Growing up, I was always intrigued by money. I liked earning it, and I really liked saving it. In May 1997, about a month shy of my 14th birthday, I biked from our family’s home in Eden Prairie over to the Chanhassen McDonald’s – a grueling one-mile ride (uphill both ways).
When it comes to saving for retirement, is it good enough to be maxing out your 401(k) – but saving nothing above that? As with most areas of personal finance, the answer depends on your situation.
Life expectancy in 1900 was 47. In 1935 (when the Social Security program became an active policy), life expectancy had increased to 61. The Social Security full retirement age (FRA) at that time was 65, meaning that over 50% of Americans were never intended to receive any sort of retirement benefit from the Social Security program. Life expectancy is up to 78.7 as of 2017. (source: U.S. Census Bureau).
My wife and I generally agree about money. We both want to give generously to our church and other charities, we both want to save at least 15% of our income toward retirement, and we both want to have our mortgage paid off in less than 9 years (which will have been less than 15 years from when we bought our home together).
One of our primary goals at The Wealth Group is to help our clients achieve financial independence at a younger age than most Americans. Financial independence doesn’t necessarily mean you retire and quit working; it just means you no longer need to keep working or saving money for the rest of your life. But for our clients in their 50s and early 60s that begin to contemplate retirement, one of their biggest concerns is healthcare costs. Before going on Medicare, buying private health insurance is certainly expensive.
It’s silly to quote long-term spending figures as a lump sum. When you take a significant annual household expense and turn it into a 30-year cumulative lump sum dollar amount, of course it’s going to be a large number. The same could be said of food, transportation, housing, etc.
