CINCINNATI, OH (FOX19) - Steve Sprovach landed a good job at Toyota right out of college, working as a engineer. Many young people might blow a good paycheck but Sprovach had a plan and a budget.
"I've got my own Excel spreadsheet, my wife picks on me all the time, that I'm too focused on it, but I just track what we have, what's necessary, and what kind of we have as our wants," said Sprovach.
Sprovach and his wife Tasia, who is finishing her degree at the University of Cincinnati, have a mortgage and they both have student loans. Some are federal loans, and they are at a fixed 3.2 percent interest rate. Some of their loans hover near 7 percent interest.
Sprovach says he wants to pay the student loans off and start saving for retirement, but which should he do first?
"Use the savings that I have for starting to pay down both mine and hers, college loans, which one to choose, use the money to pay down the house, or put the money, the extra into savings, 401-k or Roth IRA," said Sprovach.
The easy answer is there is no financial aid for retirement. You either have enough money or you don't. The truth is the more you money you save in your twenties and thirties, the more you will have when you retire. Even if your retirement is 40 years away, opportunities to save are not endless.
"So here's my first piece of advice," Nathan Bachrach, Fox19 Financial Analyst, "You've got 480 opportunities to put money away for your retirement, and that's it. Then you're done. So first, think about retirement."
So what about the popular idea that if you retire with a million dollars, you have got it made?
The biggest threat is inflations. If you somehow manage to stockpile a million dollars, figuring a 3.1 percent annual rate of inflation, you would only be able to buy $736,908 worth of goods in 2018 and in $543,034 worth of good in 2028.
According to Bachrach says that saving a million dollars may be easier than you think.
"Say you save $5500 dollars a year, beginning at age 30, and you get a $1500 401 (k) match, too," said Bachrach, "Assuming 7% annual returns, you'd have $1,014,640 saved up by age 65."
Bachrach says that is a lot of assumptions. You may not always have an employer match, you may change jobs and have to sit out a 401(K) for a year or two, or you may not manage the $5500 savings every year.
Bachrach says that the best strategy for young people just starting out is to put the paying off student loans and just make the minimum payment but make sure you have enough emergency savings.
He also says don't rush to pay off the house either because it won't bring you income.
So if you do manage to save a million dollars, how can you make it last?
A financial advisor can help make sure that you have the right asset allocation to help offset inflation. These can be a blend of stocks, bonds, real estate and hopefully social security. But the million won't mean that you are living the high life.
If you take 4 percent out every year for 30 years in retirement, that would be about $40,000 per year before inflation and you would still have to pay taxes on it.
So start putting money away for your retirement early.