Time is inexorable.
Imagine that you are in a railway car, one from which you
cannot escape. It moves at a constant rate toward some distant end. You may
want to go slower, or faster, but cannot. You can earn and spend money to buy
things. Bigger house. Nicer car. Great clothes. But you cannot buy more time.
That railway car just keeps chugging along, day after day, year after year, to a
remote, misty end.
When the journey is new, and we are young, and that shiny
track extends far over the horizon, we think that time is limitless. We think
nothing of wasting it. Wishing it away. “If only it were Saturday.”
But as the journey progresses, our life events pile up and
mark time’s passing. Marriages. Births. Deaths. We become more sensitively attuned
to our journey. Now, each new year, each birthday, each season, gives us pause,
because the remaining ones are suddenly quite finite and countable. We don’t
know how much further this train has to travel, but sense that our journey has
an end.
Time is, in fact, our only priceless, irreplaceable possession.
We only have so much, and it passes relentlessly whether we use it wisely or
squander it foolishly. Time doesn’t care. But we should.
How can we best use and appreciate our time, this infinitely
precious gift which has been bestowed upon us? Books have been written on
making memories, forming bonds, creating and giving, all things which enrich
our lives and make our time more valuable. But let us focus on one bit of
advice to those who are still young, who
have the power of time in their favor.
Let’s say you are 20-something, just out of college, in your
first job and enjoying life (as you should). Although it is far distant, you
should give some attention to enjoying your retirement as well. After a long
working career, you and your family will deserve to relax, travel, and
otherwise relish a well-earned retirement.
But today, many American families are ill-prepared.
According to the Economic Policy Institute, “nearly half of families have no
retirement account savings at all.” Social Security is a wonderful foundation,
but is not enough on its own and must be supplemented. The most important thing
you can do is to regularly contribute to a tax-advantaged retirement account
(401K, 403B).
At this point in your life, you will have forty years or so
to build that retirement cushion. And that much time is a powerful ally.
Here is a hypothetical case of an individual approaching
retirement. Let’s call her Sally.
Sally is 65 years old and plans to retire in the next couple
of years. As a young woman, she decided to provide for her future by regular
investment in the stock market. Starting in January of 1976, she began saving
about $6.50 per day and at the end of each month bought a $200 share in an S&P
500 fund. She repeated this month after month for 40 years.
We all know the market has seen some terrible crashes along
the way. But Sally persisted and invested $200 each month, a technique she may
not have known is called dollar cost averaging. By investing a fixed amount
each month, she automatically bought more shares in a down market and fewer
shares in a costly market. Over the forty years of her investment career, Sally
maintained her discipline, allowing the balance to ride and adding her monthly
buy like clockwork. What are her results?
Forty years is 480 months, so Sally invested a total of
$96,000 (480 x 200). But she allowed all dividends and earnings to accumulate and
grow, and never lost her nerve. At the end (based on actual stock market
returns) she would now have $600,000 in her account. Not bad for the cost of a
hot dog, cup of coffee, and a lottery ticket every day.
Better still, Sally can begin drawing regular payments from
her nest egg, $3000 per month for the next 20 years (assuming a nominal 4% appreciation
rate). That’s on top of her Social Security. Look out Tuscany, here we come!
This is not to advise you to invest only $200 per month. On
the contrary, invest as much as you comfortably can. Many companies will
provide a match for 401K contributions up to a certain percentage of your
salary. You should always invest enough to get all of that matching contribution.
It is quite possible to retire with a million dollars in your pocket.
Time is a powerful ally. But unfortunately, to take
advantage of it, we must start young. And that’s precisely when we don’t
appreciate it. God’s way, perhaps of keeping us all from becoming millionaires.
