Why You're Going To Need A Million Bucks To Retire

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?

Why You Need $1 Million to Retire [ABCNews]
(Photo: saramarie )

Comments

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  1. shoelace414 says:

    but if you have a 50% return on your money, just think how much you’d have!

  2. Investment cat is using the wrong knot for his collar style. Discourages me from investing with him.

  3. Bladefist says:

    Yep. I’m a youngin and I can’t depend on social security (nor would I want to) so I am putting 1k in savings a month and doing the company 401k.

  4. chiieddy says:

    Well, if you’re retiring soon, hopefully you moved your stuff out of risky equities and into bonds before the latest market downturn (coughrecessessioncough). However, if you’re not retiring for awhile, now’s a great time to invest in your 401k because the market WILL go up again (eventually). I do like date targeted funds for investment neophytes.

  5. ArgusRun says:

    I’m on track. Living within my means etc.

    Save early and often. My neighbor in the cubicle next door has had the same steady accounting job for 12 years. She is the only person in accounts receivables. She should be saving a buttload, but she spends every freakin penny she takes in. She still rents a house and when her landlord sold out a few years ago and she had to move, she didn’t have enough cash for even a security deposit. She finally started paying into her 401k when we explained how our employee matches half.

  6. MitchV says:

    The columnist is dead on. No way am I going to count on Social Security to bail me out.

    If you don’t have a 401k through work, do a Roth IRA.

    My gift to my kids is that they won’t have to take care of me when I get old.

  7. ArgusRun says:

    @chiieddy: 2045 baby!

  8. bonzombiekitty says:

    wahooo…. 1.7% of the way there (should be roughly 2% but my 401k has taken a big hit this year).

  9. Depending on the type of life you like to lead, when you retire and how long you live after the retirement date, it’s easy for a person to need more than $1M. If a person retires at 65 with $1M and lives for 20 years, the person would have $50K per year (maybe a little more as interest continues to accrue on the amount remaining in savings). Hopefully this person has a lot less expenses than they did during their working life, but one major illness can wipe out that yearly sum pretty easily, not to mention maintenance prescriptions.

    What if this person is married and the spouse doesn’t have any retirement savings of their own? Now you’re looking at $50k per year for two people.

    I’m in my early 30s and have been planning retirement financials for several years. Now’s the time to do it.

  10. nataku8_e30 says:

    I always wonder about estimates like these. I haven’t read the article, but is he talking 500,000 future dollars or today dollars? If he’s talking how much I’ll need saved when I retire in 40+ years, I’d be surprised if 1,000,000 2048 USD would really be enough.

  11. regenerator says:

    I think it’s the people who think that $500K is an exorbitant amount who are out of touch with reality. I would be incredibly scared if that’s all I had at retirement, especially with increasing life expectancy. My minimum goal is $2 million; I would feel much better if it’s at least $3 million. I don’t think people truly think through what retirement entails: this is money that has to cover all of your living expenses until death. My company offers a Roth 401(k), and I contribute a total of 15% of my after-tax pay to that, meaning I will not be taxed on that at retirement, when I will be in a higher tax bracket. Even if I stay in my entry-level position and only receive 3% annual raises, I’m on track to hit my retirement minimum goal. The key is to start early; you get the best return on your money and also never really miss the money because you never see it.

  12. jscott73 says:

    I don’t know, $1 million dollars still seems a little on the low side to retire, especially if you retire around 55-60 and live for another 30 years or so.

  13. SadSam says:

    I would say I’ll need way more than $1 mill to retire on. I’m doing my best maxing out the 401k and the IRA each year but I think the gov should up the max. amount allowed and up the income caps on the Roth. If we are going to be responsible for funding our own retirements we need more tax advantaged ways to do so.

    I also am getting more and more annoyed by the local (city and county) over generous gov. retirement plans (funded with my tax dollars). If I have to fund my own retirement (no more private pensions) so should the gov. employees (generous gov. pensions were put in place to help make up for gov. salaries that were less than private salaries, that is no longer the case). I can’t afford to fund my own retirement along with paying the high taxes necessary to fund the gov. worker promised pensions. [www.nytimes.com]

  14. Balfegor says:

    at a 7.5-percent average annual rate of return

    Hahaha.

  15. smythe says:

    I’m a little more than 5% there… but I’m only 26 so there’s plenty of time to grow. With any luck I’ll be able to retire early and live off my Roth contributions until I hit the age where I don’t have to take a penalty for withdrawal

  16. Erwos says:

    @Balfegor: So true. Does anyone under 30 really think SS is going to be around when they retire, or really be all that useful?

    I’ll also emphasize: put money in both your 401k _and_ your Roth IRA. If taxes skyrocket in the future, that Roth IRA might save you.

  17. athmsVT says:

    It would be nice if we were allowed to make a 7.5% ROI on the 6+% of our salaries we are required to contribute to social security. We would all have a decent start to a retirement account in 40 years. If you add the the 6+% your employer is required to match, it would be a nice chunk of change. Sadly, we will only collect a small pittance from Social Security.

    We should spend the time fixing social security, or quite frankly eliminating it, before we try to educate the masses about the necessity of saving for retirement.

  18. farcedude says:

    The thing I see about it is, a lot of people (especially now – it wasn’t just the banks driving the subprime mortgage market) like to live rather high on the hog while they have a job, and they have some idealistic notion that they’re going to be able to have that same level of enjoyment on a small retirement check. If people keep living longer (I plan to live to ~90, personally), they’re going to hit a wall. Maybe you don’t NEED $500,000 to $1,000,000 to retire, but if you like flying to visit your grandkids instead of hitchhiking, you’ll need it (especially if you’re still paying rent/mortgage on an apartment/house/property).

  19. iMe2 says:

    Isn’t the strategic thing to do for young people is put enough in their 401K to max the employer matching and then put the rest in an IRA (if both are available)?

  20. Triterion says:

    @nataku83: True, having a million in 35 years would be like only having 500,000 today, and that’s if inflation stays at a steady 3% which I’d be surprised if it did!

  21. Johnny Blackshoe says:

    Investing only makes money for investment brokers. You can’t predict the future so spend all of your money now or save only for the short term.

    If you think you are going to be old and die on the street, you have bought into the fear marketing.

  22. howie_in_az says:

    Assuming my salary stays the same (it should increase by at least 5% per year), I’m on track for ~$3M in my 401(k) by the time I retire, so sayeth a quickie python script I wrote. Of course I think it’ll be worth more like $1.2-$1.5M, given inflation and such. The house should be all paid off by then and the kids will hopefully have scholarships to colleges and not need to mooch of of maw and paw — I’ve been promised a Ferrari upon retirement, but that money can’t come from the 401(k). I think the Ferrari is so the soon-to-be-Mrs can cash in on my life insurance policy soon after I wreck the thing, then live comfortably in a custom-designed home in the woods.

    Yeah, it’s love.

  23. oyvader says:

    @jscott73:

    Who retires at 55-60 aside from dotcom millionaires?

  24. jillian says:

    Now, if only I could get a 401K in a currency that wasn’t USD…who knows what those dollars will buy in 2048 when I retire at the age of 70? (I’m also realistic enough to assume a later retirement age)

  25. katylostherart says:

    that doesn’t even seem remotely absurd.

    @jillian: as far as i know you can’t get 401k in other currencies but you CAN get CDs in things like pounds and euros. it’s a higher minimum (10k) but it’s doable.

  26. EyeHeartPie says:

    @Triterion: Usually when they’re talking about dollars in the future, they usually add a statement on the vein of “adjusted for inflation”. If no such phrasing is there, chances are they are talking in terms of today’s dollars. Which would make the estimate misleading.

  27. Tmoney02 says:

    @Johnny Blackshoe: If thats the way you want to live your life knock yourself out. But when your 80 don’t come begging to me or anyone else for food or money. I sacrificed to be secure in my retirement, you didn’t, so we both got our just rewards.

  28. zigziggityzoo says:

    21 years old and 35% there. Woot!

  29. satoru says:

    Heresy! $246 a month would be better spent going to fund my monthly iPhone 3G cellphone bill. We’re all going to die from global warming anyways right?

  30. MissPeacock says:

    @Git Em SteveDave is a poor substitute for LindsayJoy: My boyfriend and I bought that same tie for his kitty not too long ago, and the cat actually wore it. Target, $1.99.

  31. Raanne says:

    When i met with our financial guy, he suggested 4 million for me and my husband by the time we retire. (2 million each).

  32. Tallanvor says:

    @Erwos: While I believe that there will be some changes to social security (the retirement age will likely rise a bit more, and they really should tax all earnings, not just up to the current $102,000), I don’t expect social security to disappear.

    That said, I don’t plan on *needing* social security when I retire. –My plan is to have it be pure disposable income.

  33. RandomHookup says:

    Of course, how much you need will depend a lot on how young you are when you retire, how long you plan to live (see Mom & Dad, e.g.), if you have the house paid off (and if it makes sense to sell it) and, most importantly, what lifestyle you are planning. Too many financial planners overestimate the money you need (and helping bump up the money they are paid because you have more money under management) because they use the 1st few years of retirement as an estimate.

    After a couple of years of traveling, lots of retirees settle down on their spending because they have now done the things they wanted to or their health causes them not to travel as much. Living on $50k sounds like so little money until you consider you won’t be making a house payment or health insurance or commuting costs and you can wear velour sweatsuits all day long and drive your 1997 Crown Vic until you kick off.

    I’ll have more than $1 mil when I retire, but I’m spending it on hookers and blow since I don’t have any kids and don’t want to outlive my money by too much.

  34. theblackdog says:

    My last yearly benefits statement indicated that if I keep contributing to my 401k until I retire and it has at least the 7.5%, I will have about $1.5 million in the bank. This is with a combination of contributing 15% of my salary to the account, the 5% employer matching, and the fund that I am buying shares in right now.

    Being young though, my salary is going to continue to go up, so I will be contributing more.

  35. A.W.E.S.O.M.-O says:

    You can retire on a LOT less if you’re smart and eat a diet high in saturated fat and cholesterol. Then if you even make it to retirement, you’ve got like 2 years, tops, before you keel over. As an added bonus you get to forego like 25 years of arthritis and bingo games.

  36. Johnny Blackshoe says:

    @Tmoney02: That’s fine. Don’t come crying to me when the market crashes and all of your investments aren’t worth anything.

    Ever notice what type of cars investment bankers drive, or houses fund managers live in?

  37. theutopian says:

    Most people treat social security as something that will ‘bail them out’ or ‘not be there’ when you retire. Keep in mind, a prudent investor puts his eggs in many baskets. Plan your retirement accordingly. Invest in a 401k and IRA, save cash, invest in your home and believe it or not, include Social Security in your calculations. Despite everyone’s doom and gloom saying that it won’t be there, there are no plans whatsoever to get rid of it and the societal shift that needs to happen to get rid of it will never happen. Consider your monthly social security check a baseline and all your investments simply add to it. Though careful planning you can have a fine retirement.

  38. RodAox says:

    This is assuming that the stock market does not/will not tank in the future… 7.5% ROI, hahahhaha…. employer matching ? on most cases on the company owned stock or non existent… in the mean time health care costs, fuel and food prices go up…. you are better off throwing a big ass party until you are 60 every year and just pull the trigger when you retire…

    Waiting to die with nothing to do in a small ass apartment that you can barely afford, while popping pills to keep your blood pressure down………. waiting to die… i pass

    We will not live forever, the sooner you embrace that fact the better…..

  39. incognit000 says:

    I have a 401(k) but to be perfectly honest I’d really much rather have a pension sitting there for me 40 years from now. Putting money in a 401(k) is a pain when you have so little to start with, and it’s not like I can really feel close to retirement.

  40. eddmel says:

    I am retired with an adequate amount in retirement accounts. What bothers me is that I pay alot in income tax. My taxable income is the same as when I was working but now I have no deductions. I am paying ordinary income tax rates on distributions which are largely dividends and capital gains. This income would be taxed at a maximum of 15% if it were outside of retirement accounts. I know I saved on income tax when I made the contributions years ago, but each quarter I now send out huge checks for estimated taxes.

  41. weave says:

    @SadSam: I’m a 26 year-in state employee looking at retirement. While it may be different depending on the state, the retirement fund in my state is funded by mandatory contributions I had to put into it during my time here. Plus I took that big hit in salary as others in my field (IT) went out and made a mint in the 90s (and are now unemployed or under-employed). I was looking for stability and security in exchange for the lower salary, so please consider that in your opinions. Taxpayers are not necessarily paying for these benefits in every state or locale.

  42. Tmoney02 says:

    @theutopian: Wouldn’t the prudent investor plan for the worst case scenario and hope for the best? Another words assume social security is gone, inflation is crazy high, and rate of return sucks. If things turn out that way they are fine. If they turn out better they are excellent and sipping cocktails in Hawaii.

  43. Zerkaboid says:

    I’m 24 so $1 million will definitely be low for me. Assuming a 3% inflation rate (yeah, generous, I know), in 40 years $3 million will be equal to about $890,000 in today’s dollars, so anyone in their 20s now better already have some $$$ growing in a 401k if you’re hoping to retire before 70!

  44. dakotad555 says:

    Bladefist:

    Rather than putting 1k a month in the bank, open a ROTH IRA and contribute the max. You’ll get a higher rate of return, and better tax incentives. You can have a 401k AND a ROTH IRA at the same time, taking advantage of both excellent investment devices. The other $650 a month of your 1k, put into a money market account where you’ll usually earn 1% or so more than a savings account. Works just like a bank; comes with a checkbook, etc…

  45. Landru says:

    Well, I guess that is one good thing about my heart condition; I fully expect to be dead before I’m seventy.

  46. ekthesy says:

    I think I’m just going to have someone poison my tea* when I hit 65. No drooling in a nursing home for me! Plus, all that “retirement savings” is now “disposable income.”

    *ekthesy’s retirement plan may not be suitable for all readers.

  47. tande04 says:

    Setting some kind of “standard” for retirement is just as silly @ 1 million as it is at $500,000.

    Thats why there are so many tools availible to gauge what you want to do with your retirement and how much you’ll need to do it. If I want to spend my time in a shack in the woods, growing my own food, and just staring at a lake all day, yeah, $500,000 is going to work just fine. If I want to spend every day of my retirement renting out the top floor of the Ritz Carlton and filling it with hookers and blow, $1,000,000 probably isn’t even going to cover the blow on the first day.

    Its no different then the 10% of your income standard that used to be accepted for adequate savings. It may be far to much for your lifestyle, it may be woefully short.

  48. jdmba says:

    I love these calculations. They usually require you to identify how many years you will live and what interest rate you will get. If these were at all possible to know, the calculation would make sense. The best you can do is use actuarial tables, which are, of course, not YOU.

    That said, who is getting 7.5% return on their money. My 401K is currently earning a cool -13% (and these are fidelity funds).

  49. theblackdog says:

    @jdmba: My 401K is down 8.5% on the return over the past year, but for me it just means I’m buying more shares for the same amount of money, and they will go up later.

  50. lawnmowerdeth says:

    My plan is similar to ekthesy’s: I smoke, drink, and eat too much, if I made it to 60 it would be a miracle, so I’m just spending all that sweet retirement money now!

    Also, I’ve been trying REALLY hard to win the Powerball.

  51. knyghtryda says:

    @jdmba:
    Tell me about it… I put 14% into my 401k and every paycheck I see my 401k DECREASE, thus earning me about -15% over the past 9 months. This is diversified across large cap, midcap, and international. I know that 7.5% number is long term, but damn, its kinda sobering see that on your first job…

  52. Bladefist says:

    @dakotad555: Ya I’ve considered that. My savings account earns 2.5% right now. Before the prime rate crap, it was earning 5.5%. Which is great for savings. The reason I don’t put it in an IRA or even a CD/stock market is because its “retirement” and “savings”. If I have an emergency, I can withdrawl quick.

    I have the 401k for retirement as well. If no emergencies happen, I’ll probably take a chunk of the savings and put it somewhere else. I’m just trying to keep atleast 6 months pay in savings for emergencies.

  53. azntg says:

    Eh, I don’t care about saving over a million or more.

    I’ll probably have to work until death prevents me from doing so. I’ll save some money though so that family members can split the sum and run though.

  54. Tzepish says:

    I’m on track to retire with $1 million, but I doubt it’ll be enough anyway :-p

  55. HogwartsAlum says:

    @Bladefist:

    Every time I try to do that, I have an emergency. ;)

  56. cmdrsass says:

    The best way to beat the system is to become a do-nothing public employee as soon as possible and avoid the DREADED PRIVATE SECTOR altogether. It helps to know someone (preferably a relative) who can grease the skids and show you how to work the system. The key is to maximize your top-earning years to obtain the largest possible pension. Assuming you don’t commit a felony, you can retire in 20 years and earn a 70% pension and low or no cost health care for the rest of your life all thanks to those hard working jokers paying taxes. If you’re really clever, you can “retire” even earlier on disability by claiming to be injured on the job. Ask around for the name of a friendly doctor.

    For case studies: see Massachusetts

  57. Notsewfast says:

    To all those laughing at a 7.5% ROR, the average return of the S&P 500 since 1926 (the year the S&P 500 was founded) is about 11%. The key is to look long term. As many have stated, you must buy high and sell low. It is human instinct to pull money out of the equity market when prices have tanked, but now is the time to load-up.

    Throwing money into the bond markets is no cure right now either, long term-money is making basically nothing (relative to historical yields) and to be honest the smart money is either picking up some cheap stock, or for the more risk-averse, waiting in cash and short-term fixed income until yields improve.

  58. selectman says:

    @Bladefist: The annual limit for a Roth is about a third of the 401k limit, $5000 this year, increasing at $500 a year here on out. I’d recommend:

    1) Max out 401k matching contributions
    2) Max out annual Roth contribution if possible
    3) Max out annual 401k contribution if possible

    This works out to be $20,500 for 2008, so that’s definitely not easy. But at least $15,500 of it is pre-tax. If your company matches 5% and you make $50,000, achieving 1 and 2 would be $7,500, which is do-able for a lot more folks.

  59. privateer says:

    @Johnny Blackshoe: Which is exactly why you don’t just put your money in one type of investment. You diversify to make sure you don’t lose everything.

    All I have ever done has been 401k and employer matching. But I waited until I was six years into my career, at age 30, before I started pulling money out of my paycheck into a retirement fund. Twelve years later, I wish I had started sooner.

    The numbers being thrown around for a “comfortable” retirement can be intimidating, obviously. But IMO, you need to start somewhere if at all possible. Start small, with whatever you can. Saving something, anything, is better than not doing it at all. Even if you never invest it, at least start saving. Rainy days will come.

    People with little room for error should begin conservatively with smart, low-risk investments. As the principal grows, you can branch out into areas that offer higher rates of return.

    Bottom line, IMO: Start saving as soon as possible. Work at your principal over time. Always stay informed, especially about the markets and the economy. Keep your investments timely and diversify when possible.

  60. harvey_birdman_attorney_at_law says:

    I just started my 401k. I’ve contributed $100 a week for 3 weeks. I just got my latest statement. I have $293. :( WTF?

  61. failurate says:

    @Raanne: I don’t really trust “Financial Guy” as his goal is to get you to give him as much money as possible.

  62. bohemian says:

    I plan to retire to a tastefully decorated shopping cart whilst dining on gourmet cat food.

  63. Tmoney02 says:

    @Secret Agent Man: I think you forgot to add “**Past results do not indicate future performance””

  64. Franklin Comes Alive! says:

    @harvey_birdman_attorney_at_law:

    Welcome to the recession!

  65. mzs says:

    The fees on my retirement plan bug me. I mean most everything was negative, some were positive, but the fees seem to eat into everything so my retirement funds are basically stagnant or shrinking from month to month. That 1-5% fees compounded over and over again really do eat into this stuff over the years. I would sacrifice the ability to have so much choice if the fees were slashed.

  66. Notsewfast says:

    @Tmoney02:

    You sound like my legal department.


    *This comment is in no way investment advice, seek advice from your investment professional before making any investment decisions.
    **There are risks associated with all investments, including loss of principle.
    ***Investments not FDIC Insured.
    ****This comment may contain confidential and/or privileged information. If you are not the intended recipient (or have received this email in error) please notify the sender immediately and destroy and delete all copies of this email and any attachments. Any unauthorized copying, disclosure or distribution of the material in this comment is strictly forbidden.

    How’s that for airtight?

  67. azzy says:

    I think I did the calculations. If I were to retire today and have the same “salary” for the rest of my estimated life, with no change other than for the rate of inflation I need 1.7 million (today) or 2.6million when I’m retirement age. I’m 29. My mother, who is 45 and has a similar salary would need 1.3 million today to retire.

    Either way, I figure I’ll be working until I drop *shrug*

  68. Tmoney02 says:

    @Secret Agent Man: lol well done. I believe my services are no longer needed. A bid you good day sir.

  69. Jevia says:

    Its hard to put money into retirement when one is just getting by with increased health care costs, mortgage rates, gasoline, food, and other assorted costs, while still paying off student loans. And not everyone gets employer matching on a 401(k).

  70. quail says:

    When my retirement money runs out I’ll just turn myself over to the corporations and have them turn me into Soylent Green.

  71. trujunglist says:

    I don’t plan on getting that far, but I’ve got my just in case plan enabled anyway. According to this, I’m ahead of schedule. Hooray.

  72. Silversmok3 says:

    Inflation adjusted, Id actually shoot for about 4 million dollars to retire ‘comfortably’.

    $1,000,000 is nice today, but in 10 or more years 1 million $ wont even put gas in your Cadillac.

  73. Speak says:

    @RodAox: It’s sobering to think the money we’ve invested exists only as numbers to us. We’re assuming there will still be an entity in the future that recognizes what a 401(k) is.

    @Jevia: I think I made the comment somewhere else on Consumerist that the number of permanent, full-time positions with benefits in my industry has dropped. Companies instead rely on contracters and freelancers so they don’t have to pay for all of that “feel-good” worker stuff. Much less a matching 401(k).

    Things are always rosy for these financial gurus. Housing is always affordable, higher education is within reach of anyone who wants to learn, no children are born with disabilities, and no one gets cancer.

  74. Cogito Ergo Bibo says:

    @harvey_birdman_attorney_at_law: Consider yourself lucky. I’m putting in a lot more and have lost $2K in the past quarter. The more you invest, the more you have to lose.

  75. Speak says:

    I forgot to mention natural disasters.

  76. chrylis says:

    @chiieddy: The key there is to have moved some of your money into equities. With life expectancy today, financial advisors are recommending that retirees keep more in equities longer.

    This is, however, one area in which a mildly-managed mutual fund makes sense for many people: Putting a good chunk of your retirement money into a lifecycle fund in your early 50’s or so is a good balance, for many people, between squeezing out every cent of return and not being able to sleep because of the markets.

  77. privateer says:

    @Speak: Disasters — financial, economic, personal, whatever — are the main reason you should put away some money, preferably somewhere it can make you more money. It doesn’t have to be in some complicated investment plan or snobby real estate deal. Just save a small percentage of each paycheck and the money will grow. Then it will be there when you need it, for whatever reason.

    I don’t disagree that a lot of these so-called gurus act like everything is gonna be sweet if you just listen to them. It pisses me off that they tell you how to make more money by investing “their way,” but the way they’re making money is by selling their “secrets” to you.

    I don’t buy into it. I say just do it your way, to whatever extent you believe you can.

  78. Orv says:

    @knyghtryda: Heh, I rolled my 401(K) over into an IRA about three years ago, and it’s now worth less than when I started. I’m hoping this isn’t the 1920s all over again…someone who bought into the stock market in 1929 would have had to wait about three decades just to break even.

    Incidentally, 401(K) plan fees are sure a ripoff. I didn’t realize how high they were until I did my IRA rollover. My fees were three to four times higher for the same index funds in my 401(K) than they are in my IRA. It’s almost criminal, but the fund managers can get away with this because 401(K) participants are a captive audience.

    @SadSam: I don’t doubt that government pensions are overly generous in some areas, but you have to keep in mind that in many places those jobs also pay less than comparable jobs in the private sector. So in a sense people are just trading better retirement benefits later for a lower salary now.

    It used to be most workers, private or public, got a defined benefit pension and it wasn’t expected that every Tom, Dick, and Harry would have to try to learn to be an investment expert. I’m not convinced te current system is a step forward; I think a lot of people are going to be in a very difficult position in 20 or 30 years because they simply didn’t know where or how much to invest.

  79. Dustbunny says:

    My retirement plan is to marry Investment Cat and live off his $$$$. Meow.

  80. timmus says:

    Make sure you allocate about $18,250 extra per year. Because by the looks of what I see at the local convenience store, you’ll be buying cigarettes and lottery tickets by the truckload once you hit 60.

  81. unleashed says:

    How the hell can you people say $1 million is not enough to retire on? That’s $50k/yr for 20yrs. I guess it depends on your living location, but still. I can live normally on $12-15k/yr, with $50k available, I think I’d spend all my time on vacation.

  82. Kitteridge says:

    Retire? What is this thing you speak of?

    Like any of us are going to ever have enough to actually *retire* on.

    Social Security will be gone.
    Dollars saved today may look nice but will essentially not translate into dollars of the future.
    I sincerely doubt any of us — unless you’re already making big bucks — will ever be able to kick back for decades on end and just take it easy. I also think we’d be bored senseless after a relatively short period of time.

  83. godospoons says:

    I can afford cheezburger?

  84. Meathamper says:

    Yay! Investment cat!

  85. rlee says:

    @Triterion: It’s much worse than that. According to “the rule of 72″, 3% a year means a doubling in just 72/3 = 24 years, not 35. If you run the numbers, it turns out to be about 23.5.

  86. Grrrrrrr, now with two buns made of bacon. says:

    A million???? I’ll be lucky if I have $50,000 by the time I retire.

    Come on, folks..start practicing with me now….

    “Welcome to Wal-Mart. Welcome to Wal-Mart”

    “Hi, Welcome to McDonald’s”

  87. @unleashed: How the hell can you people say $1 million is not enough to retire on?

    Ideally, you want to live off the earnings, not the principal. USAA’s retirement calculator told me I’d need $1.8m to “finance my retirement lifestyle” (about $47k/year). I’ll save that much to leverage the tax savings, but I don’t know about retirement. It just sounds so boring to me:

    Q: “What do you do these days?”
    A: “Play golf and watch TV. I’m just waiting to get the fuck out of here.”

  88. @oyvader: Who retires at 55-60 aside from dotcom millionaires?

    Teamsters.

  89. stinerman says:

    @Bladefist:
    You’re not supposed to rely on SS. It’s an insurance program, not a retirement program.

  90. zyodei says:

    I wonder why nobody mentions more the prospect of retiring overseas? I can assure you that you won’t need a million dollars to retire in nicaragua, or thailand, or somewhere like that. And, all things considered, you might well have a much higher quality of life as well…

  91. buckfutt says:

    My wife and I are saving like mad for retirement, roughly 20% of our income goes into various 401’s and IRAs. That said, even if we do make it to one of these big numbers, we’re going to get raped in taxes down the road thanks to all the baby boomer pukes who haven’t saved a dime. They have the numbers, they’ve never once taken responsibility for themselves, and they’ll vote the rest of us into penury to pay for THEIR retirement.

  92. johnfrombrooklyn says:

    Government workers.@oyvader:

  93. johnfrombrooklyn says:

    Believe it or not, not everyone wants to leave a neighborhood where they’ve lived for 40 years and move at age 65 to a Thai village. Hard to imagine I know.@zyodei:

  94. johnfrombrooklyn says:

    It’s true. If you are in the 30 years or under age bracket, you’d better brace yourself for a generational war. The baby boomers haven’t saved diddly as a group. Ten years from now when they all need hip replacements and don’t have a dime to their name, they’re going to be looking to the younger generation to pay for it.@buckfutt:

  95. mythago says:

    I wonder why nobody mentions more the prospect of retiring overseas?

    Because developing nations with low or no taxes also have the kind of public services you associate with developing nations with low or no taxes. Not everybody wants to have to live in a gated compound because there is no real police presence, or wants to pay cash and have a private LifeFlight plane available because it’s four hours by dirt road to the nearest thing approximating a hospital.

  96. hexychick says:

    What scares the hell out of me is that for me to save a million straight up, it would require 20K a year in savings and that is absurd on my salary. That’s a little less than HALF of my salary. Obviously I won’t make this salary for the rest of my life and I will eventually get married and have investments going, but it’s still a sobering thought and helps keep my debt very low. I also started increasing my 401k percentage rate every 6 months when they have open enrollment/changes. Something is better than nothing.

    @unleashed: because if you’re under 30 now, retirement is another 50-something years away and who knows what the cost of living will be or what money will be valued at then? By then a million could be bubkiss.

  97. Ilikenumbers says:

    @orv – While that has always been the logic to the whole “public v private” employment debate, I can tell you from personal experience that government employees are WELL compensated (Mom is a State worker, Dad a county, and fiance a fed).

    For the love of crap, my parents each make around 100k and my mom doesn’t even have a degree. My fiance is getting another bump to a higher grade (one of those cool “ladder deals” and will be making in excess of 65k, at the ripe old age of 25 after randomly applying for an internship in an office that had no correlation to her major) and that’s before this year’s COLA.

    In my field (accounting) sure, I can/could make more in the private sector, but the hustle is much harder, and in this economy, the reward is much less. Accountants don’t bonus like sales people and those in the BMGT side of things (something to do with internal controls, blast!). If it wasn’t for all the time/energy/sleepless nights invested in getting my CPA finished up, I’d take a federal job no sweat.

  98. Featherhammer says:

    I thought we’d all be underwater in 50 years! Baseline projections of how much a person will need to retire neglect the instability in the world which is hard to put in an equation.

    As a state employee I don’t pay SS tax… Its awesome. The downside is that I won’t receive any SS benefits, but I don’t think that in 35-40 years anyone else will either.

    Its hard to imagine what the world will be like in 40 years. I guess thats why people save money.

  99. Spacecataz says:

    Well, I will need a little more than a million to buy a plane to fly straight into a volcano. That’s one sweet death…

  100. Marshfield says:

    Back in the 50s and 60s, when companies had retirement plans, somehow people got by just fine with one breadwinner. I grew up in the 50’s, and everyone on our street was middle class, took vacations, had a TV and a car, and got by fine.

    Nowadays, even though we have a few more gadgets in the house, it takes two people working just to keep up, and getting the kids through college pretty much destroys your ability to save. And now that companies don’t have funded retirements, I figure that I’ll never get to retire.

    Or… I’ll be in a big bunch of old fogeys living in cardboard boxes at the edge of the town dump in 30 years.

  101. Jim says:

    @Bladefist: Ya I’ve considered that. My savings account earns 2.5% right now. Before the prime rate crap, it was earning 5.5%. Which is great for savings. The reason I don’t put it in an IRA or even a CD/stock market is because its “retirement” and “savings”. If I have an emergency, I can withdrawl quick.

    I have the 401k for retirement as well. If no emergencies happen, I’ll probably take a chunk of the savings and put it somewhere else. I’m just trying to keep atleast 6 months pay in savings for emergencies.

    Humbly suggest a credit union. All my accounts, even regular old free checking accounts with no minimum balance, are at 4.5%. The CD I cashed out from my old bank to move to the CU was set to roll over at .8%, so kind of a no-brainer.