Assume you get a salary of $50,000 per year. Your basic living expenses are $45,000, and you put $5,000 into the bank for retirement funds.
Next year, your basic living expensses go up to $46,000. You still put the $5,000 into your retirement fund, but you have to borrow back $1,000 from your retirement fund. So your retirement fund is worth $10,000, of which $9,000 is in a bank account and $1,000 you owe yourself.
The next year, you still don't get a raise and living expenses go up to $48,000. You still put the $5,000 into retirement funds, but this year you have to borrow $3,000 to pay your living expenses. So your retirement fund now has $15,000, of which $11,000 is in the bank and $4,000 you owe yourself.
Oops, the roof goes out. You don't have any money left over to pay for it, so you borrow the $10,000 from your retirement fund, giving it an IOU.
You now have a retirement fund of $15,000, of which $1,000 is in the bank and $14,000 is notes from you to you.
The next year is the year you planned to retire on your $15,000. It's all there in the fund. Just pay back the $14,000, and retire.
Yeah. Right. |
