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Now that you have these rough numbers, let's talk about how to save. WHAT IS A RETIREMENT ACCOUNT? Most people have heard of the 401(k) plan offered by many companies. People tend to think this is a magical bank account that you're supposed to put money in, but they don't really know why or how it works. There are actually many different types of retirement accounts, such as 401(k), 403(b), IRA, SEP, and pensions. Yes, they all sound like the names of droids, how fun! While there are differences between the types, they are all similar in concept. A retirement account is a place to put money that is sheltered from taxes. The trade-off for having the tax shelter is that you can't use the money (without significant penalties) until you retire. Tax "sheltering" means you can avoid paying taxes on the money either now or later. We'll discuss the now or later part … later. If you're investing in a traditional 401(k) plan, you are investing money from your paycheck before it gets taxed. You 86 m a s s a g e & b o d y w o r k m a y / j u n e 2 0 1 8 • What income do I need at retirement (factoring for inflation)? • How much money do I need saved up at the moment I retire? Yeah, it's a big number. Seeing that huge number can freak people out. (What!? I need $600,000 to retire?! OMG!) But in reality, all this work is just to get you to a much more practical question: How much do I need to save every month to get to where I want to be? Here's where the miracle of compound interest can really help you. Here's a very conservative scenario: Let's say you have $3,000 in your retirement account today and you start contributing $200/month for the next 30 years. At 8 percent rate of return you would have $332,867. That's less than $7 a day, and you end up with over $300,000 on the day you retire. That feels pretty great! Obviously, more savings is better than less, but this illustrates the magic of compound interest. The majority of the balance comes from growth, not your investment. You CAN do this, but it takes time and discipline. Time to grow (meaning starting now) and the commitment to contributing regularly are key. Retire Inspired Quotient tool (he calls it the "R:IQ" tool) at Chris Hogan's website, www.chrishogan360.com. You can plug in your numbers and get some projections in just a few minutes. (If you use another tool, you may need to estimate a rate of return and inflation. When using these tools, I typically use 8 percent as my rate of return during the saving period, 3 percent for rate of inflation, and, of course, 4 percent withdrawal at retirement.) Using these tools and your knowledge of your lifestyle, you can easily get the following numbers: