The collision industry does a pretty good job of offering information on ways to increase profitability and wages. Even though this is wonderful, little has been published on ways to use that money to invest for retirement.
The sad truth is most people working in shops have never been taught financial literacy. Their parents and grandparents often worked until they were nearly worn out, then lived a life of scarcity on Social Security until passing.
For the average couple who retires at age 62, their monthly Social Security benefit is $2,750, or about $33,000 annually. Benefit amounts vary based on income levels during their working years and when they decide to start receiving benefits. Here’s the deal: Social Security was never designed to fully support people during retirement. It was designed to only supplement one’s retirement plan. Unfortunately, the harsh reality is that the median retirement savings in a 401(k) is only $211,000. Any money withdrawn from a tax-deferred retirement account after the penalty-free age of 59.5 will now be taxed as regular income.
The latest statistics show that the average American man lives to around age 75 and women live to about 80. The good news is for those who make it to 65, average life expectancy is 82 for men and 85 for women. Of course, lifestyle and heredity play primary roles in one’s longevity.
So, how can one avoid a scenario of working 35-45 years with little to show for it? It starts with delayed gratification, which is defined as the ability to resist immediate rewards in favor of a more valuable long-term reward. We must create daily, weekly, monthly, and yearly financial goals. The key to this requires discipline and focus.
When should one start planning for retirement? Well, ideally their first paycheck after finishing school should have a minimum of 15% going toward retirement. Some of you are thinking, “Greg, you don’t understand, I have a house payment, groceries, diapers to buy, and kids’ college to save for.” You know what? You’re right. It’s not easy! But as Dave Ramsey says, “If you will live like no one else, later you can live and give like no one else.” If you get a chance, look up the story of multimillionaire Ronald Read from Vermont. After death at age 92 in 2014, it was revealed that Ronald had amassed a fortune of over $8 million. No one in his community, nor even his own children, knew Ronald was a multi-millionaire because he certainly didn’t fit the part.
How did Ronald accumulate this wealth by working at a gas station and later as a part-time janitor? He simply used the age-old system of “pay yourself first,” and then he paid his bills. Every week, he went to his local library to read the free Wall Street Journal, bought blue chip stocks like Procter & Gamble that paid dividends, and reinvested those dividends without spending them. Nothing flashy, nothing glamorous - just compounding multiplied by time. By starting early with the right mindset and self-discipline, almost anyone working a W-2 job today can retire in their early fifties. No matter what your age, you must start saving and investing now, as the prime retirement “go-go” years are between ages 55-70. After 70, health and energy levels begin to deteriorate.
In the end, no one really cares where you live, what you drive or what you wear. Cherish these words of Albert Einstein. “Compound interest is the eighth great wonder of the world. He who understands it, earns it… he who doesn’t… pays it.” A simple rule of thumb: never borrow money on something that has wheels under it - cars, motorcycles, SXS’s, fancy Snap-on toolboxes, etc. These are, 99% of the time, quickly depreciating assets (AKA liabilities).
A few must read/listen to books: The Millionaire Next Door by Thomas J. Stanley, Rich Dad Poor Dad by Robert Kiyosaki, The Psychology of Money by Morgan Housel, The Richest Man in Babylon by George S. Clason, and The Simple Path to Wealth by J.L. Collins. Investments don’t necessarily need to be in equities (stocks and bonds); they could be rental properties, body shops, etc.
For retirement planning, I encourage you to consider meeting with a fee-only CFP (Certified Financial Planner). For you who prefer DIY, investigate robust retirement planning software like Boldin or Projection Lab. CFPs and retirement software can build different Monte Carlo scenarios for when you want or can retire, desired spending levels, inflation, investment returns, Social Security timing, Roth Conversions, IRMAA effect on Medicare premiums, RMDs (Required Minimum Distributions) and tax-saving strategies and more.
As the owner of my shop, I am personally responsible for teaching my employees these basic personal finance principles and leading them by example. Why? Because we should care about our employees and their futures!
