Photo: Engin Akyurt. Source: Pixabay
You’ve heard the advice: “Put enough aside when you’re in your 20s, and you can have retire with millions by the time you turn 60. Just give up your daily latte, and you, too, can be a millionaire.”
But let’s do the math. Suppose we give up that daily latte and save $5 per day. If we invest that in the stock market at the long-run return, after inflation return, we’ll end up with about $150,000. We can’t retire on that.
This is why people don’t like trust retirement “experts.” Folks may not run spreadsheet programs to make their calculations, but they’re not stupid. They know that you can’t spin straw into gold, and that you can’t turn a Starbucks latte into a huge nest-egg. Maybe if I had 80 years, then my weekly $25 could grow to over a million. But I don’t have 80 years until I retire. It doesn’t take a worksheet to know that.
Photo: Tumisu. Source: Pixabay
People have daily demands that keep them from saving very much, especially when they’re young. Rent, health care, child care, transportation – these needs trump entertainment and fancy coffee. And today most people need a smart phone and data plan. Ever try getting hired without quick access to email and a phone? It doesn’t work.
Retirement gurus who suggest austerity as the solution for young people should look in the mirror. How austere is their lifestyle? How well would it work for them if they drive a cheap clunker to their radio or TV spot, and it breaks down on the way? Are their bosses very understanding if they show up late? Didn’t think so!
People don’t save enough because they don’t make enough. The best way to get ready for retirement is to learn how to be more productive. And the best way for politicians to improve our retirement system is to stop wasting taxpayer dollars. Anything else is just froth.
Douglas R. Tengdin, CFA
Charter Trust Company
“The Best Trust Company in New England”