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Retirement?

With the rise in expenses, many families are having difficulty keeping up with all of their payments including their mortgage/rent, car payments, and many more. In this increase in prices, you would think that Income would follow and be similar in comparison to growth, right? No, in fact, income has only increased by 316% from 1981 and housing pricing has increased by 526%. It's harder to buy houses and now people people are spending more on them, but how does this correlate to retirement? Well, not only are they spending this crazy amount on houses with less income, but their everyday expenses as well.


By age, the average amount saved for retirement is very low. Those under 35 save, on average, $30,170. This doesn't mean that much because it includes a very wide range of people. Also, many are graduating from college, just starting out, and don't have their careers fully set up. Often, those in this age group will be in more junior jobs and have lower salaries and opportunities to save as much as those older.


It starts to get very interesting as you enter the 55-64 age group. On average, this age group only has $408,420. Only? $400k is a lot of money, and should be enough for retirement, right? Well, let's break it down.


Although no one knows when they will die, the average age of death keeps getting older and older. Someone going into their 90's in age, isn't becoming so rare anymore. And, although people will probably be spending less as they get older, these retirement savings are going to be 100% to surpass the person.

Ex.

If someone spends $50k/year and is age 65, and planning on retiring, how much should they have? If they live to 95, that would be 30 years in retirement. 30 x $50,000 = $1,500,000. This is a lot of money to save, in fact, many use a different strategy called to 4% rule.

Total Retirement x 4% = Total budget/expenses per year

This strategy is projecting/planning that you would live, at most, another 25 years or until 90 if the retirement age is 65.


With these very high numbers and complicated predictions, it may be scary to plan, or even think about retirement. Luckily, Social Security is something that is there to help you with retirement.


Social Security

Social security is paid along with your taxes, that is paid back once you retire. The amount that you are paid by Social Security depends mainly on how much you make at your age of retirement, as well as when you retire. The more money you make, and the later you retire, the higher your social security will be.

Ex.

$50,000 salary and retires at age 62, will receive a $1,386 monthly benefit($16,632/year). But, if you wait until age 67, it will be $1,980 a month($23,760/year) or even all the way up to $2,455($29,460/year) if you wait until age 70.


Depending on what age you retire, really can change your retirement. This could slice the total retirement savings needed in half.



There are retirement accounts that are great, especially when you start young. Accounts like Roth IRAs and 401K's allow for a great opportunity for accruing a great amount for retirement.


Roth IRA: A Roth IRA, or an Individual Retirement Account, is a great brokerage account to start with. Typically these accounts work just like your standard Brokerage account and you can invest in it very similarly. Also, these accounts are able to be opened at pretty much any age. The best part about them is that when you take the money out at retirement, it's all tax-free.


401k: A 401(k) is a type of retirement savings plan offered by many employers in the United States. It allows employees to contribute a portion of their salary to a tax-advantaged account, which can be used to save for retirement. Employers may also offer to match a certain percentage of the employee's contributions, which can be an additional incentive for employees to participate in the plan.


This is all to say that the earlier that you start saving and investing, the higher likely you are to have a better retirement. Always contribute to your retirement and savings. Although, at the moment, it seems boring and useless, it will pay off in the long term. If this interests you, and you want to read more, try these three books:













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