You’ll Need a Million Dollars Just to Survive

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“If we are not millionaires by the time we retire, we may struggle to survive.”  

— Derek Sall

Have you ever really thought about this? Those of us that are completely ignorant of what the future will bring do not save anything for it. Those of us that are somewhat wise at least put a hundred bucks into a retirement account each month. But, a very small percentage of us start investing early and also seek out the answer to the question, “How much money do I need by the time I retire.” And, even beyond this, “Will my savings rate get me to my desired end goal?”

We are all busy in life, but there is absolutely no excuse for ignoring what will inevitably come in our future.

Inflation WILL Happen

We have all heard of it: inflation, but few of us even consider that it might have a negative impact on our retirement accounts. If you have been ignorant up to this point, please do not ignore its negative effect any longer. Instead, learn of its impact and resolve to beat it and become wealthy anyway!

Before we get too deeply into the topic of inflation, what is it really? According to Parkin and Bade,

“Inflation is an upward movement in the average level of prices. Its opposite is deflation, a downward movement in the average level of prices. The boundary between inflation and deflation is price stability.”

In a world of ever-increasing credit and a frivolous printing of money, the resources needed to buy (although somewhat figmentary) continually outweigh the products available to purchase, which then cause the value of money to decrease. It is not always an easy concept to understand, but just note that inflation happens almost every year. At the average rate of about 3.5%, our money is continually losing its power to buy goods. If it takes $100 to buy a week’s worth of groceries this year, it will cost $103.50 for that same basket of groceries next year. The year following that, the cost will increase another 3% to $107.12. And the cost only rises exponentially from there.

If your grocery bill is $100 today and you expect to buy the same amount of groceries 40 years from now, about how much money do you think you would need? Many of you would guess $160 or $170. Still others might say $250. But, each of these amounts would be too little. In order to buy the exact same items 40 years from now, you would need $395.93!!

effects of inflation chart

The Effects of Inflation on Your Retirement

Now that you have considered the effect on groceries over the next 40 years, think about what else might also increase. Clothing, energy costs, medication, gasoline, vehicles: all of these items will also rise in cost by approximately 400% as well! Pretty much anything you can think of will be about 4 times the cost 40 years from now. So, in order to retire comfortably in your old age, you will need to plan on these larger expenses!

If you were living at home with just you and your spouse, how much money could you comfortably live on? The average answer to this question would be somewhere around $25,000. You can’t do a ton on $25,000, but you could get by and have some fun once in a while. So if you are 40 years from retirement, how much money will you need each year to get by? That’s right, $100,000. So what if you had a million dollars? How long would it last?

If you have $1,000,000 and you withdraw $100,000 a year, your money will only last 12.5 years

So, if you plan on retiring when you are 65 years old, then your million dollars will only last you until you are 72.5! What if you live to be 90? What on earth are you going to do?

This is why I tell everyone that they need to become millionaires at the very least. No longer is millionaire status considered wealthy – it is going to be essential in order for you to live above the poverty level in your retirement years!

Stop sticking your head in the sand and pretending like you have plenty of time to invest in your retirement. If you are over 30 years old, your retirement fund is already a ticking time bomb. Begin investing today!

Will you have a million dollars by the time you retire?

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