Am I saving Enough to Retire With Two Million?

CNNMoney has an article up right now where a reader asks Walter Updegrave whether he’s saving enough to amass $2 million by retirement.  The guy is a savings machine putting away $4000 a month and I wonder if he really wants to know the answer or whether he is showboating just a bit.  I mean, if you’re saving that kind of money, I’m guessing you are smart enough to try out a few online retirement calculators.  Anyway, he’s definitely investing in his future and I applaud him for that.

Walter gives him some pretty general advice and tells him that, “yes, you should have over $2M by the time you reach 65, even if you only get a 6% return on your money.”  He also points out that, with inflation, $2M isn’t going to be quite what it is today.  All in all, I enjoyed reading the article and it just reinforces that we’re making the right choices at our house to enjoy a comfortable retirement (assuming we don’t hit any major “life bumps” which is quite likely.)

Once I finished the article, I wandered in to the comments section.  I can’t say I was surprised to see that the comments were very toxic.  A few of the comments basically said, “What a crock.  You elitist bastards are saving more than I make in a year” etc etc.  Sure, he’s saving more than a lot of people can.  I get that and understand that they are frustrated by it.  But another commenter pointed out that if you can’t save $4000 a month, maybe you can save $500 a month which would still put you FAR ahead of most other people and probably give you the cushion that you need to enjoy retirement on a more modest income.  If you aren’t making that much now, you’ll need even less money in retirement to enjoy the same standard of living.  It almost appears that some people throw up their hands and say, “Well, I can’t save that much so I guess I’m screwed!”.  No, you’re not.  Save as much as you can and do it automatically and regularly and you’ll be far better off than not doing anything at all.

Let’s take a quick look at what saving $250 a month can do for you at age 25.  If you do that until you retire at 65, you’ll end up with over $850,000 assuming you increase your contributions by 1% a year (so save less than half your raise each year) and get an 8% return on your investment.  Sure, those are guesses but you have to base your estimates on something and I think that’s relatively conservative.  Don’t think you can get an 8% return?  Sacrifice a bit more and save $300 a month.  That will still give you a nest egg worth over $600,000 assuming a 6% return.  The point is, rather than spend all kinds of time thinking of all the reasons that it sucks to be you, make some sacrifices and start saving.  If you’re young, you have the most important investing variable on your side: TIME.  It doesn’t take a lot of sacrifice to amass a decent nest egg if you start early.  Even if you aren’t young, start saving more now!  Even if you only amass $200,000 by the time you retire, that will still help you drastically in your retirement!