Well, if you are one of today's 20-year olds, you might depending on whether inflation has it's way with you!
http://www.figuide.com/todays-20-yea...lifestyle.html
Most young people don’t understand inflation as well as their parents and grandparents. You have to either be a student of monetary history or an old movie buff who pays attention to the actor’s reaction to what something used to cost.
To illustrate the insidious effects of inflation here are some statistics from the official inflation numbers:
- Someone retiring in now in 2014 with $1 million at age 65 can safely withdraw $43,600 a year. [See safe withdrawal rates in retirement]
- However, today’s 20-year olds will need over $7 million to have that same lifestyle when they retire. [The inflation rate compounded for 45 years or 1.045^45 = 7.248]
- In 1970 they would only have needed $166,000 in retirement to have a similar purchasing power for the rest of their life. [Official CPI Inflation Calculator]
That is the insidious effect of government-induced inflation. As we wrote in the original article:
Most people wrongfully worry more about the effects of short term market volatility and less about the effects of long term inflation.
http://finance.yahoo.com/news/a-20-y...184050231.html
Beating inflation
Seven million (or even $4 million) sounds like an impossible feat, but your personal retirement goal might be quite different.
Financial planners and free
tools online tools can help find your target, but both options have their drawbacks — planners cost money and online tools can be confusing to navigate.
If you really want to set yourself up for a healthy retirement, focus instead on one simple goal: beating inflation. No matter how much you save, so long as your return on investment is higher than the rate of inflation, no one can say you’re not a winner. (The current inflation rate is around
1.5%.)
If you’ve got $1,000 in cash, your first impulse might be to throw it in a savings account or a CD. But because savings rates are so devastatingly low now (
0.06% on average — yikes), that’s not the wisest approach.
Your best bet is to invest in a 401(k) or
open an individual retirement account (IRA) on your own. Both options give you access to low-cost investments that won’t require much upkeep. We’re fans of “set it and forget it” options like
target date funds, which are cheap, reliable and adjust your investments as you age with little work on your part.
For more click the links.
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