The Best Ways to Boost Your Retirement

With the S&P 500 still down more than a third from its 2007 high, we're all a little unsure about our retirement plans these days. So it's time for some good old-fashioned elbow grease. A little effort now should make for a lifetime of security and peace of mind. And the first step is to run your numbers through financial calculators to estimate whether you'll have enough saved to kiss the boss goodbye. (Metaphorically, of course.)

The calculators' answers are important information. But what's even more useful is changing the variables to see what most improves your chances for success. A retirement plan has a lot of moving parts — how much you save, where you live, when you start taking Social Security benefits — and some decisions will have a bigger effect on your nest egg than others.

The factors that have the biggest impact on a retirement plan vary from person to person. But to demonstrate how you can fiddle with your factors to analyze your own plan, let's examine the retirement prospects of a hypothetical worker — whom we'll call Hilda, as I'm a sucker for good German names — and see how dialing her numbers one way or the other changes her projected retirement income. Here are Hilda's particulars:

  • Age: 55
  • Marital status: Single
  • Current income: $60,000
  • Desired retirement age: 65
  • Desired retirement income: $45,000
  • Estimated age at death: 95
  • Current savings: $100,000
  • Annual contributions to retirement accounts: $6,000
  • Assumed annual return on investments: 8%

For our analysis, we'll use the “Am I saving enough? What can I change?” calculator found among the retirement calculators at The Motley Fool. Once you've entered your numbers and hit the “results” button, the calculator provides the number of months that it estimates your savings will last given your desired retirement income. In Hilda's case, here's the calculator's analysis: “Your living expenses after retirement will be fully funded for 127 months.” Divide by 12, and you see that her money is expected to last 10.6 years. Unfortunately, that's not good enough. If she wants to retire at 65 and expects to live until 95, she needs her money to last 30 years, or 360 months.

So what should Hilda do? Here are her options and possible outcomes, adjusted a single factor at a time.

Save More
Hilda's current savings rate is 10% of her income. What if she ups that to 15%, or $9,000 this year? According to our calculators, that will make her income last 155 months — an additional 2.3 years. That's a fine first step, but it still has her running out of money in less than 13 years.

Let's say she, through a drastic lifestyle reduction, managed to contribute the maximum to her 401(k), which in 2009 is $22,000 for someone age 50 and older. That would supersize her portfolio enough to last an estimated 322 months, much closer to the 360-month mark. But she probably can't save 36% of her income. She'll have to look at other options.

Spend Less in Retirement
What if Hilda decides she can live on a retirement income of $40,000 instead of $45,000? After all, she'll no longer be stuffing her 401(k) or paying Social Security and Medicare taxes (7.65% of each and every paycheck), and her income-tax bill will drop, too. Maybe she'll also have eliminated her mortgage by then.

Dropping her annual income requirements by $5,000 adds 51 months (4.3 years) to her portfolio's estimated lifespan. Not huge, but not negligible, either. However, Hilda feels this would be cutting costs a little too close. She wants to look at other possibilities.

Retire Later
What happens when Hilda continues to save just 10% of her income but retires at 68 rather than 65? In that case, she'd have three more years of saving, a higher Social Security benefit (because of her higher lifetime earnings and her beginning benefits later), and she'd need her money to last just 324 months.

In this case, her money would last 255 months, or 21.3 years. By retiring three years later, she's doubled the longevity of her portfolio. But it still won't last until age 95. However, if she retires just one more year later — at 69 — the calculator estimates her money will last longer than she will, which is the goal of any retirement plan.

Work in Retirement
Unfortunately, Hilda can't stand the thought of working full-time for more than another decade. However, she's open to the idea of working part-time for the first five years of her “retirement.” If she earns $30,000 in each of those five years, her portfolio's life expectancy improves from 127 months to 237 months, or almost 20 years. That doesn't get her to age 95, but it's a significant improvement. In fact, for every year she works part-time in retirement, she adds about two years to the estimated endurance of her portfolio.

Quick note: Because Hilda's “full retirement age” for Social Security purposes is 66, she shouldn't begin taking Social Security until then if she's still working. When you begin benefits before your full retirement age but then earn work-related income, your benefit can be significantly reduced.

 

Tap Home Equity
There are a few ways to use home equity to boost your retirement. Let's see how Hilda could add these to her calculations.

First, let's assume that she no longer needs her family-sized home. She actually has some equity in the home, so she sells it, buys a smaller home, and comes out with an extra $50,000. Realistically, given the state of real estate these days, it would take at least a year to sell her house and actually get that $50,000 into her hands to invest. If it earns 8% a year, it would add 58 months — almost five years — to the longevity of her savings. That's a decent-sized boost, and that's not counting the lower cost of heating, cooling, maintaining, and paying property taxes on a smaller home.

The other option is a reverse mortgage, which is when a bank pays you money based on the value of your home, and you don't pay it back until you move. A reverse mortgage on a home currently worth $300,000 could provide a check of $1,200 every month that the borrower stays in the house, according to www.reversemortgage.org. Our retirement calculator doesn't have an input field for reverse mortgage, but since it operates essentially like a pension, that's where we'll add the $1,200. Input “30” in the “Years you will receive payments” field, and check the “First payment adjusted for inflation” button (but not the others). Click on the results and — voila! — Hilda's retirement is fully funded.

While that's encouraging, we should mention that it assumes Hilda's mortgage is paid off before she takes out the reverse mortgage. If she moves before she passes away, she'll have to pay off the loan. Plus, reverse mortgages can be expensive. So our preference is to put off taking out a reverse mortgage for as long as possible, perhaps using it only in the case of an emergency, such as needing in-home long-term care.

Note: There's a helpful infographic on reverse mortgage myths which can be useful on seeing if this might be the right choice for you.

Change Your Expiration Date
Of course, Hilda's original retirement plan is perfect as long as she dies within 127 months of retiring. All jokes aside, it's worth remembering that we're playing it very safe by assuming she'll live to 95. According to the Social Security actuarial tables, only 10.3% of 55-year-old women make it to 95. If Hilda's not in good health or longevity doesn't run in her family, she might assume she'll die at age 90. That doesn't change how long her portfolio will last, but it does change how long she'll need it to last.

A Mixture of the Factors
We looked at many variables in isolation, but the best solution for Hilda is to tweak several categories to find a combination of changes that she finds palatable. For example, if Hilda downsizes to a smaller home (resulting in a $50,000 investment a year from now), saves $200 more a month, delays retirement to age 66, and works part-time for the first two years of her retirement, her money will last until she's 95. Considering all her options, Hilda decides these are adjustments she can live with.

The Bottom Line
Retirement calculators are very handy tools, but they're not crystal balls. The results are based on many variables — such as inflation, investment returns, and Social Security benefits — that we can't predict and could turn out worse than expected.

How should you handle this uncertainty? Run your numbers once a year, using updated account balances, savings or cd rates, and benefits projections (for example, put in the estimated Social Security benefit found in the statement you receive in the mail three months before your birthday each year).

Also, different calculators provide different results, so don't rely on just one. For additional opinions, check out:

Despite their shortcomings, retirement calculators do a good job of estimating the value of one decision over another. For Hilda, the variable that had the biggest impact on her plan was retiring a few years later. But it will be different for other people. As one example, boosting a savings rate from 10% to 15% would have a much bigger payoff for younger investors than it did for Hilda, who was already within a decade of her target retirement date.

What will provide the most power to your plan? There's only one way to find out. Visit a financial calculator and start plugging away.

More about...Planning, Retirement

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Generation Y Investor
Generation Y Investor
10 years ago

I’m interested on your feelings on whether or not young retirement investors should be including social security in their retirement calculations?

I currently save and invest enough that I hopefully won’t need SS benefits to survive. So if they are still around in 40 years than it’ll be a bonus for me. But, then there’s the other camp of people who argue that the system will still be there but we’ll just have reduced benefits. It’ll be interesting to see what they do.

-Gen Y Investor

Kevin
Kevin
10 years ago

This was an interesting article. In my own analysis of my situation, I’ve found that the single most important variable is the assumed rate of return. In your example, Hilda is only 10 years away from retirement, so it wouldn’t make as much of a difference. But I think for most people with 20 or more years until retirement, the truth is that the rate of return is the single most important factor. I can wiggle my retirement date back and forth by a few years, or change my annual savings rate by a few percent, and the end result… Read more »

JonasAberg
JonasAberg
10 years ago

The problem I have with retirement calculators, is that you’re supposed to estimate how much money you will need.
For me, retirement is over 30 years away. How could I possibly know what living costs are in the 2040’s ?!

Susan
Susan
10 years ago

If Hilda is already 55 and either has shifted or will soon shift a considerable portion of her money away from stocks, is it still realistic to assume an 8% return on her money?

Tim
Tim
10 years ago

i’m not sure what it means to be retired. I couldn’t sit around doing a hobby all day for the rest of my life. I will work in some capacity until my limbs fall off. I mean, we enjoy our lives already: we enjoy our work, we enjoy our hobbies, we’ve seen and done all that, and live a lifestyle we enjoy. I’m not sure what we could do any different in retirement that we aren’t doing now.

The Incidental Economist
The Incidental Economist
10 years ago

Very sound advice. It reinforces the idea that one should revisit one’s plans regularly. Retirement planning, and investment planning in general, is subject to error due to changing economic and financial conditions. One can’t really set it and forget it. Reassessment every year or two is a good idea.

Manda
Manda
10 years ago

I tried the “am I saving enough” calculator. Unfortunately it was so complicated I had to give up. I don’t even know what some of the boxes were referring to.

Broadcast Thoughts
Broadcast Thoughts
10 years ago

This is where Monte Carlo Simulation comes into play. You control your inputs such as retirement age, amount saved per year then you apply random distributions to factors such as longevity, inflation, ROI’s, even living expenses. Run a few million trials and you will quickly see the probability of your inputs building a nest egg large enough to outlast your lifespan. Many of these calculators just provide a point estimate. That’s all well and good but as the past few years have deomonstrated you can’t always expect 8% return on your money every year. Simulators, when set up properly, can… Read more »

Kevin@OutOfYourRut
10 years ago

I’d like to emphasize the recommendation about working into your retirement years. Unless you’re wealthy apart from retirement planning, you probably won’t be able to accomplish a full retirement in the way most of us envision it. There’s a basic math issue here in that unless you have investment skills that are well above average, it’s unlikely that you’ll be able to save enough in a typical 40-45 years working life to fund a 30 year non working period, at least not based strickly on investments. Investment returns are unpredictable and bear markets do happen–we’ve had two big ones in… Read more »

Erica Douglass
Erica Douglass
10 years ago

“Realistically, given the state of real estate these days, it would take at least a year to sell her house and actually get that $50,000 into her hands to invest.” Uh…in every part of the market, reasonably-priced houses are flying off the MLS. I read about an REO in Orange County, CA recently (kind of a dump, even) that had over 60 offers. The key is “reasonably priced.” You aren’t going to get what your house would have fetched in 2005-2006. In some places, you may not even get half that! If your house is on the market more than… Read more »

Jessie
Jessie
10 years ago

I am 40 years or more until retirement, so these online calculators do very little for me. It’s impossible to predict what rates of return will be like over the course of the next four decades.

So what do I do then?

I put a consistent $75/bi-weekly into my RRSP (with ING) once that sum is large enough, I will see about investing it somewhere. I am hopeful that I will be able to join my company’s pension plan (either this year or next) and that will significantly boost my savings.

Tyler@FrugallyGreen
10 years ago

I save diligently for retirement, but after spending a lot of time thinking about it, I don’t think I want to retire. I don’t want to spend 40 years toiling away to just end it all and kick my feet back. Instead, I think I would rather find the work I love and am meant to do, throw away concerns about the money that could come with it, and enjoy a very early semi-retirement that lasted the rest of my life. I would spend half my time doing what I love, and the other half of my time…doing what I… Read more »

Four Pillars
Four Pillars
10 years ago

Pretty good post. As someone mentioned – will a 55 year old have all their money in equities? Those calculators can be fairly detailed and really only apply the closer you get to retirement. I used to spend a lot of time trying to do a lot of fancy retirement calculations but there are so many variables for people in their 40’s, 30’s, 20’s that it’s almost pointless. Variables such as: Investment rate of return (as noted) Savings rate Life changes. This is the big one – if you are quite young then you might just be starting your career,… Read more »

Kevin@OutOfYourRut
10 years ago

Tyler (12)–AMEN!!! “You retire, you expire”, as the saying goes.

I don’t know where this idea of retiring to play golf or shuffleboard or what-have-you, ever came from, at least in regard to the middle classes. Even Social Security was set up to be a supplement for lost wages due to old age, not a formal retirement plan.

How did we go from that to living a life of splendid nothingness for 1/3 of our lives???

Financial Plan Pro
Financial Plan Pro
10 years ago

I second the comments about not wanting to retire – I think my goals around retirement are similar. I want to find something that is sustainable as far as lifestyle goes and that I love doing – and do it forever. Do I want to work 60 hours a week until I die? No way! Also, I think it would be good to discuss some of the pros and cons of the suggested options here. For example, reverse mortgages. They’re pretty bad news, and they’re often a product used to prey on elderly people, who, when they die, are basically… Read more »

Rob Bennett
Rob Bennett
10 years ago

The single most important factor that affects the long-term success of a retirement plan is the stock valuation level that applies on the day the retirement begins. Extensive research has been done on this question and numerous big-name experts have agreed that it is impossible to plan for a retirement effectively without considering valuations. Yet this article links to a retirement calculator (FIRECalc) that contains no adjustment for the valuation level that applies on the day the retirement begins and thus gets all the numbers wrong. This is not good. Millions of retirements are going to fail in days to… Read more »

Kevin
Kevin
10 years ago

@Rob Bennet: “The single most important factor that affects the long-term success of a retirement plan is the stock valuation level that applies on the day the retirement begins.” I’ll ask you the same question I ask you every time you post this market-timing drivel (and that you have yet to answer): How are you supposed to know if the market is over or under valued at any given moment? I know you’ll come back and say “The P/E 10”, but I’m looking for something specific. What’s the exact value for the P/E 10 above which the market is clearly… Read more »

Brent
Brent
10 years ago

Something that I hear a decent amount about that I haven’t heard mentioned is forced retirement. My concern is that companies actively try to remove people that are close to “retirement age” and are much less likely to hire ones that are close to that. It may not be a matter of wanting to work later in life, it might be ability. For me most all of these calculators are absolutely useless for real retirement. They get me in a ballpark region, but the variables have too much range for a predictable outcome. If you are early in your life… Read more »

Craig
Craig
10 years ago

Good tips but that is a different situation than what the Gen Y is going through now. Because taxes are going to increase and costs up with salaries remaining neutral. We would like to save more and take the good advice but it is unrealistic in most cases.

Rob Bennett
Rob Bennett
10 years ago

Until you can answer this simple question (which I and many others have posed to you REPEATEDLY), your theories on market timing will never have any credibility. It may be that they will never have credibility in your; eyes, Kevin. I know that they have credibility in the eyes of hundreds of others because they have told me so. If you want to read a tiny sample of the extremely positive comments I have received, please go to the widget on the left-hand side of my blog called “People Are Talking” and you will see dozens of them (with links… Read more »

Lesley
Lesley
10 years ago

To all those who say they don’t WANT to retire, just remember that you may not have a choice and you need to plan for that possibility. I’m currently watching it happen to my parents, they recently turned 60 and my dad was diagnosed 1 year ago with a form of dementia. He had every intention of working full-time for a few more years and then doing free-lance work (he was an electrician). Instead, he is now unable to work, and my mom’s full-time job is now caring for him. They didn’t plan for this sort of scenario at all,… Read more »

Corey@KismetPlan
10 years ago

Thank you for the great article. I really like scenario analysis of this type and like seeing the impact of the decisions laid out nicely like this. I’d like to mention the importance of getting started saving early. I’m sure Hilda is in a better position than many folks her age, since she has 100k in the coffers at this point…but she really should have looked for some advice 5, 10, 20 years ago and she could have made minor adjustments to her plan for greater impact….behold the power of compound interest. For you younger readers out there, please get… Read more »

Kevin
Kevin
10 years ago

@Rob Bennett:

“The fair value P/E10 level is 14.”

Wow, I’ve gotta admit I’m surprised. I honestly didn’t expect to ever get a solid answer from you. Touché.

fern
fern
10 years ago

Very, very nice post. It actually contained useful information and thoughtful commentary, something often lacking from many PF blogs that appear to be ad hoc ramblings of zero interest. I might add that if your retirement plans at all vary from what’s considered “standard,” don’t rely too much on the SSA estimates of your retirement benefits. For example, I hope and plan to retire earlier, at age 60, so i think it would be a mistake to rely on the benefits they estimate. That being said, it’s entirely possible to get the same benefits projected if you retire at full… Read more »

Scott Lovingood
Scott Lovingood
10 years ago

Two quick comments. I notice that inflation is not accounted for in the scenario. Future inflation will have a huge effect on anyone’s retirement plan. Do you assume 8% market return above inflation? If you do that is a large return. Do you think equities will perform at that level for the next decade? Do you believe in reversion to the mean? If you do, then the performance of the stock market for the next decade or so will be much below what we have had from 1980s to 2000. It will be much more like what we have encountered… Read more »

Little House
Little House
10 years ago

What if you choose not to retire? For instance, you decide to run a part-time business, maybe blogging, designing gift cards, or helping other elderly people get around town even if you partner with them on the metro? I am only concerned about my very late senior years when I can’t drive, can’t feed myself, or can’t take care of myself and have to hire someone to care for me. How do you figure out how much you’ll need for this? How long with these services be needed? How much will these services cost? This is really my greatest concern.… Read more »

fern
fern
10 years ago

Contrary to what someone else said, i think Hilda was in pretty bad shape to be 55 (!) and only have $100K in savings.

David@Dinks Finance
10 years ago

@ #3 “The problem I have with retirement calculators, is that you’re supposed to estimate how much money you will need. For me, retirement is over 30 years away. How could I possibly know what living costs are in the 2040’s ?!” I have trouble with this as well. While we have to plan SOME way, it’s difficult to know what living expenses will be. How will inflation factor in? Will there be certain medical advancements or technological advancements that become necessary that we really can’t factor in? Obviously those who are retirees today never envisioned the world of cell… Read more »

Stevelle
Stevelle
10 years ago

One more voice criticizing the choice of going with ‘8%’ in the case study. That is absurd. Not only is it above the long-term average for a reasonably balanced portfolio after fees and expenses, but risk tolerance should be significantly lower at retirement-minus-10-years than the average long-term portfolio.

This topic is complex enough that the comedic effect of treating the online calculator like a Ad-Lib form is potentially harmful.

chacha1
chacha1
10 years ago

Re: making calculators work far in advance … history is a good start. There is never a guarantee that stock-market historical rates of return will apply in the future, but it’s reasonable to assume that if you have 30 years to plan for retirement, you can estimate a 7 to 8% annual rate of return on your stock portfolio. If you have less than 30 years, you want to hedge this bet by not sinking everything into the stock market. As to inflation, it is reasonable to assume that the cost of living will increase by 2 to 3% annually,… Read more »

StackingCash
StackingCash
10 years ago

I’m also another who hates the simplistic 8% ASSUMED rate of return. How about I give you my experience of a NEGATIVE 1% rate of return. Yes, I was duped into poor investments. I was so swayed by everyone and everything telling me buy and hold because in the end you will get that 8% rate of return. Also I’m beginning to question those who say shares matter more than price because the more shares you have the more money you can lose. I hope everyone learns from my mistakes.

Beth
Beth
10 years ago

@ Lesley — you’re right! I’m shaking my head as I read these comments about working well past “retirement age”. I think a lot of people over estimate how good their health will be and how much free time and energy they will have. (In my parents’ case, much of their retirement has been occupied caring for their parents). I’m worried about saving enough for retirement, but I’m also focusing on things like eating well and exercise so I can try to delay the onset of illness or disability. (Statistically speaking, we live ten or eleven years of our lives… Read more »

Tim
Tim
10 years ago

@Lesley and @Beth, doesn’t that just prove the point? I’m so confused. I think I have early onset of dementia, at least mad cow. I don’t think the “experts” ignore health costs and issues in the calculations, at least what i’ve read. You do have to factor in the costs of not being able to work and increased health costs.

E
E
10 years ago

Like Beth and Lesley have said, I don’t plan to stop working but I plan in case I have to stop working. Retirement savings, disability and long-term care insurance, and maintaining my present health and fitness are all factors.

Calculators are fun to play with, and maybe they can give some general idea of what to expect, but for most practical purposes I find them pretty useless.

Lesley
Lesley
10 years ago

@Tim, it proes the point of saving NOW, when young. “Hilda” is too late for that, all she can do is make the best of her current situation. But I am seeing a lot of people posting that they plan to continue working into their retirement. As long as they are planning to save enough anyway that they only work because they want to, then fine. Myself, I intend to have enough saved up so that I do not have to work past 60, even being conservative, and hopefully not past 55. Not to say that I won’t continue to… Read more »

Beth
Beth
10 years ago

@ Tim — Sorry, I think I wasn’t clear in my last comment. I didn’t mean that experts weren’t financially planning for disability, but rather that we’re not doing enough in other areas of our life to prepare for it. Most people I know are more worried about their money than they are about their health. It the goal isn’t necessarily about living longer, but about enjoying more years of health. Anyone who is counting on working past 60 or 65 as part of their retirement is going to need good health. Like E, I’m not counting on working past… Read more »

Kevin@OutOfYourRut
10 years ago

We can talk a lot about what you should do for retirement when you’re young, but there are an awful lot of “Hilda’s” out there who are not too many years away from retirement, and not in any way optimally prepared.

I think that discussions of the imperfect situation are really instructive to the largest number of people. Statistics indicate that the vast majority of people are financially well short of the golden retirement they’re hoping for. But that shouldn’t mean that their fate is hopeless. There’s lots that can be done.

Tim
Tim
10 years ago

@Beth, I understood you…I fully expect to be shadow boxing along the highway once the mad cow really gets to me. i probably won’t remember that i buried all my money in a pelican case under the oak tree at 13 Sycamore St, Hartford, CT 06033. i hope one of you fell GSR’ers will remind me when the day comes.

Chris
Chris
10 years ago

I think that, if I was Hilda, I would be doing my level best to live today on the $45k that she thinks she can live on in the future and be saving that other $15k toward that future day. That accomplishes 2 things: (1) makes her face reality about the reality of living on that much income (2) saves 150% more than she “currently” is saving in the example and gets her much closer to the $22k contribution limit that drammatically improved her situation. I would much rather know at today that I cannot live on a certain amount… Read more »

E
E
10 years ago

@kevin #37, word. My husband is one of those people. He is 51 with no savings and a fair amount of debt. There is no retirement for him. If he becomes unable to work it falls to me – another reason for me to save as hard as I can and plan plan plan. On the plus side, he will probably be able to collect social security, while I (35) most likely will not.

SJ
SJ
10 years ago

Paying off my house early is a cornerstone of my retirement plan. (I already contribute to 401K to get matching employer funds, have an emergency fund, and put $ aside for equities.)

Where does everyone else fall on this?

I’m curious how many people are focused on paying off the mortgage entirely v. how many people pay as much extra as possible and plan to sell current house, pocket equity, and downsize.

Please note that I don’t think one way is better than the other. I’m asking just b/c no one has really mentioned either way.

Julie
Julie
10 years ago

Doesn’t it seem that expenses in retirement go from high (hobbies, travel) to low (slowing down physically but still living at home) to high again (end of life care)? To any retirees out there, am I right? How does one plan for that?

fern
fern
10 years ago

To SJ, yes, paying off my mortgage prior to retirement is a must, IMO. I am 50 now and will have mine paid off in 6 more years, based on my aggressive prepayments, which make special sense now with such low interest rates. I hope that between age 56 and 60, when i plan to retire from f/t work, i can really rev up my savings rate since i won’t have that mortgage anymore.

Penny
Penny
10 years ago

8% rate of return? When was this written? Do you have some crystal ball? I think the article is well-written, but the realities of the unexpected are almost impossible to calculate. Thanks for a formula, but the variables are the problem.

Brian
Brian
10 years ago

What a great post! Individual’s retirement lives are longer today than they were yesterday with life expectancies ever expanding with advances in medicine. With this in mind, investing for a 20-25 retirement life forces advisors to take a hard look at asset allocation. Investing in fixed income won’t get you there, for your early years in retirement you must remain, at least in part, in equities. @[email protected]’s commented, “I’d like to emphasize the recommendation about working into your retirement years… In addition, working in retirement can have an incredible impact on your retirement, even if only part-time. Let me explain,… Read more »

prodgod
prodgod
10 years ago

While I’d probably like to keep working into my “golden” years, the reality is there are not very many elderly people in my line of work. Therefore, If I want to (or more likely NEED to) continue working in old age, it will be as a Wal-Mart greeter, or something along those lines. My point is: yes, you may INTEND to keep working, but that doesn’t mean you’ll be wanted as an employee. Just something to consider. ALSO, I often read about the benefits of compound interest. All fine and good until a market crash wipes it all away. I’m… Read more »

Kevin@OutOfYourRut
10 years ago

Prodgod (46)–AMEN on the small business! Most people only think they’ll be able to retire, based on assumptions of overly generous rates of savings, investment returns, social security and pension earnings. But there’s this traveling companion called inflation that can turn those projections of seven figure 401k’s into dust in short order. The only way to deal with that will be to have a current source of income to make up the difference. It’ll be really good to have a business or second career planned in some field that you enjoy because it’ll be hard enough working in your 60s… Read more »

tlw
tlw
10 years ago

To [email protected] and others who were wondering about the 8% rate of return: You should not have paid attention to this rate of return. Soon the financial advisor community will talk about the returning of 12% rate of return which means your investment will double in 5 years. The key take away message is: put more in your 401k if your rate of return is not what you expects, e.g. if your rate of return is -35% (like in 2008), just simply put more saving to make up for the loss. I think this should become the new motto for… Read more »

Aaron Dalton
Aaron Dalton
10 years ago

There could be a Catch 22 here. Working hard, postponing retirement and cutting discretionary expenditures to the bone could allow Hilda to save enough to enjoy 30 years of post-retirement life. But the added stress might give her a heart attack at 66.

Mark
Mark
7 years ago

If you are older then 40 you must start take care of your retirement.

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