{"id":3082,"date":"2016-08-11T07:41:37","date_gmt":"2016-08-11T07:41:37","guid":{"rendered":"https:\/\/raizinvest.com.au\/investors\/its-all-about-hitting-your-splits\/"},"modified":"2021-02-08T04:57:50","modified_gmt":"2021-02-08T04:57:50","slug":"its-all-about-hitting-your-splits","status":"publish","type":"post","link":"https:\/\/raizinvest.com.au\/investors\/blog\/its-all-about-hitting-your-splits\/","title":{"rendered":"It\u2019s all about hitting your splits"},"content":{"rendered":"
\"image\"<\/figure>\n

 <\/p>\n

Any
\nmarathon runner will tell you: You don\u2019t think about all 42 kilometres at once.
\nThat would be too overwhelming. Instead, picture the race in chunks: 5km, 10km,
\nor even one kilometre at a time. Manageable chunks.<\/p>\n

This
\nsame philosophy can be useful when saving for your\u00a0post-work life,
\nespecially\u00a0when it\u2019s still decades away. While the idea of\u00a0saving $1
\nmillion\u00a0may feel like a near-impossible feat, putting away just $150 or so
\nper month in your 20s seems completely reasonable\u2014and that still may get you to
\nthe million-dollar mark by retirement age, provided you\u2019re disciplined, start
\nearly and hit your \u201csplits,\u201d as runners would say.<\/p>\n

Just
\nget started, save regularly, experience the power of compounding returns and
\nlearn about market risks\u2013 and track your progress.\u00a0<\/i><\/p>\n

For
\nthe sake of simplicity, let\u2019s set aside inflation, fees, taxes and dividends.
\nYes, those things are important, but it\u2019s more important that you just get
\nstarted, save regularly, experience the power of compounding returns and learn
\nabout market risks\u2013 and track your progress.<\/p>\n

Here\u2019s what this example could look like:<\/p>\n

\"image\"<\/figure>\n

Okay,\u00a0deep
\nbreaths<\/i>.\u00a0I\u2019m going to walk you through these targets, and explain why
\nthey\u2019re more reachable than you might think\u2014and why, if you\u2019ve hit 30 and
\nhaven\u2019t saved that much, it\u2019s not too late.<\/p>\n

The
\nfirst thing you\u2019ll probably notice about this chart is that your money doubles
\nevery seven years. I\u2019m basing that on an investing concept known as the\u00a0rule of 72,<\/a>\u00a0which says that if you earn 7.2
\npercent interest annually your money doubles in 10 years. Roughly, the reverse
\nis true, as well: If you earn 10 percent on your money, it doubles in 7.2
\nyears.<\/p>\n

You
\nalso likely noticed that the larger you\u2019re starting point in each doubling
\ncycle, the larger the growth\u2026.That means the most important consideration is
\nstarting the doubling clock.\u00a0<\/i><\/p>\n

For
\nthe milestones listed above to work, you\u2019ll likely need growth from both equity
\nmarket returns (say, 7 percent)\u00a0and\u00a0additional cash saved (3
\npercent). Any percentage variation works\u2014bigger investment returns, less cash
\nadded; more cash added, smaller returns\u2014so long as you get to about 10 percent,
\nyour money will double every seven years or so.<\/p>\n

You
\nalso likely noticed that the larger you\u2019re starting point in each doubling
\ncycle, the larger the growth. Under the example above, the balances really
\nstart to grow\u2014to $200,000, $400,000 and beyond\u2014during your 40s and 50s. That
\nmeans the most important consideration is\u00a0starting the doubling clock. If
\nyou embarked on this particular milestone chart at 37 instead of 30, for
\nexample, you may be missing $800,000 by retirement age.<\/p>\n

Now,
\nlet\u2019s talk through my assumptions, and how I got there. Again, it\u2019s not that
\ndifficult to get from $50,000 to $100,000 in just seven years. You can do it by
\nearning 7 percent in returns\u2014a\u00a0fair guideline for market returns\u2014<\/a>and contributing
\nabout $150 per month to your account.<\/p>\n

Note
\nthe difference saving regularly makes, by contributing larger cash you may
\nsignificantly reduce the time to double your money.<\/p>\n

it\u2019s
\nentirely possible to start a humble retirement account, add $150 per month in
\nyour 20s and 30s and still be on target to retire a millionaire. You just have
\nto hit your splits.\u00a0<\/i><\/p>\n

Another
\nthing to keep in mind about your contributions: As you get older, the amount of
\ncash that must be added in order to keep up the doubling effect\u2014the 3
\npercent\u2014needs to grow substantially. But you\u2019re likely making more money, so
\nthat\u2019s not unrealistic.\u00a0For example, between ages 37-44, you\u2019ll grow your
\nretirement balance from $100,000 to $200,000 by earning 7-percent returns, for
\nexample, and depositing at least\u00a0$250 per month (based on 3 percent of
\nyour starting balance, and assuming you\u2019re getting 7 percent returns). Then
\nfrom ages 44-51, your balance will balloon from $200,000 to $400,000 with 7
\npercent returns and at least $500 in monthly deposits (3 percent of $200,000
\ndivided by 12).<\/p>\n

Raiz
\nfully automates this process, with the Roundup and Automatic Investment feature
\nyou can hit your splits whilst living your everyday life. For more information on Raiz fees, click here<\/span>.<\/a><\/i><\/p>\n

So
\nyes, it\u2019s entirely possible to start a humble retirement account, add $150 per
\nmonth in your 20s and 30s and still be on target to retire a millionaire. You
\njust have to hit your splits.<\/p>\n

It
\nis time to start thinking about saving for retirement, just like you would if
\ntraining for a marathon. \u00a0This is where Raiz can comes in. \u00a0Instead
\nof just waking up one day and trying to sprint 42km, you need to train, and
\nstart working on your financial fitness. Raiz fully automates this process,
\nwith the Roundup and Automatic Investment feature you can hit your splits
\nwhilst living your everyday life.<\/p>\n

But
\nnone of those facts detract from the undeniable power of regular savings, time
\nand\u00a0compounding<\/a>. A journey of a mile begins with the first
\nstep. A journey to $1 million begins with your first $100 investment.<\/p>\n

Important
\nInformation<\/b><\/p>\n

The
\nexamples above are for display purposes only and to illustrate a point \u2013 actual
\nreturns will be different and could be significantly less than the examples.
\n<\/i><\/p>\n

This
\nblog was written by Raiz Limited\u2013 Authorised Representative of AFSL 434776. The
\nRaiz product is issued in Australia by Instreet Investment Limited (ACN 128 813
\n016 AFSL 434776) and promoted by Raiz Limited (ACN 604 402 815). A Product
\nDisclosure Statement dated 27 May 2016 for this product is available on the Raiz
\nwebsite and App.<\/i><\/p>\n

A
\nperson should read and consider the Product Disclosure Statement in deciding
\nwhether or not to acquire and\/or continue to hold interests in the product. The
\nrisks of investing in this product are fully set out in the Product Disclosure
\nStatement, and include the risks that would ordinarily apply to investing.<\/i><\/p>\n","protected":false},"excerpt":{"rendered":"

  Any marathon runner will tell you: You don\u2019t think about all 42 kilometres at once. That would be too overwhelming. Instead, picture the race in chunks: 5km, 10km, or even one kilometre at a time. Manageable chunks. This same philosophy can be useful when saving for your\u00a0post-work life, especially\u00a0when it\u2019s still decades away. While […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false},"categories":[1],"tags":[],"yst_prominent_words":[1387,1389,1375,1373,1386,1384,1380,1385,1379,1388,1376,1383,1372,1374,1382,1371,1390,1378,1381,1377]}