That’s the question tackled by Walter Updegrave in his CNN Money column, Ask the Expert. Here are the given facts: the individual is 25 years old, contributes 10 percent to his 401(k) and maxes out his Roth IRA. Will that be enough to retire in twenty-five years?
Walter thinks he has a lot of work to do. By retiring early, he won’t be able to take advantage of social security or penalty-free retirement account withdrawals right away. Considering there’s a good chance today’s 25-year-old might live to 100, that is a long time — 50 years! — to be relying on investment income.
The Expert cites a rule of thumb: for every $1 of income desired in retirement, $25 in savings is required. (Another way to say that is the assumption of a 4 percent safe withdrawal rate.)
The article finishes with a short blurb about healthcare, a significant cost to consider. I get the slight feeling at this rate I’ll be working until I’m at least 75.