This week on the Retire With More Show, we had a very special guest, personal finance journalist at Money Magazine, Donna Rosato. With two million subscribers, Money Magazine remains the largest personal finance magazine in the United States. Donna is regularly on CNN and MSNBC and I’ve seen her on The Today Show, CBS This Morning, CNBC – she’s very charming and they put her on the air frequently to talk about personal finance.
There is a big appetite for this information from both younger folks and older folks. Donna and I talked about some of the interesting facts that companies and organizations all over the world are bringing forth to her to pitch to her to write stories about. So we asked her, as the person who gets all of this information, what is it that she finds really interesting?
In Fidelity’s latest 401(k) Millionaire survey, the number of people in their 401(k) plans with a million dollars or more has doubled in the past two years. And what they are seeing is how people with a 401(k) offered to them throughout their career are managing with it. And these 401(k) millionaires are particularly interesting.
“They’re not just individuals who make a lot of money. But a lot of the people in Fidelity’s survey who are 401k millionaires earn less than $150k a year. So that fascinated us about how you could be a 401k millionaire without being super, super wealthy and they practice a lot of things that are really interesting. Some of the habits include of course saving early.”- Donna Rosato
When you run the numbers looking at what it takes to have a million dollars, if you start when you’re 25 and you put away 10% of your salary you’ll easily get to $1.5 million by the time you get to 65. So you don’t have to save a lot. You just have to start doing it early enough and you can put yourself in much better shape.
Now there’s this panic of how much do I need to save, and there’s this rule of thumb in the industry, when you retire you should replace 80% of your pre – retirement income. But actually we’re finding a lot of people are living very happily on less than that.
“I interviewed this terrific couple. The husband was diagnosed with a chronic condition and they didn’t want to work until they were 65. They were 62, and they didn’t have quite enough money for retirement so they decided that they could live on less. To accomplish this, they sold their house in Chicago, they moved to Tennessee and were able to buy a house in cash and they were just so happy. They were living on less, but they were thrilled because they had so much freedom in their life.” – Donna Rosato
The #1 thing you want to do before you retire is figure out how much money you need. Part of that is to take into consideration your fixed costs and then after that it’s discretionary spending.
“What has been surprising to me is that people can live on less than they expect very happily and that the things that make them happy in retirement really don’t cost a lot of money.” – Donna Rosato
Another thing is baby boomers are deciding to work longer and thinking that maybe that will solve their retirement problem, and maybe even find something they really love to do. People in their 50s are ready for something different. They’ve been doing the same job for 25-30 years and they’re not ready to retire, but want to find something more challenging or maybe less stressful, but still enjoyable. That makes it easier to work until your 70. And so we see all of this talk about “encore careers” and “boomerpreneurs”.
“The fastest growing groups of entrepreneurs are people in the 55-64 age group. And they’re starting businesses at a higher rate than people in their 20s-30s. If you want to start your own business, you need some money and if you’re older you’re probably going to have access to money or maybe you have a pot of money that you could devote. You probably also have more contacts too, so it might be easier to launch your ‘encore career’. And then there’s the motivation. Maybe you’re ready to begin working for yourself, or with this kids out of the house you’re now able to start a venture that you never thought you had time to before.” – Donna Rosato
To end our program, we asked Donna for one last critical piece of advice to give to our listeners, on how to retire with more.
“I would start saving as early as I could and I would put money away – every little bit counts. My best piece of advice is to just have retirement savings siphoned out of your paycheck. If it’s automatically done, you will never miss it. Just have it automated and it wont be hard to do.” – Donna Rosato
Make sure you tune in live to the Retire With More show next week with me and John Rothmann, Saturday at 9 AM on KKSF Talk 910.