Thursday, 01 September 2011 17:53

Enough for Retirement?

Written by  Dave Ramsey
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Question: I’ve heard you tell people that having $90,000 to $100,000 saved up for retirement isn’t enough. That’s what I’ve got set aside right now, and I’m pretty sure it’s all I’ll ever need. Why do you think everyone should have a million or two saved up?


Answer: The amount you’re talking about isn’t enough to retire on with any kind of dignity. If you make 10 percent off your money over time it means you’re living on just $10,000 a year. That’s below the poverty level.

Don’t misunderstand my message. I’m not about being greedy, and money is not the key to happiness. Money is good for three things – personal security, helping others, and it’s good for fun. You need to do some of all three.

What I am about is changing my family tree. With money we can create and leave behind the training and resources to make a huge positive difference in the world. I want good people to have big piles of money in order to do good things.

This is true of my own family, too. I don’t want to leave my kids in a situation where they have lots of money and no sense of responsibility. I want to train them to be responsible and generous so they can really bust loose with that big pile of cash they’ll inherit one day. I want them to be able to have an impact three generations down the line in our own family and to impact the world around them in a fabulous way!

Question: What exactly do you mean when you talk about diversifying your investments?

Answer: When it comes to investing, diversification simply means spreading your money around. This helps reduce risk, because you’re not putting all of your money into one company. This way, you won’t lose everything if that one company goes broke. It’s also why I tell people not to put all of their money into their own company’s stock.

I have lots of mutual funds with one or two mutual fund companies. Within those two companies they’re called fund families. Think of it like a brand of soup. Campbell’s® is a brand, but they have all kinds of different soups. I also have money in different banks and in different money market accounts, and I have money in different types of real estate. So, I’ve got several different kinds of investments, but not a million different things running around out there.

If I listed them all out they wouldn’t even take up an entire page. I like to keep things fairly clean and simple, and I encourage you to do the same!

Question: I’m saving up money to buy a house in the next couple of years. How should I invest this money before I actually buy something?

Answer: The problem is that you’re not really investing; you’re just saving. Investing means you aren’t going to touch the money for five years or more. If you may use the cash to buy something within five years, you’re really just kind of “parking” the money for a little while.

If it were me, I’d put it in a money market account. It’s basically just going to sit there and not earn much, but you won’t lose anything, either. If you’re lucky, you might see one percent interest in the short term, but that’s about all you can expect considering the low-interest rate environment these days.

Last modified on Thursday, 01 September 2011 18:20
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