Ben Stein How Not to Ruin Your Life

One of the great cliches of life, often thought and said by us all, is this: "How I wish I knew then what I know now. What a far better life I would have." How true this is.

The problem is that you cannot go back in time to fix your life. But you have an even more valuable opportunity. You can employ what you know right now, this very instant, to take better care of the you who is going to be old and gray and then older and grayer.

You cannot imagine how important this is in the context of retirement planning. You can look at it on the most personal level. You, who I'm assuming are a young man or woman in your 30s or 40s, will some day retire. Either you will be forced to by your employer or you will be forced to because you'll be tired or ill or just plain sick of working. Yes, you may still do a bit of work, but at 70 you are not going to want to work as hard as you did when you were 40 -- if, indeed, you want to work at all.

Who is going to pay for your expenses when you stop work? Social Security? Maybe for us old people it will be there, but for young people its future is dicey indeed. Mr. Bush was not lying when he said the system would be bankrupt in a few decades if not sooner. Will your private pension take care of you? Not too likely. Only about 15 percent to 20 percent of workers have meaningful defined benefit pension plans and most of these are government workers. In the private sector, the sound and sizeable defined benefit pension plan is becoming as extinct as the Dodo bird.

So, who will rescue you? Why, the current, contemporary you, that's who. This analogy, thought up by my pal and co-author Phil DeMuth, is both frightening and reassuring. It's frightening because we humans often dislike responsibility. It's liberating because if we're smart, once we know the facts of a danger, we take action to avoid it.

In the course of this column, I am going to tell you a lot of actions to take to save your retirement, but the first one I want to tell you is probably the most vital: Start early. The difference between starting early and starting late is stunning. Just to give you an idea, check out this scenario.

Assume you start working at age 21. Assume that, adjusted for inflation, your real income grows by 100 percent in the course of your life (a very modest assumption). Assume that you invest in a broad portfolio of the stock market, say the Vanguard Total Stock Market Index Fund (VTSMX). Assume you take the very smart advice of my other investment pal guru, Ray Lucia, and keep lots of ready cash in a bucket so you don't have to tamper with your stocks and can keep letting them compound over long periods of time. Also assume you want to retire on 80 percent of your last year's salary before you retire at age 65.

If you start at 25 with six months' salary saved, you need only save 3 percent of your total, pre-tax salary per year to get the nest egg you need (roughly 15 times earnings at retirement) by age 65. But if you start at age 45, you need to save 18 percent of your salary (again, assuming you start out with six months' of salary saved). If you start at age 50, you need to save 28 percent of your salary. And if you start at age 55, you need to save nearly 50 percent of your gross salary to get where you need to be.

In other words, if you start with a sensible plan at a young age, you can get to your savings goal without breaking a sweat. If you wait until you are middle aged, it takes some serious doing. If you wait until you are a silver fox, you're required to do some heavy lifting indeed. If you assume the stock market has passed its glory days, you need to save even more.

The point is simple, as most vital points are: You need to start today, right now, this second, to save in a prudent way.

Now, if you will definitely get Social Security or if you have an annuity, things are not as Draconian. But the point is still vividly powerful. Let the magic of time and compounding do the heavy lifting. And, as Jim Bellows, a true genius who used to be my editor years ago, often said, "Start at once and do the best you can."