Is Saving for Retirement Overrated these days?

Question

Don't get me wrong. I believe in saving for the future and I max out my 401(k), however it seems like companies, advisors, and planners stress you should be saving more because you "won't have enough" when you retire. I want to enjoy some of it now and still plan for the future, yet my advisor warns me that I'll still fall way short. All the financial publications seem so worried about not having enough.

Is this overblown?
Or should I sock it all away and live minimally?

Answer 1

Make goals, then determine how to accomplish those goals. How much money does it take for you to live comfortably right now? How much capital will need to have that income when you retire? How old do you want to be when you retire? These are the numbers you need to keep in mind when setting your goals.

As for how to accomplish your goals, look at diversifying your investments. I'm not just talking stocks and bonds. Stocks and bonds are okay but they're subject to market ups and downs. You'll need some solid cash reserves in CD or some similar bank offering. It won't accumulate quickly but it won't lose value if the market takes a nose dive. Also, watch how much you put in "tax-free" investments. They may be tax-free now but you have to pay taxes when you draw it out for retirement. I've seen people get financially slammed by drawing out too much at once. Better to have some previously taxed savings to avoid that type of disaster.

If you plan carefully then you can comfortably spend part of what you make now and still save enough.

Answer 2

You know...in a way it is a bit overblown. Yes, the average life span for a man and woman are rising...but it's not as much that people are living longer it's that people are not dying early...more people are reaching retirement age rather than dying from influenza, malnutrition, small pox, malaria, or whatever when they were kids. However, once there...they don't live any longer. This raises the average lifespan. Look at it like this.....5 people: each dies 20 years apart starting at age 20. Average life span is 60 years old. Now 5 more people...because of better nutrition they don't begin dying off until age 60 and are separated by only 10 years. Average life span becomes 80. Seems significant...but in reality two of those people didn't really get to retire and would have been better served not saving so much (ignoring spousal issues). Third person was only one who's retirement situation was significantly different and would have had to make sure they planned. Last two lived about same as before....no real change in their needs and life spans.

Bottom line is that you need to take a good, hard, realistic look at your family history. Did your grandparents die at 65? Did your wifes' grandparents die around same age? Did your parents and their siblings die young? Your wifes? That tells you a lot about how long YOU two going to live. You should plan accordingly.

Of course it's no guarantee...and that's why you save a little extra just to make sure. Financial advisors and publications are in business because people save for retirement...they make more money the more people are saving. It's in their best interests to push the agenda. It's in YOUR best interests to be realistic about your own mortality, the statistics involved, and the standard of living you wish to ensure during your time on earth.

Me? I'm being realistic...my spouse's parents and grandparents died at around age 70. Mine reached their mid-90's. So we are saving extra so that we can live it up for 6-8 years and then wrap it up and live out our days frugally. I don't plan on us both to live to 90 because the likelihood on it happening is minimal. No need to save as if we both will.

Answer 3

Investing for the future means investing for your family and that can never be overblown.

When you hear them say you will not have enough - they are probably right.

Inflation eats away at purchasing power. If you have many years to go you should get the best possible jump on it that you can.

There is a 40 year investment calculator below that shows you what certain deposits, investment returns, and inflation rates might look like in the future.

Download it and try it out.

Answer 4

Depends upon what you want your retirement to be like. I know many who will simply sit in a chair and become a vegetable. Not much money needed to do that. They will be fine on social security and welfare. I will limit time spent with those who live like this.

I on the other hand will be traveling and having a grand time. So I plan accordingly. Expect NO ONE to fund your retirement nor care about it like YOU should. ONLY YOU can make it a good one and only you k now what a good one is to you. Everyone will have different priorities.

Here is a simple formula : Take any amount, divide it by 2 and then drop a zero.

We will do ONE MILLION for the example :
$1,000,000.oo divided by 2 = $500,000.oo DROP a zero = $50,000.oo.

Can you life off $50,000.oo a year?? If so then you will need to have one million dollars in an investment account.
Simple simple!

: )

Answer 5

Listen to the advisors. While living for the moment has its advantages, life expectancy is rising, and you'll be around for quite a while without earning money.

Answer 6

i think of it is via fact it is the age element, the music I grew up with i think of is greater effective, the 70's and 80's, the place as people who have been born interior the 1990's will say todays music is greater effective.

Answer 7

Try this for yourself. Schwab has a nice walk-through that helps you figure it out.
http://www.schwab.com/public/schwab/planning/retirement/saving/estimating_needs?cmsid=P-990084&lvl1=planning&lvl2=retirement&refid=P-1020838&refpid=P-999701