A Quiet Fortune: Mark or Robbie — which story will you choose?
Mark and Robbie had been best friends since they were little kids. They whole time they were growing up they did everything together.
As many friends do, though, Mark and Robbie grew apart as they got older. Sure, they saw each other, but not as often as they would have liked. When they did get together, Rob and Mark talked about almost everything: their old school days, their jobs, kids and parents, which cars got the best mileage. But they never discussed finances.
You see, all the while Mark and Rob were creating their lives, Mark had been doing one thing that Robbie hadn’t: He had been creating a future.
It was almost an indiscernible difference. Both of them earned an average income for the area. Generally their lives were fine, and neither felt as though they wasted money.
There was one thing that Mark had done, however, that Robbie hadn’t: Mark had started investing when he was 18 years old.
As soon as he had graduated from high school, Mark decided to put most of his graduation money to work. He talked to a couple of money-savvy relatives and started a mutual fund account. Each year Mark stuck $2,000 into that account, switching funds occasionally if another option looked more sensible.
Those first years had been really tough; after all, $2,000 would have paid for books in college as well as more than a few party nights. But Mark was determined. He had seen some numbers in a high school economics class that had made him think:
Two thousand a year invested at 7 percent for 42 years would grow to $544,774. With an 8 percent growth rate that same $2,000 would become $743,661.
Mark figured that he would be putting aside a total of $84,000 over the years, but could end up with hundreds of thousands more by the time he quit working. Not bad. So with that bit of information Mark decided to do whatever it would take.
Robbie had heard those same numbers in school. But retirement was a lifetime away. Heck, he’d be making a million a year by that time, he guessed. Why worry now?
It wasn’t until Robbie was almost 50 that he thought about his “million-a-year” dream and woke up to the fact that all he had for retirement income was Social Security and a small matching 401(k) from the company. That would not do much toward making life comfortable. In fact, he worried that it might not even buy necessities.
At their next visit Robbie asked Mark if he had thought about retirement. When Mark said confidently that he should be set to retire at 62, Rob was amazed to think that his best childhood friend had been thinking about it for years already.
“No,” Mark replied. “I really don’t think about it much at all. My investing is done automatically. I quit missing that $2,000 by the time I was 24. I just didn’t have it. … It was mine to grow, not to pay bills with or to spend. I just took that old advice to pay myself first.”
Impressed, Robbie went home to do a bit of calculating himself. Let’s see, he wanted half a million to retire on, too. But he’d better plan on quitting work a few years after Mark since he hadn’t started saving yet. Maybe 65 would be good. He went to a retirement planning website to calculate how much he would need to invest regularly to get to his own goal of $500,000. He plugged in the numbers:
If he started now he would be investing for 15 years. He would begin with $2,000 and should make 7 percent on average.
Robbie hit the “Calculate” button. What? The result said he would have to invest $1,559.50 each month, a total of $18,714 per year.
Stunned, Robbie sat at his desk and wondered how he had put this off for so long. Here was his best buddy saving just $2,000 a year and he would have to save almost that much every month for the next 15 years. Not possible.
Please, make Mark’s story, not Robbie’s, the path you choose.
Terrie Drake is the author of the book “A Quiet Fortune” and a retired teacher and librarian. She and her husband have lived in Glenwood Springs since 1974. She is not a financial adviser; consult a competent professional for your personal financial solutions. She can be reached at firstname.lastname@example.org.
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