How are we supposed to do this?

Question

Granted it's a mathematical reality that when a younger person gets to retirement age, they will need about a $ million + to even live out their golden years. In terms of the American middle class I believe the median income is 35- 38k a year. ( I might be off on that number a little) Even with investing money,how are we supposed to obtain this goal?

Also keep in mind a million dollars seems like a lot of money but 35 to 40 years from now would only help someone maintain the life style that they have now.

Answer 1

The median income in the US is closer to $40k with W Virginia coming in at the low end at a little ove $30k and Maryland at the high at almost $56k.

First of all when you save money you need to include that amount in your monthly budget and faithfully pay into it just like the electric bill. Secondly take advantage of every avenue you have. If your company has a 401(k) or similar plan maximize your contributions, especially if your employer matches a portion. This money goes in before its taxed so it goes a little farther. Make the maximum contribution to an IRA every year. Depending on your circumstances a regular IRA is also pre-tax money or you can contribute after tax money into a Roth IRA that you won't have to pay taxes on when you take it out.

Now the hard part. Take care of your investments. Keep your vehicle in top shape and do all the regular maintenance. Having to replace a car is much more expensive than changing the oil and doing the regular service. Buy a house and keep in in tip top shape. You can buy a house on average for 20% down and with equity appreciation you can realize either a great return when you sell or have a nice nest egg when its all paid off. Don't be a runaway consumer. Live frugally. You can live a happy comfortable life and still not throw money down the drain.

Be smart about your monetary investments. Seek advice on where to put your money from people that know. A good portfolio should double in value approximately once every 7 years. This may vary based on year to year performance.

Answer 2

1) Work longer.
We will not be able to retire at 65 and live to 90-100 with the type of entitlements that we currently enjoy.

Want some good news? Because we do mostly brain work, instead of physical labor, we can easily work into our mid-70s as long we work on keeping our health.

2) Invest early and aggressively.
If you look at the mathematical formula for compound interest the largest component is TIME, not the initial deposit. So let time be your friend and start investing in your 20s instead of waiting till your 40s and hoping for a big score.

Answer 3

Most of us were educated that Social Security would be there as a portion of what we would be able to rely on. It won't be there when we retire. I think that the idea was to maximize your 401K and use IRA's. This is the ideal, but most of us in this tax bracket cannot accommodate this.

Answer 4

I wish some one told me the answer 40 years ago. We keep working till we die if you are middle class.