When you first start out in life, the question you should ask yourself is “how much should I save?”  It is a question to answer by considering all your savings options for retirement – like a company plan that matches a percentage of your savings.

I am all for saving – and saving early is my mantra.  So, this article of a 28-year-old who, having only held jobs in the $50,000 pay range, had saved $250,000 caught my eye:  “How to Invest and Save Money Early to Retire a Multimillionaire” – BusinessInsider.com

I was nodding my head in agreement with the author’s clear understanding of the power of compound savings:

“By saving $250,000 so far in my 20’s, even if I never invest another cent for the rest of my life, I should retire with $1.6 million to $2.2 million… adjusted for inflation!”

I can understand why that $2.2 million number feels great – especially at 28.  And, how many 20-year-olds are there that have saved this much money?  I bet not many.

At age 60, my current age, I now ask a different question.  How much will my retirement savings generate for me and my husband to live on after we are retired?  We are still involved financially in a few ways with our two adult children.  We want to travel and update the house on occasion in addition to the other customary costs of aging and living life.

Would that $2.2 million be enough for us? Would it cover all our wants and needs?

Advisors today will tell you that the income off that portfolio could be anywhere from 4-7%.  4% would give you an annual income of $88,000. 7%, $154,000. Add social security – if it still exists.

$154,000 sounds good at 28. But at 60, it would not be enough.

I continued to read and stopped nodding my head right about here:

“With my retirement savings “finished” I could realistically: Stop saving entirely and start spending every dollar I earn on a lavish life of luxury.”

Well, yes, you could.  But “realistically” we could have a period like 2000-2010 where the market was flat.  We could find ourselves again in 2008 when our college savings for our girls took a hard hit.  Heck, we could have another Depression.

So, don’t stop saving.  You can still have all the options this writer talks about.  But to truly keep those options on the table, keep saving.

Susan Beacham
Written by Susan Beacham
Susan Beacham founded Money Savvy Generation in 1999 after almost two decades in private banking and investment management complemented by considerable time teaching at the elementary level.

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