. They constantly spend to the top of their income level and set little or nothing aside for the future. Yes, I also remember helping doctors or attorneys take loans out of their 401(k) accounts. I found that it wasn't so much what you made but everyday decisions that determined long-term success.
When I once asked a janitor of an elementary school how he had accumulated his 1.7 million dollar 403(b) he said, "I just started putting money into it when I first came to work here, a little bit each paycheck." Now, 40 years later as he approached retirement with a steady pension and a large 403(b) account he was financially wealthy. Avoiding financial mistakes is the key for anyone to retire well. This article lists some of those mistakes and ways to steer clear of them.
Waiting Until You're 55
Not starting to save soon enough is number one on our list. Beginning early to save for retirement can make a huge difference in the long run. To illustrate this, let's assume we have two people saving for retirement, we'll give them simple names that correspond with the age they started saving, Mr. 25 and Mr. 45. Mr. 25 puts $3,000 into an IRA each year until he retires at age 65. Assuming he gets an 8% growth rate on average, he amasses $839,343 or almost a million dollars by age 65. If Mr. 45 were to put the same amount aside but start at age 45 instead of 25, he would only have $148,269 saved, definitely not enough to start retirement with. For Mr. 45 to end up with the same amount as Mr. 25 he would have to save almost $17,000 per year until age 65. $17,000 per year for 20 years equals $340,000 cash out of pocket, whereas $3,000 per year for 40 years is only $120,000. Mr. 25 only had to save about one third the amount Mr. 45 did all because he started early. Letting compounding do the work for you allows you more money for other things you want.
1% Is Enough, Right?
Putting aside too small a percentage of income is another mistake people make. It may be difficult when just starting out and times are lean, but you will thank yourself in the long run if you make this a priority. Going back to Mr. 25 again from above, if he would have only put away $1,000 each year, his ending balance would have only been $279,781 in 40 years, again assuming the 8% growth rate. We know how much $3,000 per year would have saved him, but what about $6,000 per year? He would have $1,678,686. Doubling his savings doubles his end result.

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