hashtaggobucks
1012
19
0
It's never too late to start, but you can make life a lot easier by being disciplined now. And for those of you who think you don't need to save that much here's some basic math to explain... if you have $1M saved at retirement you will be living on ~$10k a year with interest rates the way they currently are, but even if they quadruple you'd still be making under the median income.
tl;dr save a little money now, you'll have a lot more later
radieon
Monthly savings maaan, this is some powerful stuff
windedsloth
6% is poverty. Good planning is 10% per year
justacap
@OP and when is "retirement" for the purposes of this graph? Men only live until 76.
hashtaggobucks
66-67 which is the current age you are able to begin collecting the full benefits of social security
MissSiesta
I plan on dying before then
hashtaggobucks
That's great news! You'll have to save even less!
hepcat10
What if you've already started saving? (I.e. I've got $40k already, now how much to save?)
hashtaggobucks
Save more!!! Ideally you want ~$2M in the bank with the hope that interest rates improve to 2%-3%. Then you could live off of $40k-$60k/year
hashtaggobucks
And FYI interest rates are closer to 1% right now.
pirateninjaunicornattacksquad
6% return? Can you tell me where to get that fantastic return rate please?
hashtaggobucks
There are plenty of places... a basic index fund would be a good start.
justacap
OP is implying that growth is the same as income, and that you'll be able to cash out during good years; ie: born lucky.
hashtaggobucks
This obviously is a pretty general graph and isn't perfect at all, but it helps as most people can't even comprehend this basic concept.
hepcat10
Incorrect, this is based on average 6%. Half the time, it will be worth less than 6% (hint, a great time to send extra $)
iwasxyzzybeforeyouwereborn
This is true, but don't forget that inflation and taxes will make it hard to have an net real return rate of 6%.
justacap
Yeah, I'd like to know where to get a net real return rate of 6%. Under 40 yrs, you might hit the 7% market rate, or not.
justacap
You could beat the taxes if you started investing prior to 25 in a Roth. After that, you need to put in more than Roth limits.
hashtaggobucks
True but the market has had an average return of about 10% (6-7% when adj for inflation) and you can get that through a basic index fund.
justacap
And I thought avg returns were 7% (but maybe I was reading inflation). Also, I doubt those inflation numbers.
hashtaggobucks
7% is a little high but it's right in range... http://www.investopedia.com/ask/answers/042415/what-average-annual-return-sp-500.asp
justacap
"the market was nothing but a continuous 15-year disappointment for an investor who entered in 1965."
justacap
Also, of note - dividend paying stocks are on the way out (elites keeping the cream) - just like stock splits started leaving in the 80s-90s
justacap
* depending on when you start investing (be born at right time). Get started at the wrong time, and you could get much lower returns.
hashtaggobucks
The market always rebounds... eg anything you '08-'09 you should've essentially made back by now if you left it in the market
justacap
Except that you lost the 6% gains during those years, so no compounding happening - and now you're playing catch up. Same for stagflation
justacap
in the 70s. Great Depression. Issues in the 80s, etc. 10% overall is fine, but that doesn't help you when you have only 40 yr window
hashtaggobucks
One would also hope you would be able to save/invest more as you get older and have a higher income. Also this is a model, results will vary
justacap
What's super hilarious about this, is that most people don't have this type of income. Paying for college 24-26 == negative income.
justacap
At 25 you'd need to have $500 in addition to bills, so you'd need to be making $1.5-$2K a month min., depending on location.
hepcat10
I know waitresses making this money.
hepcat10
So you don't end up with 1M, and instead end up with $500K. Still worth it to try something.
hashtaggobucks
This. That guy has just been assuming that this applies to each and every specific situation, when clearly it's just a model for reference..
Octavius440
I think he's just frustrated at the double edged sword of an education.
justacap
At 25, that means living on $660 or less for min. wage. 54.6% of all households earn less than $40,000 AGI. At 30, that means living on $31K
hashtaggobucks
You're exaggerating the downside here... most people aren't paying off student loans AND making min wage... usually just one or the other.
justacap
So, you're over 40 then. Gotcha. Check the job placement rates, and job retention rates.
hashtaggobucks
Gotcha. You could also die by 20. That would make this graph irrelevant. Doesn't change the message trying to be sent here.
Octavius440
OP doesn't seem to understand the current academic epidemic
justacap
IKR?
hashtaggobucks
No, it's that if you have a college education and make minimum wage then you made a bad investment and should have just kept working.
Octavius440
I'm not arguing that. The problem is, even with a decent paying job, it takes over a decade to pay off.
Kafula1106
I'm 28, I make about 30,000k annually. I can only save 150 a month for retirement and that's because no car payment. I have my bachelor's .
justacap
OP thinks you're stupid, and it's all your fault. I sympathize, I personally know hundreds (maybe north of a thousand?) of people like you.
Kafula1106
I make $20 an hour. I have a BS in environmental science.
justacap
Not bad, what're benefits like?
Kafula1106
I also have a toddler who is growing like a weed.
hashtaggobucks
This dude has a degree that is irrelevant to his job, a kid he can't afford, and lives in an expensive market where jobs are scarce.
hashtaggobucks
I have empathy for his situation and know life isn't perfect, but it is his decision that he is in those spots. He took his gamble and lost.
Kafula1106
Oh well then let me switch to my degree field where I'll make half of what I currently do, ditch my kid, and move to the magic isle of jobs.