Is retirement even possible for the average twenty-something? In this day and age, everyone is told to put as much of their money as possible into retirement accounts. But will this be enough?
First off, how much are twenty-somethings going to need to retire on? I would say that if you want to retire in thirty to forty years, then you should have between three to five million saved up.
Why that much? Inflation. For those of you who don’t understand the meaning of this word, inflation is the cost of things going up over time. For example, in the year 1900 a candy bar might have cost around a nickel. However, today that same candy bar would cost about fifty cents or more thanks to inflation.
In order to reach this goal of three to five million dollars, twenty-somethings will have to deposit about ten thousand a year(minimum) into some type of retirement account. Can you afford to do that? I’m sure some people can, but what about the ones who can’t?
Also, that same retirement account needs to earn around eight percent per year(more would be better). Like I said earlier, if you lack the funds to retire, you could move to another country with a lower cost of living. However, I doubt many people will want to do that mainly because most individuals will want to be close to their families.
There are several wildcards that will affect the amount of money twenty-somethings will need when they retire, as well. One wildcard is Medicare. Will we have free Medicare in the future? Of course, free Medicare would not really be free since taxes would have to be raised for it to exist in the first place.
A second wildcard is Social Security. Many twenty-somethings(including me) believe that Social Security will no longer exist in the future. Too many people are retiring these days and depending entirely on Social Security to support them in their retirement. In time, this will probably doom Social Security because it was never meant to be the sole provider for retirees.
A final wildcard is children. If twenty-somethings decide to have kids(and many will) then they will have to support those children, and possibly send them to college. Twenty years from now college could cost between one hundred and fifty to three hundred thousand dollars per child. That’s a lot of money that is going to interfere with your retirement saving. I’m glad that I’m not having children.
There’s no doubt about it, retirement is going to be horrendously expensive for twenty-somethings. A lot of money is going to be needed; I just hope that twenty-somethings can save enough.