Maximize Social Security. Social Security provides a base level of income that your retirement savings should build upon. Take steps to maximize the amount you get by making sure you have at least 35 years of earnings under your belt before you sign up for payments, so that zeros won't be factored into your calculation. And carefully consider the age at which you begin to claim benefits. Payouts increase for each year of delayed claiming between ages 62 and 70.
Don't plan on retiring at 65. A male born in 1946 can expect to live 18 years after retirement at age 66, according to Social Security Administration projections. Men born in 1980 should plan for at least a 19.3-year retirement, after the higher retirement age of 67. For women, the average projected length of retirement jumps from 20 years for those born in 1946 to 21.2 years for those born in 1980. And these are just the averages. "Generation Y's life expectancy is going to be a lot longer," says Farr. "They have to fund more years of retirement than the old financial planning models built in."
Of course, you don't have to retire at age 65, or at what the Social Security Administration defines as the full retirement age, which is 66 for most baby boomers and 67 for younger people. Working a few extra years gives you more time to save, allows your investments more time to compound and reduces the number of retirement years your savings must finance. If you're 25 now, and willing to work until age 70, you could reach $2 million by saving just $95 per week, assuming an 8% annual return and not even counting the 401k match.
Don't get hung up on the number. How much you need to save for retirement largely depends on your expenses. If you're willing to pay off your mortgage before retirement, move to a smaller house or low-cost area of the country, and live a modest lifestyle, you may find a way to get by on less. Conversely, those who want a lavish retirement will need to save more.
"If you've got a goal based upon assumptions about inflation and rates of return, it's actually counterproductive, because those numbers can be pretty big, especially for young folks," says Alfonso. "It's more important to focus on the things that you can control, such as the percent of your gross income that you save, and to really focus on your career and moving up the salary chain."
VIDEO ON MSN MONEY
Something struck me when reading all these posts.....We dont need 2 million to retire. we need to get back to the basics. We dont need cell phones, tablets, tvs in every room, dinner out every night, expensive cars etc.... We need to get back to the basics. Spending time with family, reading, working around the house etc... In other words everyone is so materialistic anymore... it's all about what you have these days.... Be happy you are even alive and have friends and family..... When you lie on your deathbed are you going to say... "gee I am glad I have 2 million dollars"... or are you going to say "gee i wish I had just one more day to spend with my family/kids/friends"..... Think about it....
What do they recommend for people living paycheck to paycheck to survive? $142 a week?! That might be a family's grocery budget! I doubt many people today will even earn $2 million in their lifetimes. Sorry but this article does not represent real life...to many low wage go nowhere jobs to make this happen.
2 million through private savings? Average salary of 75k? 10% annual 401k contribution and employer matching? 8% guaranteed annual return?!!!
Who the hell are these people kidding? That's way out of the range of most college educated Americans.
I LOVE it. We're supposed to wait until 67 to retire, but if you get laid off at 50, try getting another job. And assuming you are employed and your employer actually offers a 401k, many do not match until you have worked in the company for five years. In my industry, hiring and firing are commonplace. You are lucky if you last the required time to be fully vested and receive matching funds. So there's that.
This article is simplistic, simplistic, simplistic.
Tell me how to get 8% consistent over all those years and I will
start today - lets be realistic
Two million? Get real. By the time Gen Y retires the Fed will be working on QE 15, inflation will have increased the price of a gallon of gas to $50, and Facebook will be charging everyone $2,000 a month to use its High Definition, 3D Skype based website so they can share their horrible experience of an unsuccessful 30-year job search.
"Work until 70", you cannot be serious. I have seen too many people work until their sixties and keel over soon after retirement. The government would love nothing more than to have you to work until you drop.
Than again, the slaves of ancient Egypt drugged on until the end with high hopes of brighter things ahead, perhaps we have much in common with them.
When I started working full time at 22 I was very progressive and put 20% of my paycheck away in Mutual Funds (this was 1997)...I was told every year by my financial advisor that my investments should provide me with an average of 7% returns and that my money should double every 7 years. Its been 14 yrs now and I have a $1,000 more in my 457K than what I have invested, boy do I ever feel lied to, I should have blown my money on women and beer like my friends did.
I personally see no reason why I would want to retire in this expensive country. Two Million! Basically that means that the majority of Gen Y and Gen X people will be working until they die. Depressing. Wait, not so fast...there are so many great places in the world to be able to retire. South Amercia, Central America, Southeast Asia. Bangkok Thailand for example has a Joint Commission Accredited Hospital and Thailand overall has great healthcare. Everyone else can work til they die, but I am not affraid to travel out of my comfort zone to secure a healthy and affordable retirement. See you in Thailand folks... when I'm 55!
Oh yeah, I plan on retiring when I turn 62 or REDUCE my days at the J.O.B. drastically(I don't want to get too bored now)!!
IM 30 YEARS OLD AND UNEMPLOYED , MY RETIRING PLAN IS TO LOTTO MY WAY OUT OF THIS CRAP HOLE IM IN.
Roth 401ks and IRAs allow young people, who are likely to be in a low tax bracket, to prepay taxes on their retirement savings.....Once your contribution is made with after-tax dollars, that money can continue to grow for the rest of your life without the drag of taxes. If you wait until age 59 1/2 to withdraw the money, you won't have to pay taxes on any of the growth.
Not so quick......if you vote for a National Sales Tax or consumption tax (just vote for a Republican), you'll be paying taxes AGAIN when you spend the money after you retire.
Be careful what can happen through the back door. Take the tax deduction NOW, while it still exists, and don't gamble that the rules will always stay the same.
I just checked my 401k provider website: Only 5 out of the 26 funds available have 10 year returns of 8% or greater. Wasn't 8% the return used to calculate all those pensions that are currently underfunded?
Although their general advice may be worthwhile, articles like this are entirely speculative. I'm at the verge of retirement myself, and I can' tell you exactly how much anyone needs to retire, even right now. It depends on a lot of factors. So the idea of putting up a number for anyone in their 20s or 30s, that's just speculation.
Just learn general thrift, and that very few things are actually "necessities". Stop trying to live the life of Riley, especially in expensive big cities. You'll work the rest out.
(Did that guy below say he makes over 40K a year and can't save anything? What a tool!)
Copyright © 2013 Microsoft. All rights reserved.
Quotes are real-time for NASDAQ, NYSE and AMEX. See delay times for other exchanges.
Fundamental company data and historical chart data provided by Thomson Reuters (click for restrictions). Real-time quotes provided by BATS Exchange. Real-time index quotes and delayed quotes supplied by Interactive Data Real-Time Services. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by SIX Financial Information.
RECENT ARTICLES ON RETIREMENT
Start of summer already? Better get shopping. But give the grills and new electronics a miss for now, according to the experts at Dealnews.