My last post probably made you think this blog is turning into a financial blog.
It’s not.
But in order to look at the concept of retirement as most Americans understand it, we must see some things.
1. Most people want to stop working completely when they turn 65 yrs. old (or 67 if you take the government’s suggestion). We think this because that’s what everyone tells us is normal.
2. Most people don’t really know what they want to do when they retire. They have vague dreams of travel, leisure, family time, and hobbies, but no real concrete plans.
3. Financial experts warn us to save money for retirement, but it’s hard to know how much.
We’ve discussed #2 a bit, and #1 is where I want to go, but in order to do that, we need to look at #3.
Confusing I know…
I got onto several popular websites today to calculate how much I’ll need for retirement. I was asked to enter my age, income, and expectations for how much I’ll spend in retirement, and how well I thought my investments would do over the next 40 years. Obviously, there’s a lot of guessing in this game.
I looked at AARP, CNN Money, and Yahoo Finance. Each one gave different answers, but they all agreed that if I wasn’t planning on Social Security helping me when I retire, I needed to save somewhere between $1.1 million and $1.35 million to maintain my current lifestyle after retirement. That’s a ton of money, but this is not counting the help from Social Security, if it exists when I retire.
That’s a big IF. I don’t think that America’s finances will allow a retirement program by the time I retire unless we make some major changes now that no one seems willing to do. If America continues to be in a bad financial situation, and it can’t offer any retirement help to me, then my retirement plans will look very different than if it can offer me help. The example below explains what I mean:
If Social Security exists, and I want to maintain my lifestyle after retirement…
AARP says I need to save 1.5% of my income every year, about $450 per year.
Yahoo Finance says I need to save 1% per year, about $300 per year.
If Social Security doesn’t exist and I want to maintain my lifestyle after retirement…
AARP says I need to save 20.5% per year, about $6150 per year.
Yahoo Finance says I need to save 10.5% per year, about $3,150 per year.
CNN Money says I need to save 12% per year, about $3,750 per year.
I hope you see the huge difference. With Social Security, I have plenty of years to save so it will be pretty easy, as long as I’m consistent. Without Social Security, I’ll need to save $3000 – $6000 every year. I earn about $30,000 per year, so those numbers look impossible. If I counted every penny and never gave any money away to anyone…
I still couldn’t do it.
I’m left in a sticky situation. My only hope for a decent retirement is a government program I don’t think will exist when I need it. And it won’t exist, not because someone decided to change a law, but because we literally won’t be able to afford it.
I know all the experts say that if Social Security isn’t here, then something else will take its place. I certainly hope it does, but I’m not holding my breath.
So now that I’ve wrecked your day and mine, we’ll re-evaluate some assumptions and see if we can’t see another way.
rebelauthentic 