Thursday’s need-to-know money news

money-bucketsToday’s top story: What you need to save every day for a comfortable retirement. Also in the news: The three tax buckets, the 10 commandments of savings, and four boring but essential money conversations.

$82 a Day Is the Average Savings for a Comfortable Retirement
$82.28 to be exact.

What Pre-Retirees Should Be Asking About Taxes
Introducing the three buckets.

The 10 Commandments of Saving Money
Thou shall follow these rules.

4 Boring Money Talks You Need to Have
Boring but necessary.

How to Find Financial Assistance for Your Down Payment
Don’t let your down payment hold you back.

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Comments

  1. Quoting numbers to the last penny makes them seem very precise, but they’re still only as good as the calculations that produced them. The $82.28 article links to a USA Today post, which refers to “an analysis” but doesn’t cite any specific sources.

    $82.28 a day is about $2500 a month. Investing that much over 30 years, with a 7% average return (the number given in the USA Today piece) gives you almost $3 million. That should generate an income of far more than $50,000.

    What I think is going on is that they’re assuming an inflation rate of 3%, so that your 7% nominal return becomes a 4% real return. (You also have to increase you $82.28 each year with inflation, contrary to the USA Today writer’s claim that “That means it’s be a struggle (sic) if not impossible to save that much now, but it will be easier in the future as $82 won’t seem so high.”) Then your $82.28 gets you $1,682,551 at the end of 30 years, which, assuming a 3% annual withdrawal rate, generates an income of almost exactly $50,000.

    Importantly, though, all this is assuming absolutely nothing from Social Security. As pessimistic as some people are, it’s unlikely that the program is ever going to disappear entirely, so I think it’s somewhat irresponsible to scare people with the huge amounts they’d need to save based on that (unstated) assumption. At the same time, I think it can serve as an important illustration of how important Social Security really is. Who wants to have to come up with an extra $2500 each month just to have a merely average retirement?

    • Liz Weston says:

      Kristin Wong, who wrote about the calculation, has been answering comments about this…it’s an interesting discussion at the bottom of the link.