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How to Build A Retirement You Can Fall In Love With

Dear Friend,

Do you remember the first time you fell in love with your spouse? I have a friend of mine who says, "I don't care what you say, you never forget your first love!" Man was he right. Every time you look into the eyes of the one you love the most, it's like falling in love all over again.

And why is that so?

When you decided to marry or be with that special someone, you saw your future. It's one of the few times in life you can see everything. You know where you'd like to live, how much money you want and the kind of house you want to live in. I bet you even pictured what your first child would look like.

The point is this. You saw and began to build a relationship you fell in love with. Did you know you can do the same with your retirement?

You Have Permission To Love Retirement

Who said retirement can't be the stuff of dreams? There's no rule saying you can't live where the sun is or swing on a hammock each day. If you want to spend your retirement in Arizona, Florida or North Carolina it can happen. And here's a little secret you may not know. It takes four key ingredients to build a retirement you'll fall in love with. I like to call these "Retirement Arrows." Each one is so important I can't cover them all in this article. Today we'll start with the first arrow. If you hit the bulls-eye with this one it'll make your retirement more enjoyable!

The Most Important "Retirement Arrow"

The right amount of money is the first arrow you need. This is where you need to be real honest. How much money do you need for the retirement of your dreams? You need to keep in mind debt, taxes, inflation and income. Debt can suck retirement dollars right out of your wallet. Inflation if not watched can sneak up on you like a Grizzly in the woods. And income taxes depending on where you live can take a big bite out of your paycheck. This in turn affects how much you can invest in your 401K. Finally your income is the key. The more you can make and save determines how far your dollars will stretch in retirement. All of these things act like "arrow killers" to your retirement.

Let's look at the factors that can dull your retirement arrows.

Arrow Killer #1: The Big "D"

The number one "arrow killer" is debt. From credit cards to overspending it's easy to get in over your head. If you're making $4,000 but paying out $2,500 a month to pay debt you're in trouble. "But I've got $1,500 left!" You sure do, but does that cover the rest of your expenses? I doubt $1,500 these days covers rent, food, medical and unexpected expenses. If you're lucky you might have $100 left, if that. I liken debt to a slow leak in a yacht. No matter how pretty the income looks the boat is sinking!

Arrow Killer #2: The "Terrible T's"

Man, where do I begin? If you're single with no kids, Uncle Sam tends to hit you harder. For 2009, the 25% tax bracket for single taxpayers is for taxable incomes between $39,950 and $82,250. If you're married with kids at least you get tax credits. Take tax credit money and pay off debt or save it. Its money you'll love to have for your 401K. For information on tax brackets go to

Arrow Killer #3: The Inflation Devil

Since 1914 inflation has risen 3.43% per year. This is one reason inflation is the "silent enemy" of your paycheck. Investors on Wall Street hate factoring it in to their gains each year. But it's a financial reality that's not going away. Go to to keep up on inflation. Never set up a financial plan without factoring in inflation. The more it rises the less money you can put toward retirement. But don't fret. There are ways to beat the inflation devil!

Arrow Killer #4: Income Scum

I know, this is supposed to be your friend! Sometimes income is like that good friend you should trust with your wife. But if left unguarded can become too comfortable and ruin everything. Keep growing your income. You can lose your job to illness, injury or good old fashioned economic times. Keep an easy, but second pipeline of income. It should grow as you work. Save 20-30% of it, while working your regular job. If you can't work it'll replace that income and keep you moving forward.

An income that's not growing won't pay down debt. Like a good friend who knows your wife, watch your income!

How to Sharpen The Arrow

The best way to sharpen this retirement arrow is by consistently and steadily growing your 401K plan. Now I know there are plenty of things in your way. Unexpected expenses pop up. You need new tires or your child has to see the doctor. But here's a fact you can't argue with. I like to call it the "Law of Expenditure."

"No matter how much money you make, on any given day it will be spent on something or someone. Therefore, make sure you pay yourself first!"

I'd like you to read this law two more times. Somebody is getting your money. I don't care if it's the power company, Uncle Sam or your child for allowance. The first person who should get a piece of your hard earned action is you! Set a goal to pay yourself for retirement each month. It doesn't matter if it's 3-15% of your paycheck, do it for you.

When you started going after the love of your life, what did you do? You did exactly what I did. It didn't matter what your schedule was you invested a percentage of your time to building that relationship. Why? The dream or vision of you being with them for life outweighed everything else. The same is true with your retirement. The more you picture it the more serious you become about investing in it. Let's look at what can happen when you start paying yourself.

Employer and Employee 401K Contribution Plan

401K Balance: $3,000
Annual Salary: $50,000
Annual Increase: 3%
Percentage for 401K: 6%
Employer Match: 50%
Frequency of Match: 6% of Annual Salary
Years to Fund: 20
Annual Interest: 9%

401K Balance by Year

1st year: $7,891.82
2nd year: $13,362.57
3rd year: $19,458.49
4th year: $26,271.05
5th year: $33,837.35
10th year: $85,938.66
20th year: $309,397.81

I want you take a look at your 10th and 20th years. This is what patience can do for your retirement. By the year 10 you're not far from $90,000. By the time you actually retire, you're looking at six figures for retirement. And remember these amounts can climb or fall, based on all the factors we mentioned earlier. But keep going. When you began building your relationship with your spouse, there were a few setbacks. But you didn't give up. And today you're both reaping the rewards. Do the same with the retirement you'll love one day. Never give up on building the right amount of money. It will literally pay off when the time comes.

Next time we'll look at the second most important retirement arrow. Without this one, all the money in the world won't mean a thing!

Clyde McDade is a Financial Copywriter. He's the author of the upcoming e-book, "How to Grow More Money for Retirement and Your Child's College Fund."

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