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Human lifespans are longer than ever, Social Security and other pension programs will not be around 30 – 40 years from now in nearly the same capacity if at all that they exist currently. There is nobody to ensure that you will have enough money to retire unless we invest in our own future. The old adage of saving 10% of your income is no longer enough to take into account the inconsistencies of the future, the new recommendation I read on a CNN Financial site was that a minimum of 15% of your salary should be put away into diversified investments if you want to maintain the same style of life when you retire at 70 years old.
Note: This was based on 40 years of saving 15% of your annual salary to maintain the same standard of living.
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Also 70 is the new retirement age, no longer is 55, or even 65 considered the forecasted retirement age anymore. I don’t know about my readers but I want to retire long before 70 because I just think your quality of life at 70 generally is much less and you can’t anticipate how many years you will have left. I have to consider the average lifespan of 78 years means that if I retire at 70, then I will have average of 8 years to enjoy my retirement life. If I retire at 65, then at least I would have 13 years on average before hitting the average age.
Likely, lifespan will increase even further with the upper middle class and wealthy having average life spans into the 90’s within 30 years from now, I still see the affluent, educated, wealthy having higher lifespans due to generally affording better medical care and paying more attention to medical health and issues. The other side of the coin is that let’s say you were to retire at 70 years of age but you would live until you were 105 years of age, can you build enough savings and retirement to live 35 years without depleting your retirement fund? Considering that CNN Financial article once again said the average person will need $220,000 in finances just to cover their medical costs in retirement, and this doesn’t include that Medicare and other programs provide benefit.
Like it or not, unless you make a humongous salary or are blessed with family wealth or inheriting large sums of money it will be up to you to carve out enough income to support yourself and possibly your spouse through retirement. Almost gone are the days where one person can stay in one job for decades or work one job and still put away enough to retire, most have to afford a 2nd part time job and this is where some sort of entrepreneurialism can help and one of the reasons why I have taken up blogging over the past few years.
Another way is simply scaling back your lifestyle and living within 50% of your salary and income means. Just because you can afford brand new high end car leases/purchases or houses just under qualifying as mansions doesn’t mean you should. Live only with what you must to enjoy your current situation and think minimal, put as much away as possible and always make sure you build a nest egg to absorb at least 1 year of unemployment if you can just in case.
This doesn’t mean one has to be frugal to the point of being unwilling to spend any money at all, but one must overcome the “keeping up with the Joneses” mentality that has become rampant in society and this mentality and way to save and be financially responsible is hopefully something I can instill in my children. Unfortunately in this life money equals security and you need to make sure that you and your family are secure.