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.
Published or updated September 14, 2005. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.