7 Reasons to Start Saving for Retirement Today
Angela Colley — Building Blocks
If you don’t plan on working until you drop dead over your TPS reports, you’re going to need a retirement plan. Trouble is, most of us don’t even know how much money we need to devote to our leisure-filled golden years. A recent study by Merrill Lynch found 81 percent of people have no idea how much they actually need to save, let alone how to get the ball rolling no matter their age.
While the age of grandpa’s company pension is long behind us, the assumption that somebody—our employer, our union, our spouse, our government—has our retirement savings all figured out for us lingers on. Unfortunately, our future selves don’t have time to wait on the development of a new national discourse on retirement. Here’s why:
Numbers like those above are why more than half the millennials in the Merrill Lynch study thought a financially comfortable retirement was beyond reach. And true, those stats are enough to make you want to throw in the towel—or at least curl up in a ball and plan to work until you’re 90—but that is not a life plan and you need a life plan. Whether you’re starting at 25, 35, or 45-years-old, you can retire with $1 million if you have the right strategy.
Trigger warning: Seemingly absurdly high figures are coming. We start at $1 million, itself a crazy number, until you recall that it’s estimated a single person will spend at least $130,000 in basic healthcare costs in retirement. Then we estimate that you would spend 20-25 years in retirement, which is inline with current longevity estimates for today’s 35 year-olds and assumes you retire at age 65. So, that puts your annual amount available between $43,500 and $34,800, not including Social Security.
In terms of saving to get to $1 million, we also make a lot of mostly negative assumptions (better safe than sorry, right?): you’ll be solely responsible for all the $1 million, you won’t have a company match to your 401(k), and you’ve never saved a dime. If you already have some savings you can put toward retirement, plan to share retirement income with your partner, and can take advantage of a company match, you’ll be at a better starting place. Also, this is $1 million in purchasing power, not real dollars. If you want to bet on historically low inflation over the next several decades, you could get away with saving much less.