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Welcome to How to Retire on Time, a show that answers your retirement questions. Say goodbye to the oversimplified advice you've heard hundreds of times. This show is about getting into the nitty-gritty so you can make better decisions as you prepare for retirement. Text your questions to 913-363-1234 and we'll feature them on the show. Don't forget to grab a copy of the book, How to Retire on Time, or check out our resources by going to www.retireontime.com.
Welcome to How to Retire on Time, a show that answers your questions about all things retirement, including income, taxes, Social Security, health care, and more. This show is an extension of the book, How to Retire on Time, which you can grab today on Amazon or by going to www.how to retire on time.com. My name is Mike Decker. I'm the author of the book, How to Retire on Time, but I'm also a licensed financial adviser, insurance agent, and tax professional, Which means when it comes to financial topics, we can pretty much talk about it all. Now that said, please remember this is just a show.
Mike:Everything you hear should be considered informational as in not financial advice. If you want personalized financial advice, then request Your Wealth Analysis from my team today by going to www.yourwealthanalysis.com. With me in the studio today is mister David Fransen. David, thanks for being here.
David:Yes. Glad to be here. It's fun.
Mike:David's gonna be reading your questions, and I'm gonna do my best to answer them. You can send your questions in right now either by texting them to 913-363-1234. Again, that number, save it in your phone. 913-363-1234, or email them to hey mike@howtorettireontime.com.
Mike:Let's begin.
David:Hey, Mike. What advice do you have for teens and their retirement?
Mike:Yeah. This is one of those questions where it's if I could do it all over again, what would you do? Yeah. So I'm gonna be a bit unconventional, but listen up. You know, you heard it here first.
Mike:I'm actually writing an article for Kiplinger on this very topic. Okay. Because it is more difficult to get ahead today than any other time. We are experiencing what's called the silent depression. And it's the idea that wages have not kept up with inflation.
Mike:And it's been going on for decades. You know, this is effects of a global market. It's the effects of technology, which makes it easier for businesses to operate faster, more efficiently so they need less workers. And you could argue, well, technology is one of the biggest sectors. Yes.
Mike:But imagine us trying to process and create things without technology. It would take so much more labor. And if you're having a hard time with that concept, just think of the tractor. When the tractor was invented, you needed less people on the farm. Technology is a disruptor.
Mike:It's a wonderful thing. But we're living in a different time, and wages just haven't kept up with inflation. I I don't think anyone's gonna dispute that. So in my very unconventional opinion, I don't think the current path is the right path. As in you go to school, you go to college, you get a job, and then you start trying to figure it out.
Mike:I think, again, just my opinion, that a 16 year old should try and get a job and try to make at least 6 to $7,000 a year. Okay. Part time, 20 hours a week. You're working through the summers. But if you can earn, let's say, more than $7,000 a year and you things work out to where your expenses and all that, then you could put $7,000 into a Roth.
Mike:You need to think about it. Your home's paid for because you're living with mom and dad. Yeah. Most of your expenses are paid for. Mom and dad don't force them to pay for gas if you can afford it.
Mike:Don't force them to buy a car if you can help them. Like, those are ways that if they if they can just work and put their income into a Roth IRA and they save $7,000 when they're 16 years old, 17 years old and 18 years old, and then they invested in equities, not a stock bond fund portfolio, in equities, in stocks, which are one of the highest growing asset classes sectors. It's where most people can make a lot of money with a low barrier of entry. And you don't need to have a lot of money to buy an ETF today. They've made it very simple.
Mike:But now just think about what we just did. We put some money at the earliest age in their Roth IRA so it can grow tax free and in retirement it pays tax free. So if we assume the growth until age 60 and we're adjusting for inflation, it'd be around 8.7%. That's just based on, you know, the eighties nineties, 2 thousands. So all the way to the day accounting for inflation, that would be the growth for current value or the money today.
Mike:They would have saved around $800,000 for their retirement. So when you think about how stressful it is to try and save for retirement, how just to make ends meet, what if you could basically take a large chunk of their retirement, which they can't touch until they're 59a half anyway, locked it away in there and bought a bunch of equities, bunch of stocks. Now what you've done is a couple of things. 1, you've made sure they got a job because you gotta go in the workforce one way or the other. And so they've gained some experience, built their resume.
Mike:You've checked off a large portion of their retirement. Think of how less stressful you would be financially if you knew that a large portion of your retirement was taken care of. And then, again, just my unconventional opinion here. And then you would send them to a better job to where they're exploring their options. You go to school when you want to develop a specific skill that will eventually turn into a career.
Mike:K. So for me personally, I thought I wanted to be a doctor until I realized and this was at University of Washington. I was kind of playing with one of their simulations on with this scalpel cutting fake skin. Oh, freaked me out. Could not handle it.
Mike:So that quickly changed. And then I was gonna become an attorney. And then I realized that reading contracts and just, you know, I love reading contracts. But if I did that day in and day out, it wasn't my thing. I happened because of internships and trying different jobs.
Mike:I happened to stumble into finance. There's never in a 1000000 years would I have thought I would have enjoyed a career in finance. But I love logic and I love problem solving. And financial planning is basically that. Completely changed my life.
Mike:Would not have known. So experimenting with different jobs, you know, 6 months here, a year there. But you do that till you're, you know, 20, 21 years old. And while you're doing this, hopefully you can get an associate's degree as well. So you knock out the 1st 2 years of college at a community college free.
Mike:Right. Or really cheap.
David:Yeah.
Mike:Then you can go back to school, whether it's at a university or it's at a technical school. Maybe it's a code school. Maybe it's a plumbing school, whatever it might be. But now you understand the skill you want to develop to create a career out of it. Oh, and by the way, remember, you've got a lot of your retirement taken care of.
Mike:How much financial stress has been taken off by that one action? And how much better could you craft your understanding of who you are as a person? We don't wanna follow our passions. We gotta figure out what we're passionate about to begin with. And the only way you're gonna be passionate about something is if you try it out and you become good at it.
Mike:We're passionate about things we believe we're good at, really. So that's that's my unconventional bet. And by the way, here's just some fun other numbers for you. Instead of 8.7, let's say the markets just take off and things just end up in your favor, and we averaged around 10% year over year accounting for inflation and all that, that was the the net of inflation amount. You'd have around 1,300,000 when you're 60 years old if you just put 3 years of contributions to Roth.
Mike:Uh-huh. And that was at no other 401 k, nothing else.
David:It's amazing.
Mike:What about if it was 12%, you'd have 2,900,000. So are we doing things right by sending kids straight in the debt, or should they cover their basis first as they explore to figure out who they are? I know a lot of parents say, well, call's the time where you you you leave and you get out and you figure things out. I get that. But at what cost?
Mike:And many, many parents can't really afford to put their kids through school, but they do it anyway at their own expense. Mhmm. And I think there's a lesson to be learned about kids paying for their own school, at least half of it. Whether it's through scholarships because they earn them, whether it's through I mean, just working
David:grant or, something.
Mike:But Yeah. If you don't work for it, it's not gonna mean as much. Yeah. Just my opinion. But, yeah, I I I personally believe and, yeah, my kids who, you know I've got a 4 year old and, a baby due in April.
Mike:Yeah. So there you go. But, yeah, when they're 16 years old, they're gonna be doing this if I have any say in it. You never know what teenagers. But to me, it seems a more healthy, suitable, and productive way to help a child, 1, build a foundation, a financially literate foundation, as they explore to figure out who they are and and what they want to do in life.
Mike:You're listening to how to retire on time. That's all the time we've got for the show today. If you enjoyed the show, consider subscribing to it wherever you get your podcast. Just search for how to retire on time. Discover if your portfolio is built to weather flat market cycles or if you're missing tax minimization opportunities that you may not even know exist.
Mike:Explore strategies that may be able to help you lower your overall risk while potentially increasing your overall growth and lifestyle flexibility. This is not your ordinary financial analysis. Learn more about Your Wealth Analysis and what it could do for you regardless of your age, asset, or target retirement date. Go to www.yourwealthanalysis.com today to learn more and get started.