What exactly is so scary that was able to scare the hell out of me? Answer: When I realize the amount I need to have when I retire.
I am not sure if you have heard of this but let me explain. Let’s say you are 25 years old and you hope to retire at 65. This means you have 40 years to work on your retirement goals. Next, you will need to ask yourself what kind of lifestyle do you want in your silver years? Let’s just assume you just need a modest $2,000 a month, or $24,000 a year, retirement. Do you know, when you’re 65, you will need $80,000 to pay for your $24,000 lifestyle, and that is only for 1 year. Yes, $80,000. Why? Inflation! And this is the amount calculated based on a reliable annual inflation rate of 3%.
That’s not the end. Inflation don’t stop just because you are ready to retire, it will continue to inflate into your retirement. And how much would you need at the end of the day, if you plan for your retirement to end when you’ve reached 95 years old? $4 million. That’s how much you need if you need only a $2,000 a month retirement based on today’s value of the dollar.
Still putting aside that $200 every month and dreaming of retiring in Waikiki Beach?