Over at ABC News columnist David McPherson is responding to some reader backlash stemming from an article in which he used an example of somebody retiring with $500,000 in an IRA. The readers accused him of being out of touch with reality. Well, rather than apologize, he’s upped the ante. Now he says you’ll need $1 million to retire.
The days when an employer will guarantee you a monthly check upon retirement are fading away fast.
You’re on your own, and you better wake up to that fact.
If you’re retiring within the next few years, there’s still a decent chance you will collect a guaranteed pension. But unless you’re a government worker, 10 years from now there will be few retirees who can count on one.
That’s why you need $500,000 or more.
David suggests you try to meet this goal through your employer’s 401k plan. (Um, assuming you have one…)
For most workers, the best way to do it will be through your 401(k) plan. The combination of tax deferral, an employer match and automated payroll deductions make the 401(k) the best savings vehicle for most workers.
Let’s say you’re 30 years old, earning $50,000 a year and are 35 years away from retirement with nothing saved so far. Contribute about $246 a month, and at a 7.5-percent average annual rate of return, you would reach the $500,000 goal. That contribution amount is equal to about 6 percent of your salary.
Throw in a 3-percent match from your employer, and you would be on track to reach $750,000 at the same rate of return. Assume annual salary increases, and these numbers will look even better.
The key is to save early and often. If you do, you’ll have $500,000 before you know it.
How’s that for a reality check?
What do you think of this? Are you on track to retire with a million bucks?