Let’s do the math on the American Dream. Young professional settles in to a working rhythm by age 25 and works 40 years till he hopefully retires at 65. Retiree enjoys healthy golden years and hopefully gets to put in another 20 years where he/she dies peacefully at ripe old age of 85. Because it is no longer cool for said retiree to depend on children or anybody else they must have saved enough money over the 40 years to help them remain “financially independent” till they die.
That sounds awesome. All I have to do is figure out what I want to live on and then save it. Simple right?
Well, let’s examine that from the mainstream household in America (but it works for any income level). For illustration let’s say the average household makes around $50,000 a year. That means that over the 40 years of working they make $2,000,000. If they want to remain living at a similar lifestyle in the golden years (and who doesn’t, right) they will need $50,000 for the next 20 years which equal $1,000,000. Now what a minute, am I saying that I need to save half of what I earn to make it work to the end? Yep, that’s exactly what I am saying.
In this illustration you and I need to invest in a way that our savings grow to at least half of our lifetime income and is in the bank at 65 to make our last days happy, happy, happy. Man, I wish I had paid attention in Investment 101.
In future articles we will start to look at the social, spiritual, and financial ramifications of this discovery but for now let’s just stew over it! Have a great day!