● Great essay! One caveat (warning, explanation, or caution) is that we must balance the need to care for our older financial selves with care for physical selves. Over the years, I’ve been so myopically fixated on earning money, saving money, and investing money that I’ve neglected my own physical welfare.
There comes a point or diminishing returns, where an incremental dollar earned / saved / invested from the marginal hour of work confers less value than spending that hour in a yoga class, walking up a hill, or even sleeping.
RETIREMENT THEORY
Why do we waste our life working for retirement?
Imagine this:
You’re 25 years old. You have a great job making great money and you are making so much money, you buy yourself a car, a house, you take lavish vacations, buy lavish things — you have to have the best of everything. It’s an amazing life, right? Some of us get to have that while others don’t. 40 years later, you’re now 65 years old. You put nothing away for retirement at all. The house you have is your greatest asset. It’s market value went up around $200,000. The car(s) you bought — well, they’re antiques now. Some work, some don’t. All those lavish things you bought? Over the years, it’s just stuff. Not that important. You retire on your social security. By then, however, the government has done a lot of shady things — because that’s what they do — you actually cannot collect your full “social security” until you’re 70 years old, but you decide to retire at 65 making you eligible for 50% of your social security. In the now, at 65 years old, what do you wish you did when you were younger? Any regrets about not saving as much as you could have?
Now let’s understand the next scenario, which is almost the same.
You’re 25 years old. You have a great job making great money. You decide to put away the percentage of your age every year (each paycheck), 25=25%, 30=30%, 35=35%, etc. [ The reason you put away more — is because as you age, you care more about your older self because guess what? That’s your best friend right there — 25 is closer to 26 is closer to 27 …. is closer to 50.. is closer to 55.. is closer to 65 — crazy to think you’d be putting away 60% of your paycheck towards retirement at 60 — but in 5 years, that’s your reality — you’re retired! Your 25 year old self didn’t care about your 60 year old self as much as your 55 year old self, and so on. And guess who has money because you, at every age, decided to take care of yourself so that you could retire?] You do have a nice house. You do have a nice car. You do take a few nice vacations, but you’re conservative with your money. You keep putting more money away for your retirement. That age now comes. Over the years, the 401k or IRA has had a few bumps, but for the most part, it has grown around a steady annual return 6% - 7% if you average out the lifetime of that 401k. It’s not particularly the most exciting, but it’s realistic. If you started saving at 25 years old and retired at 65 years old, putting away an average of 1% more each year, you’ll retire with around $2,000,000 or so. You’re also eligible for your social security check at 65, but you decide to use the $2 million to live off of and then you claim the full benefits of your check at 67 (for now) — Congress is trying to raise it to 70 so most of us die before we are eligible.
Now you need to look at your grandparents and your parents history: you aren’t far off from when they pass away. In my case, my grandparents both died at 75 years old. Both my parents are nearing 70 years old. Both have moderate health issues. I can assume that if I eat relatively healthy and try to live a somewhat more-than-sedentary lifestyle, where I take 20–30 minute walks everyday, I have a chance to live until 80 or hopefully longer.
There are two types of older people I’ve seen: those who enjoy their retirement and those whose health decline almost immediately (my dad worked with a guy who was a heavy drinker and smoker — the day after he retired, he had a heart attack and died).
I’d like to think I’ll be in the former, and I am sure risking money right now by putting more away with the assumption that I’ll be able to enjoy it when I’m older, might be worth the risk. It’s like gambling that I’ll live that long… but it’s just money. However, when you’re alive: money matters most. When you’re dead… some of us die with nothing, some of us die with some things. And then there are others who have so much money — they have no idea what to do with it. One thing we all have in common and the only thing that’s true in the end: we’re all going to die.
I have seen both sides:
1. People who put money away for retirement
a. These types of people go on multiple vacations in retirement and once they are unable to vacation anymore, they choose to pay for home health care aides and live and die in the comfort of their own home, often surviving for at least 10 years after their health starts to decline — if they don’t live at home, they go into a well-funded assisted living center where they live out the rest of their days independently but with a nurse on staff just in case.
2. People who didn’t put money away for retirement
a. These types of people go into a nursing facility and usually never leave — they often lay in a hospital bed for days, months, possibly even years at a time — family members might or might not come to visit them — the nurses they are surrounded by are like their 'family' from now on — they have a higher risk of disease and other illness because they are surrounded by other sick people.
Most people do not put away for retirement as much as they should at all. They would prefer to think the government cares about them, but unless you’re taking care of yourself and doing things for yourself — the government loves money, but more time is spent regulating it rather than doing anything with it, other than, of course — spending it on well, technically our highest expense: war. Imagine if the government spent more time putting its money to other resources? Only the lucky few have been chosen to leave the planet when it dies… but that is for another answer.
It’s up to you, but have a conversation with your 65 year old self. There’s only three possibilities that come from that conversation:
● We have no money, you need to work and put money away for me (because I can’t do it)
● We are on track, but you should put a little more away
● We are living an amazing life, you’re doing great!
Up to you on which one you want to be. No one can force you to put more money away. But relying on the government — they have their best interests at heart, not yours ;)
Essentially what you ask is this: “Why should I waste money on my older self?” The answer really is this: “Because you choose to do so to give your older self a better life. Unfortunately, your older self cannot work for your younger self, only your younger self for your older self. If you choose not to do so, there is no one who owes you anything towards the last 20–40 years of your life when you aren’t working.”
The hardest part of our lives is accepting the fact that we’re going to grow old and we’re going to die. No one is exempt. I’m sorry. Some of us die from old age, most of us die from our hearts just giving up, and the unfortunate are killed by external forces. You are going to get your first gray hair, and it won’t be the same excitement as the first hair you got on your balls, or maybe it will. Depends on how you look at it. You did live long enough to see it. I have friends that didn’t make it past 25 or 30 — no gray hairs for them. No old age or life for them, either.
By not saving for our future selves, we think we’re going to stay young and live forever. Everyone thinks that way. Unfortunately, you have to have a new reality: “I’m young now. I can work.” vs. When you’re older: “I’m old now. I can’t work.” But unfortunately, you’re now forced to work until you can’t physically do it anymore. Except the truth is: someone has to take care of you — your money will help you have better care. If you got kids who’ll step up to the job: great, but that’s just you being a dependent asshole. Let everyone live their own lives… brighter future knowing the past has taken care of itself.
Do yourself a favor and start treating your 65 year old self like they are a real living person, because — just because you can’t see them, due to the “time reality”, they really do exist at the same time you do. Your past self only exists in memory after this moment, but your future self… is always being written until you die. How you want that future self to be — is what you do now, and that is the beauty and mystery of time.
● Good info. But at the end of the day we don't know when we are going to die. In my 63 years I have known quite a few people who have died before their retirement age. Never got to enjoy their retirement savings or their social security. My advice is to not be so focused on your future old age that you do not stop and smell the roses while you can still get around in your younger years. Because the stress of worrying about having enough money or not when you retire can cause you health issues.
退休理论
● 很棒的文章！一个警告（警告、解释或提醒）是，我们必须在照顾年老的财务自我和照顾身体自我之间取得平衡。多年来，我一直如此短视地专注于赚钱、存钱和投资，以至于我忽视了自己的身体健康。
收益递减到了一个点，在这个点上，从边际工作时间中赚取/节省/投资的增量美元所带来的价值，要低于花一小时上瑜伽课、爬山甚至睡觉的价值。
退休理论
我们为什么要浪费生命去为退休而工作？
想象一下：
你 25 岁。你有一份很好的工作，赚了很多钱，你赚了很多钱，你给自己买了一辆车、一栋房子，你去度假，买奢侈品——你必须拥有最好的一切。这是一种奇妙的生活，对吧？我们中的一些人可以拥有它，而其他人则不能。 40 年后，你已经 65 岁了。你没有为退休存下任何钱。你拥有的房子是你最大的资产。它的市场价值上涨了约 200,000 美元。你买的汽车——嗯，它们现在成了古董。有些能用，有些不能用。你买的所有那些奢侈品？多年来，它们只是东西。并不那么重要。你靠社保退休。然而，到那时，政府已经做了很多见不得人的事——因为他们就是这么做的——你实际上要到 70 岁才能领取全部“社保”，但你决定在 65 岁退休，这样你就有资格领取 50% 的社保。现在，你已经 65 岁了，你希望自己年轻时做什么？有没有后悔没有尽可能多地存钱？
现在让我们来了解下一个几乎相同的场景。
你 25 岁。你有一份很好的工作，赚很多钱。 你决定每年（每张薪水支票）存下相当于你年龄的百分比，25=25%，30=30%，35=35%，等等。[你存下更多钱的原因是——随着年龄的增长，你更关心年老的自己，因为你猜怎么着？那是你最好的朋友——25 岁更接近 26 岁，更接近 27 岁……更接近 50 岁……更接近 55 岁……更接近 65 岁——想想你在 60 岁时会把薪水的 60% 存起来以备退休真是太疯狂了——但 5 年后，这就是现实——你退休了！25 岁的自己并不像 55 岁的自己那样关心 60 岁的自己，等等。猜猜谁有钱，因为你在每个年龄都决定照顾好自己，以便退休？]你有一栋漂亮的房子。你确实有一辆漂亮的车。你确实度过了几次愉快的假期，但你对钱很保守。 你不断为退休存钱。现在到了这个年龄。多年来，401k 或 IRA 经历了一些波折，但在大多数情况下，如果你平均计算 401k 的使用寿命，它每年的回报率约为 6% - 7%。这不是最令人兴奋的，但它是现实的。如果你在 25 岁开始储蓄，65 岁退休，每年平均多存 1%，你退休时将有大约 2,000,000 美元左右。你在 65 岁时也有资格领取社会保障金，但你决定用这 200 万美元生活，然后在 67 岁时（目前）领取支票的全部福利——国会正试图将其提高到 70 岁，所以我们大多数人在符合资格之前就去世了。
现在你需要看看你的祖父母和父母的历史：你离他们去世的时间并不远。就我而言，我的祖父母都是在 75 岁时去世的。 我的父母都快 70 岁了。他们都有轻微的健康问题。我可以假设，如果我吃得相对健康，并尝试过一种不久坐的生活方式，每天步行 20-30 分钟，我就有机会活到 80 岁或更久。
我见过两种类型的老年人：一种享受退休生活，另一种健康状况几乎立即下降（我父亲曾与一个酗酒和吸烟的人一起工作——他退休后的第二天就心脏病发作去世了）。
我想我会属于前者，而且我确信现在冒着金钱风险存下更多钱，假设我老了以后可以享受它，这可能是值得的。这就像赌博我会活那么久……但这只是钱。然而，当你活着的时候：钱是最重要的。当你死了……我们中的一些人死时一无所有，而有些人死时会带着一些东西。 还有一些人有那么多钱，却不知道该怎么花。我们都有一个共同点，也是最终唯一不变的事实：我们都会死。
我见过两种情况：
1. 为退休存钱的人
a. 这类人在退休后会多次度假，一旦无法再度假，他们就会选择支付家庭医疗保健费用，在自己舒适的家中生活和死亡，通常在健康状况开始下降后至少还能存活 10 年——如果他们不住在家里，他们会去一个资金充足的辅助生活中心，在那里他们独立度过余生，但会配备一名护士以防万一。
2. 没有为退休存钱的人
a. 这类人进入护理机构后通常永远不会离开——他们经常在医院的病床上躺上几天、几个月，甚至几年——家人可能会来看望他们，也可能不会——从现在起，他们身边的护士就像他们的“家人”一样——他们患病和其他疾病的风险更高，因为他们周围都是其他病人。
大多数人根本没有为退休存下足够的钱。 他们更愿意认为政府关心他们，但除非你照顾好自己，为自己做事——政府喜欢钱，但更多的时间花在监管上，而不是用钱做任何事情，当然，除了——把钱花在技术上我们最大的开支上：战争。想象一下，如果政府花更多的时间把钱花在其他资源上会怎么样？只有少数幸运儿被选中在地球死亡时离开……但那是另一个答案。
这取决于你，但要和你 65 岁的自己谈谈。从那次谈话中只有三种可能性：
● 我们没有钱，你需要工作，为我存钱（因为我做不到）
● 我们走在正轨上，但你应该多存一点钱
● 我们过着美好的生活，你做得很好！
你想成为哪一个，由你决定。没有人能强迫你存更多的钱。 但是依赖政府——他们最关心的是他们自己的利益，而不是你的利益 ;)
本质上，你要问的是：“我为什么要把钱浪费在年老的自己身上？”答案其实是：“因为你选择这样做是为了给年老的自己更好的生活。不幸的是，年老的自己不能为年轻的自己工作，只有年轻的自己才能为年老的自己工作。如果你选择不这样做，在你不工作的最后 20-40 年里，没有人欠你任何东西。”
我们生命中最艰难的部分是接受这样一个事实：我们会变老，我们会死去。没有人可以幸免。我很抱歉。我们中的一些人死于年老，我们中的大多数人死于内心的放弃，不幸的人死于外力。你会长出第一根白发，但它不会像你长出第一根头发那样令人兴奋，或者也许会。这取决于你如何看待它。 你确实活得够久了。我有一些朋友活不过 25 或 30 岁——他们没有白发。他们也没有老年或生命。
通过不为未来的自己储蓄，我们认为我们将保持年轻并永远活着。每个人都这样想。不幸的是，你必须面对一个新的现实：“我现在年轻。我可以工作。” vs. 当你老了：“我现在老了。我不能工作了。”但不幸的是，你现在被迫工作，直到你身体上再也做不到为止。但事实是：有人必须照顾你——你的钱会帮助你得到更好的照顾。如果你有孩子愿意承担这份工作：很好，但那只是你依赖别人的表现。让每个人都过自己的生活……更光明的未来，知道过去已经解决了。
帮自己一个忙，开始像对待一个真正活着的人一样对待你 65 岁的自己，因为——仅仅因为你看不到他们，由于“时间现实”，他们确实和你同时存在。你过去的自己只存在于此刻之后的记忆中，但你未来的自己……一直被书写着，直到你死去。你希望未来的自己是什么样的——是你现在所做的，这就是时间的美丽和神秘。
● 好信息。但归根结底，我们不知道我们什么时候会死。在我 63 年的人生中，我认识不少在退休年龄前去世的人。从未享受过他们的退休储蓄或社会保障。我的建议是，不要太专注于你未来的老年生活，以至于在你年轻的时候停下来闻闻玫瑰花香。因为担心退休时是否有足够的钱的压力会给你带来健康问题。
Why do we waste our life working for retirement?
Imagine this:
You’re 25 years old. You have a great job making great money and you are making so much money, you buy yourself a car, a house, you take lavish vacations, buy lavish things — you have to have the best of everything. It’s an amazing life, right? Some of us get to have that while others don’t. 40 years later, you’re now 65 years old. You put nothing away for retirement at all. The house you have is your greatest asset. It’s market value went up around $200,000. The car(s) you bought — well, they’re antiques now. Some work, some don’t. All those lavish things you bought? Over the years, it’s just stuff. Not that important. You retire on your social security. By then, however, the government has done a lot of shady things — because that’s what they do — you actually cannot collect your full “social security” until you’re 70 years old, but you decide to retire at 65 making you eligible for 50% of your social security. In the now, at 65 years old, what do you wish you did when you were younger? Any regrets about not saving as much as you could have?
Now let’s understand the next scenario, which is almost the same.
You’re 25 years old. You have a great job making great money. You decide to put away the percentage of your age every year (each paycheck), 25=25%, 30=30%, 35=35%, etc. [ The reason you put away more — is because as you age, you care more about your older self because guess what? That’s your best friend right there — 25 is closer to 26 is closer to 27 …. is closer to 50.. is closer to 55.. is closer to 65 — crazy to think you’d be putting away 60% of your paycheck towards retirement at 60 — but in 5 years, that’s your reality — you’re retired! Your 25 year old self didn’t care about your 60 year old self as much as your 55 year old self, and so on. And guess who has money because you, at every age, decided to take care of yourself so that you could retire?] You do have a nice house. You do have a nice car. You do take a few nice vacations, but you’re conservative with your money. You keep putting more money away for your retirement. That age now comes. Over the years, the 401k or IRA has had a few bumps, but for the most part, it has grown around a steady annual return 6% - 7% if you average out the lifetime of that 401k. It’s not particularly the most exciting, but it’s realistic. If you started saving at 25 years old and retired at 65 years old, putting away an average of 1% more each year, you’ll retire with around $2,000,000 or so. You’re also eligible for your social security check at 65, but you decide to use the $2 million to live off of and then you claim the full benefits of your check at 67 (for now) — Congress is trying to raise it to 70 so most of us die before we are eligible.
Now you need to look at your grandparents and your parents history: you aren’t far off from when they pass away. In my case, my grandparents both died at 75 years old. Both my parents are nearing 70 years old. Both have moderate health issues. I can assume that if I eat relatively healthy and try to live a somewhat more-than-sedentary lifestyle, where I take 20–30 minute walks everyday, I have a chance to live until 80 or hopefully longer.
There are two types of older people I’ve seen: those who enjoy their retirement and those whose health decline almost immediately (my dad worked with a guy who was a heavy drinker and smoker — the day after he retired, he had a heart attack and died).
I’d like to think I’ll be in the former, and I am sure risking money right now by putting more away with the assumption that I’ll be able to enjoy it when I’m older, might be worth the risk. It’s like gambling that I’ll live that long… but it’s just money. However, when you’re alive: money matters most. When you’re dead… some of us die with nothing, some of us die with some things. And then there are others who have so much money — they have no idea what to do with it. One thing we all have in common and the only thing that’s true in the end: we’re all going to die.
I have seen both sides:
1. People who put money away for retirement
a. These types of people go on multiple vacations in retirement and once they are unable to vacation anymore, they choose to pay for home health care aides and live and die in the comfort of their own home, often surviving for at least 10 years after their health starts to decline — if they don’t live at home, they go into a well-funded assisted living center where they live out the rest of their days independently but with a nurse on staff just in case
2. People who didn’t put money away for retirement
a. These types of people go into a nursing facility and usually never leave — they often lay in a hospital bed for days, months, possibly even years at a time — family might or might not come to visit — the nurses they are surrounded by are like their family from now on — they have a higher risk of disease and other illness because they are surrounded by other sick people
Most people do not put away for retirement as much as they should at all. They would prefer to think the government cares about them, but unless you’re taking care of yourself and doing things for yourself — the government loves money, but more time is spent regulating it rather than doing anything with it, other than, of course — spending it on well, technically our highest expense: war. Imagine if the government spent more time putting its money to other resources? Only the lucky few have been chosen to leave the planet when it dies… but that is for another answer.
It’s up to you, but have a conversation with your 65 year old self. There’s only three possibilities that come from that conversation:
●We have no money, you need to work and put money away for me (because I can’t do it)
●We are on track, but you should put a little more away
●We are living an amazing life, you’re doing great!
Up to you on which one you want to be. No one can force you to put more money away. But relying on the government — they have their best interests at heart, not yours ;)
Essentially what you ask is this: “Why should I waste money on my older self?” The answer really is this: “Because you choose to do so to give your older self a better life. Unfortunately, your older self cannot work for your younger self, only your younger self for your older self. If you choose not to do so, there is no one who owes you anything towards the last 20–40 years of your life when you aren’t working.”
The hardest part of our lives is accepting the fact that we’re going to grow old and we’re going to die. No one is exempt. I’m sorry. Some of us die from old age, most of us die from our hearts just giving up, and the unfortunate are killed by external forces. You are going to get your first gray hair, and it won’t be the same excitement as the first hair you got on your balls, or maybe it will. Depends on how you look at it. You did live long enough to see it. I have friends that didn’t make it past 25 or 30 — no gray hairs for them. No old age or life for them, either.
By not saving for our future selves, we think we’re going to stay young and live forever. Everyone thinks that way. Unfortunately, you have to have a new reality: “I’m young now. I can work.” vs. When you’re older: “I’m old now. I can’t work.” But unfortunately, you’re now forced to work until you can’t physically do it anymore. Except the truth is: someone has to take care of you — your money will help you have better care. If you got kids who’ll step up to the job: great, but that’s just you being a dependent asshole. Let everyone live their own lives… brighter future knowing the past has taken care of itself.
Do yourself a favor and start treating your 65 year old self like they are a real living person, because — just because you can’t see them, due to the “time reality”, they really do exist at the same time you do. Your past self only exists in memory after this moment, but your future self… is always being written until you die. How you want that future self to be — is what you do now, and that is the beauty and mystery of time.
Update:
Adding this tool for people to start thinking about retirement: Retirement Calculator | How much do you need to retire? | Nerdwallet
Great essay! One caveat is that we must balance the need to care for our older financial selves with care for physical selves. Over the years, I’ve been so myopically fixated on earning money, saving money, and investing money that I’ve neglected my own physical welfare.
There comes a point or diminishing returns, where an incremental dollar earned / saved / invested from the marginal hour of work confers less value than spending that hour in a yoga class, walking up a hill, or even sleeping.
I often do the same, as a workaholic, and have to remind myself why I’m working, and it’s okay to take breaks, walks, and even an hour of exercise per day to get my mind off of things.
George, I can only shed light on what I said above. I’m by no means a financial advisor and I didn’t even go to school for it. Everything I know about savings came from my grandfather. I don’t know how he instilled it into me, but I am thankful for the lessons he taught me.
He used to bring over a bag of pennies almost every time he visited. He’d make me count all of my pennies and said I could keep them if I could count them. Then he’d make me recount the pennies, take pennies away, recount again, give more pennies, but his condition was that if I was off by a penny… they were no longer my pennies, and he would take them all back because they would now be his pennies. His analogy was that if you can’t keep track of your pennies, you may as well not have any pennies at all. So I knew he wasn’t being mean and teaching me a lesson, but if my penny count was off: I wasn’t allowed to keep any pennies at all. It was a game to me, really. A game that never got boring because — it was money. Not much money today, but to a 6 or 7-year-old kid, 500 pennies was a lot of money!
What is to me common sense and knowledge is a complete lesson to others. I’ve never struggled with money too much in my life. I’ve been in debt before but I’ve always known how to get out of it by going without. I try to live just within reason of my means. But I am always learning like everyone else.
However, I struggle everyday with the reality that: even in retirement, I would’ve worked my entire life for what? To simply keep the peace? I’m 30 years away from actual official retirement. Much of what I can say about retirement now is only speculation and observation of others, talking with older people, and looking at the trends of how people are living in their retired life.
So this answer wasn’t written with the intention that everyone puts away all their savings and forgets about living their lives now. I wrote it to simply make people aware that ANY savings for your older self is going to help you out. People who retire with nothing — still manage to live a somewhat reasonable life — social security exists to give you that “basic life” — you don’t get anything extra from it, but the majority of people don’t even think about getting old or how they are going to retire. I’d love to say: “You can rely on your government to take care of you.” But you know that’s horrible advice from anyone. You can refute me if you wish :)
It's a shame that the more you make the more the government takes. I have literally worked two jobs putting in approximately ninety hours a week for the past twenty years trying to have something for retirement for the wife and I. This year, the United Slaves of America union hit the wife and I up for roughly $25,000.00 in taxes when you figure what was pulled out each week in our checks for federal, S.S. , F.I.C.A. etc and what we payed back at the end of the year to the union. So, how in the hell is one suppose to “live” life, put money back to hit a supposed 80% income level in retirement as to what you were making in your working years to have a comfortable retirement? I have a friend that runs a Fernery, a foliage business, and he told me the workers do not come in to work everyday due to if they make over a certain amount in a month they lose their free medical insurance provided to them by the United Slaves of America union. This is why my wife and I will not have a comfortable retirement due to being forced to subsidize another individual's health care even though this other person can work more hours and pay a relative proportional amount towards their health care, but the United Slaves of America union is set up in such away that if you want to work more then your energy will be harnessed for the collective.
Agreed Lickity, I have worked two jobs as well, and always working multiple, sometimes freelance, and ended up owing over $6,000 in taxes. It was as if I was working the second job for free. There’s no incentive to work more than one job in the United States. I’ve seen it myself as well.
Investors and big businesses are involved in job creation and moving the economy forward. The government likes this growth, and therefore rewards and incentivizes this behavior by giving tax breaks, among other things.
Some food for thought:
Who Pays the Most In Taxes? Link here
This link explains it well:
Why The Rich Don't Pay Taxes - Millennial Revolution ( click here )
There is much more information available out there if you're looking to become an investor and make your money work for you, instead of trading your hours for money (and then having a good chunk of it taken away by the big nasty government!)
Good luck in your future endeavors.
top 1% pay 40% of the Tax in US !!
So true George. Retirement planning is not just saving/investing money for later part of our life but also about investing in our health by eating good, keeping fit so that we are not fragile in our old age :)
Good point. And don’t forget the additional stress (!!!) that may accrue from each additional dollar.
Thank you for your insight, I thought about this subject 😀 😊
Great additional comment! One of my favorite sayings “if you don’t have your health, you don’t have anything…” Or as Bob Marley said with his last breath “money can’t buy you life”, as he lay dying of melanoma, dying at just age 36…
Your numbers are realistic for someone earning $60,000-$80,000 a year and starting life with no debt, wedding paid for by Daddy and the parents putting down 25% on a home purchase. It also assumes good health, good luck and the absence of things like job loss, pay cuts, career changes etc. Ir also assumes that you don't find yourself without health insurance because you can't afford $28,000 a year in family premiums and deductibles.
You need to get to work so you are now shelling out $450 a month in payments and insurance on even basic transportation. Most people can't walk or bike to work.
You also have gas and maintenance expenses. A 30-mile commute = $1,200/yr minimum in gas.
Even shopping at ALDI will set you back $4,000 a year.
Work clothes & shoes? Easily $500 a year.
Do you have dental or vision insurance at work? If not, even minor things can ran into the hundreds or thousands of dollars.
Eat lunch at work? $3 a day is $750 a year. And that is brownbagging a bologna sandwich and using your office or workplace drinking water.
Assuming Mommy & Daddy aren't paying your rent or mortgage, housing in any place within range of decent jobs will cost you, at a minimum, $700 a month for rent and $150 for utilities. If you buy a decent place, your mortgage might be the same but you then have $3,500 a year in property taxes, $1,200 a year in insurance and $3,000 + in utilities. If you aren't paying $25-$50 a month for a home warranty, and your furnace or refrigerator break down, that is another $500-$3,000.
You need soap, shampoo, shaving cream, toothpaste, toothbrush, mouth rinse and deodorant, at a minimum. If you maintain good hygiene, that will easily run to $500-$600 a year.
Let's do the math: $60,000 a year, with 5% into a 401k, will leave, after taxes (and assuming no health insurance premiums or deductibles, or parking costs at work), around $47,000.
Housing, car, gas, clothing, food, hygiene, lunch, etc assuming no medical, dental or vision expenses, no home repairs, no car maintenance, no vacations, no children, no pets, no hobbies, cheap internet, no smart phone or phone plan, no going out to dinner, eating a bologna sandwich for lunch every day, no drive through coffee and so forth leaves you around $17,000 a year. Let's round it up to $18,000.
Of course, you work for 40+ years at the same place, with no enjoyment or fun outside of work, with wages keeping up with inflation, no medical expenses and no emergencies……
$1,500 a month invested monthly at 6% for 40 years will give you $1,122,093 in inflation adjusted dollars.
That is assuming, of course, that the government doesn't take it away from you. Yes, several years ago, the Democrats in Congress floated an idea that the government would take over all IRA, funded pensions and 401ks, in order to shore up Social Security. In return, the government would “guarantee" you a 3% return on your money and “protect” you from the “risky" stock market.
There is nothing wrong with teaching young people about the importance of avoiding debt and of saving a steady percentage of their income. But reality has a way of sneaking up on you.
Hey Nick,
Thank you for reading and seeing that my numbers are a bit more generous and assumes that you are acutally working a job that offers a 401k, though there are plenty of options to open up your own IRA account, but my numbers definitely do not rely on mommy or daddy taking care of anyone. I moved out at 22 years old— and that would be the last time I asked my parents for anything. The younger you can start, the better.
There is also the assumption that the economy will have at least 3–7 crashes in a given lifetime. In our case, the economy crashed in 2000, 2008, and a moderate crash in 2016. It is safe to assume there will likely be another crash around 2022–2024, 2030–2032, 2040–2042, 2048–2050. Don’t quote me on that, but it seems to be there are minor and moderate crashes every few 8 years or so and a major crash likely happening at least every 20 years or so, or at least the market correcting itself, where inflation shines well.
I didn’t factor in food costs or even children into the mix, as I replied to another comment: children are giong to defer you from your savings for at least 20 years, and unless you’re making $100,000 a year with children on board, you’re likely not going to see $2 million when you retire, and it’s more likely to be around $100,000 - $300,000.
And of course, my writing is only a theory. It’s not a fact. No one has come to tell me: “hey, I tried your method of putting my age percentage away every year since I was 25 and I have $2,000,000 at retirement.” Of course, this is ALWAYS going to vary. For most people who bought a house in the 50s, 60s, and 70s — their house are worth three to five times as much as when they bought it. For people who invested in the stock market in the 80s and kept it going strong — they saw those crashes and for those who held strong and stuck it out — and kept investing, they are likely to be millionaires now, especially in the right stocks. For those who invested in a 401k and are close to retirement, they are also seeing decent returns.
Reality definitely has a way of sneaking up on you, but the intereting thing about that reality is realizing the time you were born in is going to determine how much you can and will save. In modern times, we live in an age of greed and higher taxes. But I too remember working a job making $5 an hour at my first job, while kids nowadays make $8-$9/hr at their first job. The time we are born in is a determinant of how much savings you are likely to have when you retire.
I tried to be as realistic as I could. Most articles nowadays pretend that banks still pay a great interest rate. Those days are over. I remember putting $5,000 into a 5% CD for 5 years. I was making $60/month on money I couldn’t touch. Nowadays, you’d be lucky to make $20/month on money you can’t touch. Certificate of Deposits are a joke, but once upon a time: they were one of the best places you could put your money.
So in reality: I do think it was safe to write $2 million as a good number. It’s actually “not a lot of money” to rich people, but if you’re 65 years old, after taxes, in which they’ll take around $180,000 (give or take) or so from your $2,000,000, you’re left with about $1,820,000, and factoring in the fact that you’ve probably paid off your mortgage, you have no student loans, your children are in college or have graduated, than $1.8 million should be more than enough. We’ll even be generous and say that two people need around $4,000 a month to live off of — that’s around $50,000 a year. We won’t even throw social security into the mix, and my math may be a bit off, but I’d say that amount of money would last you around another 35 years. Therefore 60 + 35 = 95 years old.
I do appreciate your realism and bringing people closer down to the million dollar mark, because that’s probably where most will be, give or take a few hundred thousand. It’s just a very different way of thinking, and it would require that you do cut your costs — if you’re eating out at a restaurant every single night or even a more than 2 times per week, than yeah, you’re savings in retirement are surely going to be less. I could tell you that if you lived in New York, New Jersey, California, Washington, D.C., Maryland, Connecticut, Rhode Island, Oregon, and Hawaii — than my numbers are completely wrong, and retirement is not very likely — for which I can only say: don’t live in those states if you want to retire early, on time, or sometime at all.
Matt,
I was not ridiculing you or your theory. I was just coming at it from a realistic perspective and the idea that a large percentage of working people will never be at that level.
I saw that you mentioned 5% on a CD. That was not unrealistic. But there were periods where unemployment was 10%, inflation was 12% and interest rates were 16%. That is why interest was better, then. The problem today is that bank interest is 0.1% and inflation is “officially" at 2-3%. Of course, they leave out fuel and other costs so that the real inflation rate is hidden. Combine that with continued massive budget deficits and the Fed policy of printing money and people with regular CDs and savings accounts are going to lose money every year. You almost have to get a 6% annual return in the market just to stay ahead of inflation.
I think that your assumptions are good as a basis for teaching young people about debt, savings, discipline, hard work and the value of compounded earnings. Unfortunately, our youth do not receive any sort of financial literacy training. Instead, they are told to borrow $120,000 for a Gender Studies degree and they wind up bitter, working part time at Starbucks and supporting Bernie Sanders.
Again, I apologize if it sounded as though I was criticizing you. That was not the case. I think that we are talking about the same thing from different angles.
Nick, I actually expected more harsh feedback from mostly everyone and did not realize this would go as viral as it has. This would be my first answer to do so in such a manner.
I know you were not ridiculing at all… I’m glad to see you were keeping it realistic because it is more likely that if people are saving, it a nice goal to aim for $2 million but it’s also reality to expect $500k to $1 million.. and for most, probably less. Someone asking, “Can I save a million dollars if I start saving now, at age 40?” This isn’t unrealistic, but it’s probably not realistic.
I’m a hustler and work multiple jobs while having a main job. I’m a web developer, web designer, programmer, writer, so… I definitely make my way. I’ve paid off student loans, personal loans, and currently have a mortgage. I do not make anywhere near $100k, but I also don’t have children, and currently have no plans for any children. As you said, life does happen, but at this time — it’s not even possible. But another thing that pushed me into realizing I needed to start saving for retirement: I worked as a security officer and many of the men were much older, either retired, or a few years away from it, still working as much as they could, living paycheck to paycheck. And I didn’t want that to be me. If I’m working, it’s because I want to work, not because I have to work.
I have a degree in psychology — and doing something completely different then what I wanted to do. In fact, I had to utilize a skill I learned when I was 12. Can you believe that? Something I learned when I was 12 years old is what got me a job and sparked my career. But the college degree got companies to take me seriously enough to hire me. However, what I do now pays more than what I originally was going to school for. Part of my main job is the psychology of advertising. My job is to convince people they need this product in their lives. It’s a bit different than direct sales, but it’s a form of marketing.
Not to get into politics, but I think before Clinton pulled her stint, I was all for Grandpa Bernie, and I was so naive and thinking, “Wow, he’s so great! What he’s talking about will help everyone!” Nope. I realized: who the hell is paying for what he is talking about? Everyone wants “free” — does that mean you’ll be going to work for free? Probably not. But that’s pretty much what he wants. Venezuela is the perfect example. Things do need to change in our country, but it won’t be through Bernie. And it sure won’t be through much of what much of the Democrats or Republicans are currently spewing out for whatever it takes to get votes.
Anyways, I like the engagement and appreciate your respect and comments. I am definitely not trying to lead anyone astray, just providing a wakeup call to everyone. All the data is available right online and can be pulled up in seconds — of just how much trouble most people worldwide are in when it comes to retirement. Very little is taught about finances and savings and retirement in grade school, high school, or even college. Without any of this vital information, it is no wonder that people just don’t know or think about it. We are all lulled into this bubble as if everything is going to be okay. And it’s surely not the end of the world if you didn’t save for retirement — there are programs to help people, but you just will get the basic necessities that you need in retirement.
Is The World Ready For Retirement?
Man… If you are not even factoring food expenses you are just selling people snake oil, like as if someone would live without eating. Also it is completely unreasonable to expect people to not have children, as most wish to do so. Also if you don't have kids, and you have a heart attack(which you will probably have considering how you said you are a workaholic) and die, all that money you saved is going to the govt anyways.
I am all for saving and being prepared financially, but what you are telling people to do is really bad for people, because they will postpone their lives(can't really live without spending money) and not even be able to enjoy the fruits of their effort thoroughly as their youth will be long gone before they touch the money. And this is the point of the question. Why waste your youth to be able to live in a nice retirement home? Makes no sense to me.
💪🏼👌🏼👍🏼
You definitely had the reality check answer. The majority of the population doesn't make enough money to pay rent and buy food, medicine, insurance etc…There is no invisible money for them to save. It's called inflation.
Hi Nick I would say de-focus on the numbers and focus on the concept instead.
what Brian Williams is outlining is a longer term view of oneself, than just a shorter term view. This can be for savings, job earning potential , planning for home or anything else at all in life. That’s an important perspective, irrespective of whether you start with a penny or a hundred pennies. One’s starting point is not as important as one’s drive to keep moving forward - the comparison is not the speed and pace at which one moves ahead but the consistency and method by which one does. we’re here for the marathon and not for the short sprint.
Yes, there can be unexpected events and unpredictable unfortunate incidents including job losses, parents passing, economy crashes - these will set us back but we can’t not apply the basic principles of planning for the future and not even make a decent attempt because it might come crashing down sometime.
If someone at 25 can contribute 25% but can contribute 5% and then steadily increases the rate of contribution as their compensation increases, that’s a useful start.
The other piece is when people start off a lower paying job, one of the things that a person is expected to look at is how do I improve my compensation - is it by working more jobs (which is what most people try to do) or do I improve my skills and thus get jobs that pay better?
I’m not trying to play down the difficulties one can encounter but the only way to play the game of life is to look forward towards building a better future.
Blah blah blah. There’s always good reasons to *not* save, if that’s what you want anyway.
You suggest at my age I should be saving 44% of my income for retirement? While my kids are young, Disneyland is magical, and my body is still strong enough to pedal the awesome and somewhat pricey mountain bike I just bought?
My wife and I never carry a credit card balance, we pay cash for sensible cars, and we contribute the max ($19,000 per person per year) to our 401k (plus some employer match). The rest goes to the here and now, and giving our kids awesome memories. If that means we live in a cheaper nursing home, so be it.
Sounds like you are doing amazingly then, AJ. Doesn’t sound like you’d be living in a cheaper nursing home if you are contributing the max.
Yeah when you’re ready to die the type of nursing home doesn’t matter…it’s time for the next life to start. My grandfather beat himself to death working in steel mills and saving up money to eventually pass in a nursing home and he had no clue where he was! I hope when I’m ready to retire I completely lose my mind and just laugh constantly…
To even consider living in a nursing home is just tragic. If I had kids, I would focus on raising them to be kind and caring towards their parents. Especially when we reach old age. I would teach them to take care of their mom and dad the same way we took care of them when they were young and feeble. I’ve seen so many kids now adults abandoning their old parents to nursing homes instead of living along with them and taking care of them until their last breath.
I see it differently. I want my children to have full and adventurous lives while raising their own families. I don’t want to be a burden on them.
I can see a timespan where it would be nice to live with my kids - sometime when I’m a bit better off to not be alone, but still capable of tending to my own needs without constant attention.
But if there comes a point where my children have to care for my physical needs, or watch me 24/7, I should be in a nursing home. I changed their diapers - I do not want them to change mine.
1.Ummm this all sounds great and wise and… totally obvious? So my guess is that the question was totally different. Why? Well, because why would anyone call caring about retirement a WASTE? I mean, one can even be careless about their retirement, but calling such care a WASTE in their question? C’mon man.
2.I suspect the point of the question was like - why do many people make not just savings, but incredible effort in order to secure their retirement, like for example having horrible but nicely paid job, or having no time for vacations or hobbies? Such people forget how to enjoy their current life, eventually sacrificing everything to their retirement. THAT is what I believe the question was about.
Good info. But at the end of the day we don't know when we are going to die. In my 63 years I have known quite a few people who have died before their retirement age. Never got to enjoy their retirement savings or their social security. My advice is to not be so focused on your future old age that you do not stop and smell the roses while you can still get around in your younger years. Because the stress of worrying about having enough money when you retire can cause you health issues.
I like your idea and thoughts however in reality and in the whole world (Not just ‘Murica) most people don’t have this: “You have a great job making great money and you are making so much money, you buy yourself a car, a house, you take lavish vacations, buy lavish things — you have to have the best of everything. “ Especially at 25 years old most people don’t even get to buy themselves a regular car let alone a house. Your scenarios work only for white collars who are on management level of a large business. So screw the rest of them right?
Tolga, thank you for reading.
I certainly understand your frustration and you are absolutely not wrong in your comment. This was written with the idea that people go on to get themselves educated and eventually get a decent paying job. As for “at 25” — you can start saving at any age, and you can even start at just 10% even at 40 years old because something is always better than nothing.
“Lavish things” aren’t necessary for everyone and especially not the people who have nothing, and are managing just to live paycheck to paycheck and keep the water and lights on. In some places, there is no way around it. I moved out of New Jersey for this very reason because I could do it. Some people have no choice but to remain where they are for their entire lives. Again: I cannot factor every situation into everyone’s lives. There are so many different types of people living their ways of life.
This was not written for CEOs or even “management” as you say. I’ve never held a job where I’ve made $100k a year. I’ve held 2–3 jobs where I’ve come close to being able to make $100k for just one year. And most of it went to taxes and I ended up owing money, so my government ended up taking most of it from me anyway. The more you make, the more they take. So I basically worked 16 hours days for over a year and it didn’t make me any richer. I had a little extra money in my paycheck to either spend or save — but I didn’t get rich doing it. I burned myself out instead.
I can understand that someone working minimum wage would have a harder time with this. Someone who is working a job and has kids is not going to be able to save as much financially. And I certainly am not a professional financial advisor to explain how someone could save in that particular situation.
The rules still do apply, however, for at least saving some money. The beautiful thing about life is that most of us have that power to have kids and kids are an expense. Raising one child in the United States costs close to $200,000 from infancy to age 18–21. Other countries? I’m sure it’s the equivalent to just as much, and some cultures — it’s assumed the kids stay with you for nearly all your life and take care of you as well. I’m writing from a United States cultural perspective.
Some parents get lucky and make kids who figure out ways to become more independent and make their own way in life, but others do not. Nowadays, most kids are more of a burden on their parents than anything else and I really hate to be so blunt about it. But unless your kid is changing the world and not living at home and is completely independent, it will cut into your life and your savings, but you raise your kids with the hope that your genetics survive, and because it’s illegal not to raise your children, otherwise.
But it can get complicated: The more you put away, the less you are going to be able to spend on other stuff. There are programs, even outside of the United States that allow you to save your money. The United States has social security, but many other countries have caught on to develop similar systems. How trustworthy or competent they actually are — I cannot say.
So with that said: the whole point of people who are capable of saving money and should do it are going to have better health care and health as well. The idea is to actually alleviate the burden on the whole system immediately by not relying on an already corrupt system and hoping that you at least get some of your money that you paid into the system back from the government.
The government does actually receive more than enough money to take care of people who cannot take care of themselves. Will healthcare be just as great? Absolutely not. But there are programs in place, such as Medicare and senior programs to help the elderly. Again: I write from what I know about the U.S., not other countries.
Now you might be mad at the whole idea of this, but the fact is: if it can be done, and not everyone can do it, then are you entitled to the extra money that I paid into the system to help you have better healthcare? And if we switch that around, am I entitled, at all, to your money so that I may have better healthcare? I don’t know how the whole government social security works down to a science because I have about 30 years until I am eligible to even retire, but before systems like this existed, people would just raise families and you pretty much died in the home of your father and his father and his father. Times have changed since then and now this whole new idea of savings for your older retired self is not something everyone can grasp — and we also didn’t live as long. But even growing up poor and living poor — most people are living into their 60s and 70s.
The concept is just to get the idea of savings in your head. Whether you can actually do it or not is up to you. No one is stopping you from researching online or finding ways to cut where your excess spending is, but you should not blame this situation on people who were either born or got themselves into better financial situations. This kind of thinking puts a drain and crash on the whole system.
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