July Newsletter

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July 2025 Financial Insights Newsletter

By Genti Cici, CFP, CAIA

Date: July 9, 2025

Retirement Planning: Your Biggest Goal, Made Achievable

Retirement planning is often the granddaddy of investment goals, whether you’re measuring by time horizon or the sheer size of the nest egg needed. Yet, many people are woefully unprepared. The average retirement account balance paints a grim picture, and with US Social Security potentially facing cuts after 2033 unless reforms kick in, the stakes are high.

According to a recent Federal Reserve survey, the median retirement account balance across all ages is just $87,000. For those over 65—nearing or in retirement—that number creeps up to about $200,000. Sounds decent, right? Not so fast. Using the 4% rule of thumb, $200,000 generates a mere $8,000 per year in withdrawals if you want your savings to last. Compare that to the $1.5–2 million many say they need for a comfortable retirement, and it’s clear most are falling short.

Here’s how to flip the script and set yourself up for a retirement you’ll love:

Why Plan? Find Your “Why”

Sure, “retirement” might be reason enough, but digging deeper can light a fire under you. Picture what you don’t want: grinding away in your 70s, or worse, being forced to work when your body says “nope.” Your “why” is your North Star—it keeps you motivated to save and invest year after year. Write it down, revisit it, let it fuel you.

When & Where to Start

The “when” is simple: as early as possible, ideally when you start earning income. Time is your greatest ally, letting compound growth work its magic. Starting in your 20s or 30s gives you a massive edge, though many begin in their 40s. Sadly, over 40% of folks delay or never start due to low income, confusion, or lack of an employer plan. First stop? Check if your employer offers a 401(k) or similar plan. These often come with a match—free money you’d be crazy to leave on the table. No plan? No problem. Open an IRA (Individual Retirement Account) on your own. You can sock away up to $7,000 a year ($8,000 if you’re 50 or older) into a Traditional IRA, Roth IRA, or a mix of both. While 401(k) limits are higher, IRAs are a solid starting point for anyone. And you can put more, if funds are available, on a taxable account with no limits how much you can contribute.

The Power of Time

Time isn’t just money—it’s a money multiplier. The longer you invest, the more your savings grow exponentially. Take this example: starting from zero, investing $200 a month for 40 years (say, mid-20s to mid-60s) could grow to over $700,000. Not bad for a modest monthly habit! Or, if you kick things off with $10,000 in savings and add $500 a month over 40 years, you could be flirting with $2 million or more. The key? Stay consistent, let compounding do its thing, and don’t sweat the market’s normal ups and downs.

Tax Efficiency: Your Secret Weapon

Retirement accounts in the U.S. come with juicy tax perks. With 401(k)s, 403(b)s, or Traditional IRAs, you score a tax break now through deductions. With Roth accounts, you pay taxes upfront but enjoy tax-free withdrawals in retirement. These benefits supercharge your growth by deferring taxes (Traditional) or skipping them on gains (Roth). Pick what fits your situation, but don’t sleep on these tax advantages—they’re like free rocket fuel for your savings.

Mindset for Growth: It’s Not a Checking Account

To harness exponential growth, you need to stay invested and keep contributing, no matter what life throws at you. This is where behavioral finance comes in. Over decades, markets will test your resolve with booms, busts, and everything in between. Fear might tempt you to sell; greed might nudge you to chase hot stocks. The winning mindset is patient and disciplined. Have a plan for the “what ifs,” tweak it only if your life changes, and tune out short-term market noise. Only those who stick to the plan reap the long-term gains.

Spending It Wisely: Enjoy the Fruits

When retirement arrives, it’s time to enjoy your hard work—but don’t get carried away. Smart withdrawal strategies are crucial. Stick to pulling 4% or less of your balance annually to avoid running dry. Decide which accounts to tap first to minimize taxes. Spending might feel easy, but many retirees swing too far—either overspending recklessly or hoarding out of fear. The sweet spot? Use your money to live your best life. Spend thoughtfully, but don’t be afraid to savor the rewards of your lifelong discipline.

“The Power of Time”

Here’s a quick look at where these strategies land after 40 years, assuming an 8% annual return:

 Check out how time supercharges your savings! This chart shows $200 a month growing to nearly $700,000 by age 65 if you start at 25, but only about $190,000 if you wait until 40. Kick things off with $10,000 and add $500 a month, and you could hit ~$2 million. Start early, stay steady, and let compounding work its magic!