Starting to Save for Retirement at 40 with No Money (Nothing / Zero Saved)
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- Опубліковано 20 тра 2024
- Starting to Save for Retirement at 40 with No Money (Nothing / Zero Saved).
How to start saving for retirement at 40. How to prepare to retire in 15, 20, 25, 27, or 30 years away from retirement. What percentage of my income should I be saving if I just started to save for retirement at 40, 45, or 50 years old.
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Social Security
www.ssa.gov/pubs/EN-05-10035.pdf
www.ssa.gov/oact/cola/Benefit...
www.ssa.gov/oact/cola/bendpoi...
www.ssa.gov/oact/cola/piaform...
www.ssa.gov/benefits/medicare...
www.ssa.gov/oact/STATS/table4...
www.ssa.gov/benefits/medicare...)
faq.ssa.gov/en-us/Topic/artic....
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Im 40 now and never calculate SS into my calculations because you really never know what will happen with it. Great information for people starting out.
Agreed, it is better to not plan on the government as things change over time. For myself I plan on replacing over 100% of my current income with investments, but is difficult to do for those with less time before retiring. 40% investment and 40% SS is more realistic for most people.
Outstanding job, per your history of excellent teaching. Well done! Congrats on over 2K Subscribers!!
Thank you very much!
I love how you broke everything down. I really appreciate it. You have a new subscriber. I haven't looked at your catalog but have you done one showing steps for someone to retire early i.e. 55?
Thank you for subscribing. I put this on my list of topics to cover. Until then here is a quick answer: if you plan on living on 80% of your current income you need 20 times your current income saved/invested to withdraw 4% per year. You can use a compound interest calculator like this (www.nerdwallet.com/calculator/compound-interest-calculator) to figure out how much you need to save monthly and for how many years to hit the goal of 20x. I am not including social security because the earliest to collect is 62 years old. I am also not including healthcare as I do not know if you employer covers it starting at 55 years old like some do. An example would be someone making $75k/yr x 20 = $1.5 million. To reach $1.5 million assuming a 7% real rate of return someone would need to contribute $2k per month for 25 years starting at age 30 to retire at age 55.
Well done, thank you!
You provide such great information, presented in an easy way to understand. Thank you!
Thank you for the feedback. I try to explain it in a way that makes sense to me.
Solid basic information. It's probably also worth mentioning the option of getting full-time working income up proportionately higher than the relationship to retirement income you're mentioning. Then save/invest a higher percentage for a shorter period (or portion of your overall period).
Another potentially big factor is being able to stop/cut way back on work without having to draw from investments for some time, so they can continue to grow from the full principal. And there's also the option of continuing to do some light part-time work after retirement.
So let's say I can clear $100/hour full-time. That's 200k/year. Maybe I save/invest 50% of that for more like 5 years. Even as low as 8%, that's pushing 600k in principal. Then I "retire" by cutting back to 50 hours/month, or 60k/year. Maybe I also have some passive income. Between that and the 50 hour/month gig, I can live indefinitely without having to draw from principal or take SS.
IMO, retirement is mostly about being able to do stuff you don't have time for when working (or working too much). If you enjoy working, and it's not keeping you from doing other things, there's no real reason to stop. For most people, just cutting back is probably a more pragmatic answer.
For sure, it makes a lot of sense to take full advantage of compounding returns over the longest possible term. But in reality, there are lots good reasons that doesn't happen. Travelling and doing non-work stuff when you're young is one.
Another big factor is debt. Being debt-free makes cutting back/eliminating work very different than it would otherwise be. And the ability to generate an income well above your comfortable lifestyle is key. Saving 50-75% of your income adds up fast - same as spending 125-150% of your income adds up fast!
I plan to never stop being productive, but I like the security of knowing that if I stop working or get laid off it just becomes a vacation rather than a time to panic. I love solving problems and helping others which will probably continue until the day I die. I also get paid to do work in many different countries which the weekends basically become mini vacations around the world.
Yup 👍
Another factor to consider, given current demographics, many developed countries will no longer be able to maintain the cost of pension payouts over the coming decades. Last estimates I heard place the US failure to maintain payouts at sometime around 2035 (cant remember what bank was making then projection). Again, is it worth it to bother saving for retirement?
Why not skip saving for retirement, live life to its fullest while your healthy, and take a magic potion (available in Canada) when your too tired out to keep going?