Sooner or later

What are people thinking? Catching up on retirement savings may be possible or maybe not, but why risk it? One thing is sure, saving early is less painful or at the very least much easier to predict the level of pain and what it takes to meet your goals.

If a person starts saving at age 25 and saves $300 a month until age 65 they could expect to have $600,000 assuming a 6% annual return. If they started saving at age 50 they need to save $2,050 per month to have the same amount age 65.

Saving $300 a month at age 25 may be a strain, but at age 50 $2050 with all the financial obligations possible at that age, it may be impossible. It should be far easier to give up unnecessary stuff when you are younger.

From the TD Ameritrade survey

Cutting back expenses in retirement sounds good because a younger person has no idea what those expenses will be. There are many expenses you won’t want to or won’t be able to cut. Those you think will be cut will be replaced by others. You cannot make any assumption until you have a very clear idea of how you want to live in retirement.

As for the million dollars being sufficient for a comfortable retirement, dream on. That’s another risky assumption. At best $1,000,000 will generate $40,000 a year income in 2019 dollars using the 4% withdrawal guideline.

If you had $1,000,000 forty years ago, you would need $3,500,000 in 2019 to have the same spending power. If you are a Millennial, how could you believe $1,000,000 will be sufficient 25 or 30 years from now? Needless to say, the amount you need in retirement is highly variable based on your income before retirement. That is why putting out a number such as $1,000,000 is absurd.


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