Anyone done one of those retirement calculators?
Do you find in impossible to save enough to live above the poverty level when you retire? I put in that I will live till I'm 95. And that I needed $28,000 / year in todays dollars. I even included social security which might not be around in 30 years. Anyone else baffled by the numbers?
Public Comments
- You should have started saving earlier in life. By the time you are 35 it is too late to begin. But you might try a number of 85 and see if that gives you better results. Many people after 85 do not care whether they live in poverty or not. They are in another world.
- One of the reasons that Social Security and private pension systems are chronically short of money is that people are living so much longer than they used to. A pension was no big deal when people retired at 65 and died at 70. Now that they're living to 85 and 90, it's very expensive. The same holds true of personal savings. If you put a lower age (80, say) into the calculator the required savings will be more reasonable. It also depends on how old you are. If you don't save for retirement in your 20s and 30s it's nearly impossible to catch up. The recent decline in the stock market obviously affects this as well. Personally, I'll be fine as long as I retire when I'm 102. :-)
- No one would find it impossible to save if they simply lived within their own means and not have houses and cars that cost way to much, but that is what they wanted. So people make their own choices save or get that big house that eats every dime they make. Some make samrt choices far too few do.
- I ran your numbers through my favorite retirement planning calculator (http://www.vilkri.com/intro/retirement_planning_calculator.php) and it looks like you need to save about $450 each month for your retirement, if we assume social security will still be around, and that you have no savings right now. By working a few extra years, though, you can drop this number quite substantially -- to around $300 per month if you plan to working until age 68. (Working a few extra years gives you the "double" bonus of a few extra years to save, but also a few extra years that you do not need to spend your retirement savings.) You can also assume you will not live as long, but I think it makes sense to plan for a very long life, myself. I'd rather save a bit too much and leave some behind for my children or charity than run out of money when I am 90! The thing about numbers that are so far in the future is that everything can make quite a difference -- how much you have saved so far, the rate of return you get on your investments, how long you live, and so on. To make things even more confusing, you're dealing with "compounding" -- so a dollar you save today with a 7% return is worth about $2 in 10 years, $3.80 or so in 20 years, and $7.50 in 30 years (assuming you keep all return on that money in the account so that it too draws returns). So another way of thinking about it is that every dollar you save today should grow to about $7.50 when you are 65, but every dollar you save when you are 55 will grow to just $2 when you are 65. You might want to try pushing your retirement back a little bit, or maybe consider working a "hobby" job or part time for a few years after you retire (the calculator I mention above will let you do that -- as well as help you figure out how to get the needed savings to fit into your budget). You might find a plan you can better live with now. But do get started now -- today's savings are the key!
- Actually, when I have used the calculators, I didn't have too much trouble but I was actually saving for retirement. Currently, I know that mine would be lower than what I would want, but I am starting to save for retirement again. What I have seen to often is people like you who don't save enough because they want everything today.
