Article written by Atlanta Certified Financial Planner and published on Tuesday Forbes Retirement may not be as difficult as many Americans think.
Wes Moss, host of the “Retire Early” podcast and with more than 20 years of experience as an investment advisor, provides advice that reverse mortgage professionals and their business partners can use when working with clients to formulate financial plans. Consider a safe retirement strategy.
Moss cited a February 2024 report National Retirement Security Institute Supports other recent research on America’s unresolved “retirement crisis”
Notably, in a survey of the U.S. working-age population, 79% of respondents believed there was a “retirement crisis,” compared with 67% in 2020. The president should prioritize looming shortfalls in Social Security benefits, while 87% said Congress should “act now” rather than enact a funding solution later.
Moss tried to reverse the concerns these findings suggest by doing some basic calculations of retirement savings over different timelines.
“Retirement insecurity may be a scary headline, but through self-discipline, some savings, time, happiness, and financial freedom may be achieved sooner than you think,” he writes.
Moss first assumes an “inflation-adjusted liquid retirement savings” target of $1.25 million and assumes an annual return on investment of 8%. Moss noted that since 1928, the S&P 500’s average annual return has been 11.7%.
Assuming that a 40-year-old American wants to retire at 65, Moss designed two retirement plans with completely different starting points. One scenario is that the future retiree has nothing, while the other scenario assumes a starting point of $250,000.
If this person invested $250,000 at age 40, he would not need to save anything else to reach his $1.25 million goal. Assuming their savings grow 8% per year, they will actually have more than $1.7 million by age 65.
At the other end of the spectrum are people who are 40 years old and have no investment. This person would need to save about $1,425 per month, or more than $17,000 per year, to accumulate $1.25 million in savings by age 65. Wire.
in April, Nationwide Published survey data shows that the traditional retirement age of 65 may no longer be feasible. A subset of respondents were “pre-retirees” who expressed a degree of skepticism about retirement.
“Four in 10 (41%) pre-retirees say they will continue to work in retirement to supplement their income, while more than a quarter (27%) plan to live frugally to achieve retirement goals,” Nationwide said in its report explained. “In addition, pre-retirees said their retirement plans had changed in the past 12 months, with 22% expecting to retire later than planned.”
Earlier this month, a Gallup Polls have raised alarms about the ability of Medicare and Social Security programs to help a rapidly aging population. About 75% to 80% of respondents expressed doubts about the existence of either program when they were eligible for benefits.
The Forbes article includes a chart showing the annual savings needed to reach the $1.25 million threshold, based on a person’s remaining years of saving. These amounts range from more than $86,000 per year for 10 years to approximately $11,000 per year for 30 years. This chart shows that the monthly and annual savings needed to reach that goal increase exponentially with each year people wait to save.
“Saving for retirement can be laborious, but the math is simple: the more time your money has to compound, the better,” Moss concluded. “The longer a person waits to begin the process, the more challenging it becomes.”
