If you’re dreaming of becoming a homeowner, or planning to upsize, you’ll need to tap your savings for a down payment and to support your mortgage application. Are you there yet?
If not, you’re not alone: Most adults over age 55 are behind on savings, according to a survey of 968 respondents conducted by Financial Engines. The survey showed that 68% of adults aged 55 and older have procrastinated when it comes to building a nest egg. And while most agreed that the best age to start saving is 25, many don’t start until 35…and it makes a difference.
The study provides a hypothetical example: This individual saves 6% of a $36,000 salary annually. The nest egg increases by 1.5% a year, due to raises, etc. If the saver begins at age 25, assuming a 3% employer-matching contribution and a 5% annual return, by age 65, he or she will have saved roughly $500,000.
But to reach the same goal when starting at age 35, the saver would have to contribute 12% of his or her income per year.
Making up for lost time isn’t easy, but it’s not impossible, thanks to the power of compounding. And if returns are compounded in a tax-deferred account, the potential income growth is even greater.
If you did get off to a late start, there’s still time. Talk to your advisor, and together you can build a solid savings plan to make your housing dreams come true. Just perhaps a bit later then you’d like.