Q & A with Matt Michalski, Vice President, Alpine Bank Wealth Management

Matt Michalski, VP, Wealth Management

Q. Why is saving for retirement early important?

A. By the age of 32, two out three young professionals haven’t started saving for retirement. The reasons vary from student loan debt, not finding that first good job out of college, or starting salaries aren’t always the greatest. Further, attitudes toward retirement have changed. Many young workers don’t want to wait decades to enjoy the good life. Others don’t have access to employer-sponsored retirement plans. The list of excuses goes on, but the simple answer is the earlier you start saving the more financial options you will have down the road.

The longer money works, the better the potential returns because of compounding interest. Your money grows while you’re enjoying the good life–hiking, skiing, fishing, even sleeping. If you could save $100 per week starting in your early 20s, then you would have a nest egg over $2 million by the retirement age of 67 (assuming an 8% annualized return). 

Next, when you have money withheld from your paycheck and placed directly into a 401k or IRA, those sums don’t get taxed. For instance, if you’re in a 20% tax bracket and contribute $1,000 to a retirement account, then you will have saved $200 in taxes. The tax savings means you have more principal to invest, which means your money will grow faster. Granted, taxes will be paid when you pull out the funds in retirement, but typically retirees fall into a lower tax bracket. Or it might be worth considering a Roth IRA, where taxes are paid up front and money grows tax free.

Bottom line, saving is a good practice versus spending your entire paycheck. Even if the amount is small, make it a monthly habit. Start the new year with an individual retirement account. If you already have one, consider increasing the contribution. Over time, expand your saving for other life goals, such as buying your own house, starting a business, or going on a trip. While it takes discipline, it will reward you with financial independence.

Contact Matt Michalski to learn how Alpine Bank Wealth Management can help you achieve financial independence. Call him at 877-808-7878 or email him at [email protected]

Products of our Wealth Management service are not FDIC insured, may lose value and are not bank guaranteed.

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