Comments on: How to Save a Million Dollars at Any Age: 45 Years Old http://www.consumerismcommentary.com/how-to-save-a-million-dollars-at-any-age-45-years-old/ A premier personal finance blog, established 2003. Within, Flexo discusses his own experiences with money, and he and other authors comment on a wide range of personal finance topics. Mon, 13 Feb 2012 01:22:47 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Lisa http://www.consumerismcommentary.com/how-to-save-a-million-dollars-at-any-age-45-years-old/comment-page-1/#comment-138435 Lisa Fri, 29 Feb 2008 11:56:17 +0000 http://www.consumerismcommentary.com/2008/02/06/how-to-save-a-million-dollars-at-any-age-45-years-old/#comment-138435 I like that you give specific dollar amounts here. What interest rates do you use in making the calculations? I like that you give specific dollar amounts here. What interest rates do you use in making the calculations?

]]> By: Ron http://www.consumerismcommentary.com/how-to-save-a-million-dollars-at-any-age-45-years-old/comment-page-1/#comment-136225 Ron Thu, 07 Feb 2008 22:47:59 +0000 http://www.consumerismcommentary.com/2008/02/06/how-to-save-a-million-dollars-at-any-age-45-years-old/#comment-136225 There are always bad assumptions in these kinds of articles. Your cheese may be slipping off the cracker if you think saving $286 from any age will give you a work-free retirement. Your savings rate must grow in correlation with your income. When I started in my field 25 years ago I made $12,000 per year. Now I'm making in the low six-figures. The entire time I've been saving a minimum of 10% of my pay. Many years I was able to save much more. But my point is by fixing a set percentage instead of a dollar amount I've kept pace with or beat inflation. Ron There are always bad assumptions in these kinds of articles. Your cheese may be slipping off the cracker if you think saving $286 from any age will give you a work-free retirement. Your savings rate must grow in correlation with your income.

When I started in my field 25 years ago I made $12,000 per year. Now I’m making in the low six-figures. The entire time I’ve been saving a minimum of 10% of my pay. Many years I was able to save much more. But my point is by fixing a set percentage instead of a dollar amount I’ve kept pace with or beat inflation.

Ron

]]> By: Dan http://www.consumerismcommentary.com/how-to-save-a-million-dollars-at-any-age-45-years-old/comment-page-1/#comment-136150 Dan Thu, 07 Feb 2008 04:08:38 +0000 http://www.consumerismcommentary.com/2008/02/06/how-to-save-a-million-dollars-at-any-age-45-years-old/#comment-136150 Fair point, Flexo. By the same lines, the projections of the future value of the nest egg must also be forgotten for they are mere estimations based on past stock market returns. The assumption that $286 per month (or whatever amount) will turn into $1,000,000 is wrong and the assumption that $1,000,000 will be worth $400,000 (or whatever amount) is wrong. The only real truth in the equation is the $286. Personally, I allow myself to use the assumptions to help plan for my retirement. But, I strongly recommend that if you choose to use the assumption that your portfolio will return 8-10%, you should also assume some inflation (the average over the last 90 years is 3.4%). Otherwise, you will experience expectation inflation, and a crash when it's time to retire. Fair point, Flexo. By the same lines, the projections of the future value of the nest egg must also be forgotten for they are mere estimations based on past stock market returns.

The assumption that $286 per month (or whatever amount) will turn into $1,000,000 is wrong and the assumption that $1,000,000 will be worth $400,000 (or whatever amount) is wrong. The only real truth in the equation is the $286.

Personally, I allow myself to use the assumptions to help plan for my retirement. But, I strongly recommend that if you choose to use the assumption that your portfolio will return 8-10%, you should also assume some inflation (the average over the last 90 years is 3.4%). Otherwise, you will experience expectation inflation, and a crash when it’s time to retire.

]]> By: Flexo http://www.consumerismcommentary.com/how-to-save-a-million-dollars-at-any-age-45-years-old/comment-page-1/#comment-136099 Flexo Wed, 06 Feb 2008 16:07:59 +0000 http://www.consumerismcommentary.com/2008/02/06/how-to-save-a-million-dollars-at-any-age-45-years-old/#comment-136099 fortworthcheapo: Interesting notes about the reverse mortgage, thanks. I'll have to look into that more. fortworthcheapo: Interesting notes about the reverse mortgage, thanks. I’ll have to look into that more.

]]> By: Flexo http://www.consumerismcommentary.com/how-to-save-a-million-dollars-at-any-age-45-years-old/comment-page-1/#comment-136098 Flexo Wed, 06 Feb 2008 16:02:43 +0000 http://www.consumerismcommentary.com/2008/02/06/how-to-save-a-million-dollars-at-any-age-45-years-old/#comment-136098 Dan: Articles like these in Kiplinger's make no mention of inflation. That is not a good thing. Personal finance advisors and the "savvier" media talk about the future value of $1,000,000. In 30 years and a 3% inflation rate, that $1,000,000 will only be "worth" the same as about $400,000 with today's purchasing power. But even this assumption is wrong. 3% inflation doesn't truly reflect the increase in cost of what you'll need. People with moderate lifestyles can't retire on $1,000,000 now; they certainly won't be able to 20, 30, or 40 years from now. Forget about $1 million and guesses at the future value of $1 million; it will be irrelevant to retirement. (But still, it will be better than nothing.) Dan: Articles like these in Kiplinger’s make no mention of inflation. That is not a good thing. Personal finance advisors and the “savvier” media talk about the future value of $1,000,000. In 30 years and a 3% inflation rate, that $1,000,000 will only be “worth” the same as about $400,000 with today’s purchasing power. But even this assumption is wrong. 3% inflation doesn’t truly reflect the increase in cost of what you’ll need. People with moderate lifestyles can’t retire on $1,000,000 now; they certainly won’t be able to 20, 30, or 40 years from now. Forget about $1 million and guesses at the future value of $1 million; it will be irrelevant to retirement. (But still, it will be better than nothing.)

]]> By: Computerdiva http://www.consumerismcommentary.com/how-to-save-a-million-dollars-at-any-age-45-years-old/comment-page-1/#comment-136094 Computerdiva Wed, 06 Feb 2008 15:38:18 +0000 http://www.consumerismcommentary.com/2008/02/06/how-to-save-a-million-dollars-at-any-age-45-years-old/#comment-136094 I love your blog, but am confused. Is this for a 35 year old, or a 45 year old? I love your blog, but am confused. Is this for a 35 year old, or a 45 year old?

]]> By: Dan http://www.consumerismcommentary.com/how-to-save-a-million-dollars-at-any-age-45-years-old/comment-page-1/#comment-136089 Dan Wed, 06 Feb 2008 15:24:51 +0000 http://www.consumerismcommentary.com/2008/02/06/how-to-save-a-million-dollars-at-any-age-45-years-old/#comment-136089 Flexo, It is terrible advice to forget what a million dollars will be worth when you plan to retire. Better advice is to quit aiming for a million dollars or any other dollar figure not based on your anticipated expenses in retirement. To properly anticipate your expenses, you have to make an adjustment for inflation. The Kiplinger article is bad advice. It gives people a lofty expectation that will not pass the test of time (inflation). Telling a 25 year-old that he/she can get rich by investing $286 per month is border-line unethical. People think in the now. They read these articles and think about what $1 million is worth now versus what $286 is worth now. Your ends justifying the means argument that you have to start somewhere is little better. Yes, we all need to start somewhere and we all need to save for retirement. Motivating people to do so by telling them they can have a million dollars with minimul effort is what is wrong with personal finance professionals today. Right now, most retirees are not millionaires. If we adjust the term millionaire for inflation, then in 20, 30, and 40 years, most retirees will not be millionaires. The only difference is that they will be disillusioned because they followed all of the advice given to them by articles like this, yet somehow their $1 million dollars isn't giving them what they expected. Flexo,

It is terrible advice to forget what a million dollars will be worth when you plan to retire. Better advice is to quit aiming for a million dollars or any other dollar figure not based on your anticipated expenses in retirement. To properly anticipate your expenses, you have to make an adjustment for inflation.

The Kiplinger article is bad advice. It gives people a lofty expectation that will not pass the test of time (inflation). Telling a 25 year-old that he/she can get rich by investing $286 per month is border-line unethical. People think in the now. They read these articles and think about what $1 million is worth now versus what $286 is worth now. Your ends justifying the means argument that you have to start somewhere is little better. Yes, we all need to start somewhere and we all need to save for retirement. Motivating people to do so by telling them they can have a million dollars with minimul effort is what is wrong with personal finance professionals today. Right now, most retirees are not millionaires. If we adjust the term millionaire for inflation, then in 20, 30, and 40 years, most retirees will not be millionaires. The only difference is that they will be disillusioned because they followed all of the advice given to them by articles like this, yet somehow their $1 million dollars isn’t giving them what they expected.

]]> By: fortworthcheapo http://www.consumerismcommentary.com/how-to-save-a-million-dollars-at-any-age-45-years-old/comment-page-1/#comment-136086 fortworthcheapo Wed, 06 Feb 2008 15:07:54 +0000 http://www.consumerismcommentary.com/2008/02/06/how-to-save-a-million-dollars-at-any-age-45-years-old/#comment-136086 >>you can’t take out loans to fund your retirement Not to complicate things to much, but this is not longer a 100% correct statement. The Reverse Mortgage actually allows a senior to get a fairly substantial amount of money out of their home in later years. You're eligible for more money the older you are. This isn't necessarily an ideal retirement plan - the product is pretty expensive in terms of fees and could only fund a portion of retirement, but it can be a useful financial tool for seniors who own their home outright and need extra funds. And I'm neither an advocate or a salesman of reverse mortgages, just trying to make things more complicated. :D >>you can’t take out loans to fund your retirement

Not to complicate things to much, but this is not longer a 100% correct statement. The Reverse Mortgage actually allows a senior to get a fairly substantial amount of money out of their home in later years. You’re eligible for more money the older you are.

This isn’t necessarily an ideal retirement plan – the product is pretty expensive in terms of fees and could only fund a portion of retirement, but it can be a useful financial tool for seniors who own their home outright and need extra funds.

And I’m neither an advocate or a salesman of reverse mortgages, just trying to make things more complicated. :D

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