Everyday, AJ Sheff and I read stories on the internet which paint the picture of a 90 year old labor force which can’t afford to retire. This is exactly the kind of thinking that doesn’t help at all, and in fact, conditions people to accept the status quo and make no effort to affect positive change. We’re here to change that.
The problem
Allegedly, no millennial will be able to retire… at least that’s what I’ve been told. The most common claims are:
- I save so much money now that I’m broke
- $1 million isn’t what it used to be, I’ll basically be broke
- We don’t have the benefit of pension plans like our parents and grandparents did
- I’ll be working until I’m 105.
The reality of the situation
You get the point. We’ve all heard these claims, and I’m sure plenty of people have taken them at face value and assumed they’re true. But plainly put, this is an exaggeration at best and an outright lie, at worst. But we just listen and nod our heads as people continue to relegate themselves to lifelong poverty with no end in sight. Well, let’s change that, today!
“Allegedly, no millennial will be able to retire… at least that’s what I’ve been told.”
D.C. Poc
Whether your target is $250K, $1M, or $10M, one thing doesn’t change: all of these figures have been diminished by inflation, but that shouldn’t impact your planning. Why is this, you might ask? Well, since when does anyone make the blanket statement that you need $1M to retire? We certainly don’t recommend that here at Wealthy Idiots. Rather, we encourage you to save a large portion of your income, ideally 15% or greater. With that strategy, your contributions increase as your pay does, which will solve the future inflation problem. Weird, right?
Then we have the lack of a pension claim. Okay, I got it, everyone is upset they don’t have a pension anymore. Silver lining: you know this now and can plan for it. This is way better than relying on a pension only to find out the pension fund is broke and cutting your payments by [insert number here]%. Ouch. That will kill even the best of retirement plans. You should make a savings plan today that will serve as your retirement fund tomorrow. Add that to your eventual Social Security payment, and you should at least have a 2-bucket approach.
“You should make a savings plan today that will serve as your retirement fund tomorrow.”
D.C. Poc
Other retirement considerations no one mentions
There are a few very important facts that get ignored by most financial advisors, news networks, and even blogs like us.
- You’ll have less expenses. For years, you’ve been contributing to Social Security, and putting tons of money in your retirement accounts (I hope). When you retire, this stops completely. Just think, that $20,500 for your 401(k), and the $6,000 you put in a Roth IRA is now spendable cash rather than an expense. This is $2,208 per month that you didn’t have prior to retirement. If you have a spouse who is contributing equally, this number could be $4,416 per month. Your savings goals may be much more achievable once you factor this in.
- Lower housing cost. Even if you haven’t managed to pay off your mortgage, there is a good chance that you’ve managed to find a good interest rate by retirement, and that you bought your house at a lower entry price than the current home buyers. This essentially gives you a hedge against inflation and keeps your monthly bills constant, and hopefully, lower. For this reason, I’ll likely carry a mortgage for the rest of my life.
- Other lowered expenses. Some items you don’t realize you can save money on in retirement are things like gas to/from work and eating out at lunch everyday. Being home, you have the ability to make your own lunch, saving on that repeated expense. Just don’t drive to lunch everyday of the week, or you’ll restore this cost in retirement and realize zero expense savings.
- Side hustle availability. You don’t have to stop working completely. There are a ton of retirement jobs that will offer flexibility, income, and some financial freedom. Maybe you want to drive an Uber? Or possibly pickup a consulting gig? Either way, you should have the time available to supplement your income on a smaller scale.
- Delayed Social Security. This isn’t really a savings, but rather a payment boost which will help preserve your savings. The longer you wait to claim Social Security, the bigger your payment gets. Let’s say you are due $2,000 at age 62. Your potential payment could be around $2,900 at age 67. Think hard about this before claiming Social Security.
Do this to ease your future worries
This is hard, and we get that. But the bedrock of any success story in retirement is proper planning or the lottery. Kidding, don’t do the latter, as this is just a voluntary tax. Who needs more of those?
Start by tracking your annual expenses for a while. As an example, let’s say you did 18 months of expense tracking and came in around $50k per year. You would need to find a way to generate $50k of income in retirement to live comfortably. At a 3.5% Safe Withdrawal Rate (SWR) you would need roughly $1.428M in retirement savings between your 401(k), Roth IRA, any other savings, and Social Security.
Let’s say you’re 45 years old with $200k in savings, and you just realized your behind the 8 ball. In order to save this amount by age 60, you would need to invest $1,583 per month at a 10% return until that point. If you are age 35 and need to reach this same amount, you wouldn’t need to save any additional money to reach the same $1.428M.
Again, if this isn’t a sign that you should start saving at a young age, I don’t know what is. Please take care of your future self and start saving TODAY!
Choices have consequences
Ultimately, you don’t have to do anything in this article. In fact, you don’t have to do anything at all. You can sit back and treat life casually without a care in the world. That will likely work for a long time, but when you’re 73 years old still watching that old clock in your cubicle, don’t blame us for not telling you. Instead, you should try some of the proven Wealthy Idiots methods that are available to you!