Ask Terry Questions Savings — How much is enough?

Savings — How much is enough?

By Terry Savage on October 09, 2015 | Financial Planning / Retirement

I saw you in the WGN news today and you suggested that young adults in there 20’s should save $40 a week. How much should I save towards my retirement at the age of 37.

Terry Says:  The simple answer is:  As much as you can!  It’s amazing what time can do for you.   The example I gave was saving that $40 a week for 50 years, at the historic average return (with dividends reinvested) of the stock market — about 10% per year (inside a retirement plan).  In 50 years, that 20-something would have nearly $2.5 million.  But if you only have 30 years to do that (starting at age 37), the total comes out to just under $400,000!  So, will that be “enough”?  Probably not.

The solution is to save TWICE as much!  That should at least get you to nearly a million.  And it would be easy to do that — especially if you’re saving in a company retirement plan where you get a matching contribution.

Look at it this way:  Suppose you save $400/month — $100/week.  That would be $4800/year.  But take a look at your paycheck.  Theyre taking out up to $7300 a year for FICA — the social security tax.  And who knows how that will pay off in 30 years!  But they take it out anyway — and you can’t tell them you “can’t afford it.”  So don’t you think you owe it to yourself to at least take out the same amount for savings that will be yours, for sure, in the end?

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