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Thread: What if You Needed $7 MILLION to Retire at 65??

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    Default What if You Needed $7 MILLION to Retire at 65??

    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:

    1. 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]
    2. 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]
    3. 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:
    Inflation steals half the value you store in dollars every 16 years. And actual inflation, as opposed to the official numbers, is probably about 2% higher.
    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.
    “What a caterpillar calls the end of the world we call a butterfly.” - ECKHART TOLLE

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    Banned Melonie's Avatar
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    Default Re: What if You Needed $7 MILLION to Retire at 65??

    ^^^ It's important to dissect the term 'inflation' into several components. The first is loss of 'purchasing power' of a particular currency relative to other currencies. The next is 'price inflation' in the costs of basic world commodities i.e. food, energy, raw materials etc. in terms of all currencies. The next is the 'spread' between the rate of true 'price inflation' versus the interest rate paid on 'safe' investments denominated in a particular currency.

    In response to the unspoken 'question' posed by this thread, the answer is ... extremely few of today's 20 year olds will actually be able to maintain today's standard of living 45 years from now no matter how hard they work or how much they save. Demographics, 'peak oil / water' = higher cost of 'necessities', and gov't debt levels = higher tax revenue requirements to service govt debt, arguably guarantee this. And that's the case before one even starts to look at future possibilities like .

    In regard to IRA's, some pundits will point out that putting money into a gov't sanctioned retirement account now involves an increasing risk that the 'rules of the game' will be changed well before the IRA owner actually reaches retirement age. One such rule change might be a reduction in gov't retirement benefit payment amounts that is proportional to the amount of money the person has accumulated in their IRA ! Another possibility is a 'forced conversion' of existing IRA assets into 'something else' by the gov't ( i.e. gov't bonds ). 401K's for employees which include matching employer contributions ( = 'free money' ) are obviously a different story.
    Last edited by Melonie; 10-09-2014 at 03:43 AM.

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    Default Re: What if You Needed $7 MILLION to Retire at 65??

    Hmmm. I was initially alarmed by the forced conversion proposals thrown out there. I much less concerned now. 1. I don't think Congress will do it because 2. Wall Street would have conniptions and 3. They are the prime source of campaign funds for BOTH parties.

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    Default Re: What if You Needed $7 MILLION to Retire at 65??

    I don't think I want to ever retire. I want to at least work part-time forever. Or if I did stop working, it would be to take care of like my grandchildren as like a live-in nanny, but I don't even have kids yet lol. I would just get so annoyed with all that downtime.

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    Default Re: What if You Needed $7 MILLION to Retire at 65??

    Quote Originally Posted by GlamourRouge View Post
    I don't think I want to ever retire. I want to at least work part-time forever. Or if I did stop working, it would be to take care of like my grandchildren as like a live-in nanny, but I don't even have kids yet lol. I would just get so annoyed with all that downtime.
    THIS^


    MANY MEN WANTED TO LAY ME DOWN, BUT FEW WANTED TO LIFT ME UP

    -Eartha Kitt

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    Default Re: What if You Needed $7 MILLION to Retire at 65??

    Quote Originally Posted by Optimist View Post
    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:

    1. 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]
    2. 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]
    3. 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:
    Inflation steals half the value you store in dollars every 16 years. And actual inflation, as opposed to the official numbers, is probably about 2% higher.
    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.
    It's true that the cost of living will increase over the next 45 years, but so will wages. 45 years ago, the median wage was $7,200. Today it's $49,486.

    http://www.davemanuel.com/median-household-income.php

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    Default Re: What if You Needed $7 MILLION to Retire at 65??

    Quote Originally Posted by Optimist View Post
    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:

    1. 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]
    2. 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]
    3. 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:
    Inflation steals half the value you store in dollars every 16 years. And actual inflation, as opposed to the official numbers, is probably about 2% higher.
    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.
    It's true that the cost of living will increase over the next 45 years, but so will wages. 45 years ago, the median wage was $7,200. Today it's $49,486.

    http://www.davemanuel.com/median-household-income.php

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    Default Re: What if You Needed $7 MILLION to Retire at 65??

    Quote Originally Posted by Melonie View Post
    ^^^ It's important to dissect the term 'inflation' into several components. The first is loss of 'purchasing power' of a particular currency relative to other currencies. The next is 'price inflation' in the costs of basic world commodities i.e. food, energy, raw materials etc. in terms of all currencies. The next is the 'spread' between the rate of true 'price inflation' versus the interest rate paid on 'safe' investments denominated in a particular currency.

    In response to the unspoken 'question' posed by this thread, the answer is ... extremely few of today's 20 year olds will actually be able to maintain today's standard of living 45 years from now no matter how hard they work or how much they save. Demographics, 'peak oil / water' = higher cost of 'necessities', and gov't debt levels = higher tax revenue requirements to service govt debt, arguably guarantee this. And that's the case before one even starts to look at future possibilities like http://www.pbs.org/newshour/rundown/...-gartner-says/ .
    Today's 20 year olds will most likely have a much higher standard of living in 45 years than they do today. Technology advances have always led to higher standards of living and there is no reason to believe that is going to stop now. In 45 years, oil will probably play an insignificant role in the economy, just like hay (for horses) does today. 45 years from now, most cars will probably be running on electricity or hydrogen, or at worst, gas engines that are 2 or 3 times as fuel-efficient as vehicles today. The cost of energy will be practically nothing, once solar and wind energy becomes widespread, which it will over the next 45 years. There is no 'peak water'. There is an unlimited supply, but most of it needs to be converted from saltwater to freshwater. The cost of desalination has been going down, and the falling cost of energy will bring it down even faster. Advances in technologies will lower manufacturing costs, which will lead to cheaper products. It's true that some jobs will be replaced by automation, but there will be other jobs created that don't exist today. The type of work I'm currently doing didn't exist 45 years ago. Every cam-girl in this forum is doing work that didn't exist 45 years ago. Nobody can predict the future with certainty, but there's probably never been a 45 year period in our nation's history where the standard of living went down and not up. There's no reason to believe that's going to change.

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    Default Re: What if You Needed $7 MILLION to Retire at 65??

    Nobody can predict the future with certainty, but there's probably never been a 45 year period in our nation's history where the standard of living went down and not up. There's no reason to believe that's going to change.
    In point of fact, there have been lengthy periods where the 'real' US standard of living was stagnant or declined. One notable period was the so-called Long Depression which began in 1873 and arguably continued until 1896-7. Not surprisingly, many of the conditions which existed back then also exist today. From

    (snip)New technology [ railroads, manufacturing - sic ] was successful in increasing production and brought on the expected profits for a time, especially during the Civil War when demands were endless. After the war concluded, the problem became over-efficiency, although it did not show its ill effects in the American economy until 1873. The U.S. population did not increase fast enough to consume the amount of goods produced, and demand from foreign markets was only a deferment, rather than a solution, to this problem. Simultaneously, there was the problem of unnecessary expenditures by workers whose wages had been raised and had expendable income for possibly the first time(snip)


    It's true that the cost of living will increase over the next 45 years, but so will wages. 45 years ago
    However, increasing wages alone are relatively meaningless. What's actually important in regard to 'real' standard of living is the comparative rate of wage increases, versus the corresponding rate of price increases.



    ... on that basis, American wage increases have lagged American price increases since 1971 or so - even when using the US gov't's 'adjusted' CPI as the measure for price increases. Thus, in the absence of 'compensating mechanisms', the American standard of living has arguably been declining since 1971. Obviously those 'compensating mechanisms' included wives taking full time jobs, families borrowing more and more money to support current year spending which their net income could not support alone, liquidation of accumulated assets ( i.e. retirement funds, second homes ) to support additional spending, etc.

    But, at some point, those 'compensating mechanisms' become unsustainable ... i.e. no third person to send into the workforce ( OK we'll have to consider 'basement dweller' Millennial children ), no remaining credit to support additional borrowing and spending, no remaining accumulated assets to sell off to support additional spending, etc. This arguably started to take place in earnest circa 2008. This in turn has arguably resulted in a decline in the 'real' standard of living for most Americans i.e. the 90% 'non-rich' since then.

    Some pundits would point out that a fundamental change occurred during the Civil War ( with a significant additional change in 1872 ) which precipitated the crash of 1873, that another fundamental change occurred in 1896-7 which ended the Long Depression, that yet another fundamental change occurred in 1971 which arguably precipitated today's financial situation, and that - unfortunately - there is no fundamental future change on today's horizon which might end it. While I won't attempt to press the point, all of these changes involve 'fiat' money versus 'real' value / wealth.

    You have pointed out a great future 'hope' i.e. an alternative energy source which will actually provide nearly free energy ... and along with it nearly free clean water, nearly free food, etc. Indeed if this were to come to pass, it could favorably alter the 'slope' of the increasing prices graph !!! Here's 'hoping' that such an alternative nearly free energy source actually materializes. However, if the stated costs plus 'hidden' costs of solar, wind, etc. are taken into account, it clearly won't be these. Let's hope that there's some real progress with . In the way of full disclosure, I did snag some Lockheed Martin shares during the recent market 'dip', on the speculation that they may actually be 'on to something'.
    Last edited by Melonie; 10-28-2014 at 08:19 AM.

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