Retirement for the Millenial Generation
It’s never too early to begin thinking about, planning, and investing for retirement. Not even for 20-somethings like myself. Actually, it may be more crucial right now for my generation to do this than for any other generation to do so. I’m not making light of the retirement crisis many Baby Boomers are staring in the face. That’s very real, and the need for them to ensure they do retire is very real also. What I’m saying is that their options are limited. Once you’re closing in on retirement, the most important factor in investing for retirement is gone: time. All you can do is invest (much) more and hope you picked your investments wisely.
That’s not where I and the other Millennials stand right now. We’re at the beginning of our working lives, and time is still on our side. But it won’t be forever. Therefore it is absolutely essential that we get engaged, right now, in making the right financial decisions.
Here’s some perspective for my fellow Millennials:
A $50,000 a year income is a comfortable standard of living for a married couple right now, in 2012 dollars. So, to get that each year, you need to invest $500,000 at a 10% average rate of return. But let’s fast forward, say…forty years? Welcome to retirement, my fellow Millennials. It’s 2052 and crunch time is here. (Oh, and forget about Social Security. In their history classes, our grandkids are studying why that program collapsed thirty years ago.)
Let’s say the average yearly inflation was 3% over these last forty years. In order to retire with a standard of living comparable to the $50,000/year in 2012, you need to have $1.6 million invested at that same 10% average interest rate. That $50,000 worth of goods now costs roughly $163,000.
Inflation sucks, doesn’t it? Here’s the bottom line, my fellow Millennials: We can’t consider millionaire status to be something out of reach. If we do, we’ll probably die relatively poor and miserable. I don’t know about you, but I’d rather not do that. So change that attitude. Millionaire status is out there for the taking- now it’s up to you to go out over these next forty years and kill it so you can drag it home for dinner. Sic ’em!
Thanks for reading,