Forget playing the lottery – Use this retirement strategy instead
Eileen St. Pierre, The Everyday Financial Planner
Recently while shopping at a discount store, I noticed this sign for sale:
We laugh when we see this, but there are some people who rely on this strategy. They are the ones who can least afford to do so.
Let’s run some numbers.
Suppose you spend $10 a week on lottery tickets. How much would you have saved in 40 years if you instead placed this money in an IRA that earns 6% annually? $86,735
What if you spend $20 a week on lottery tickets? If you followed the same investment strategy above, you would have saved $173,471 in 40 years.
Yeah, the payout is lower than winning the Powerball. But the odds of you reaching these investment goals are so much greater than winning the lottery. Add this amount to Social Security and your golden years get a little brighter.
Why not invest a little more?
The IRS recently announced retirement contribution limits for 2017:
- Up to $18,000 a year – or $1,500 a month – in a 401(k), 403(b), 457, or TSP workplace plan plus a $6,000 catch-up contribution for those ages 50 and over.
- Up to $5,500 a year in an IRA plus an additional $1,000 for those ages 50 and over.
- The total annual contribution limit (including employer contributions) went up $1,000 to $54,000. This is good for the self-employed or small business owners who have a SEP IRA or solo 401(k). If you’re age 50 and over, that’s $60,000 you can put away.
If opening up an IRA sounds intimidating or your employer does not offer a retirement plan, there is a new IRA being offered through the federal government called myRA. It’s a good starting point.