Whenever I hear people chatting about retirement, it always seems as if a million dollars is a magic number that will guarantee you a great retirement. Unfortunately, this is not true in many cases. In this article, I will dispel the myth about a million dollars being enough to retire on.
How Much Will You Need –
How much you will need for retirement will depend on your situation. If you’re around sixty five then a million dollars may very will be enough(just barely) to retire on. However, if you’re younger than that you will need more. If you’re around the age of forty five then you will probably need around two million dollars to retire on. At age twenty five, you may very well need to have three to five million dollars stashed away if you plan on retiring.\
Why So Much –
The main reason why you’re going to need more money is because of inflation, which can best be defined as the cost of things going up over time. A common example of inflation is a candy bar. A hundred years ago a candy bar would cost no more than a nickel, but today it can range from fifty cents to a dollar. This may not seem like much, but you must realize that we’re just talking about a candy bar here.
How about a house? A hundred years ago a house probably would cost around ten thousand dollars, but today it costs much more than that. A house may cost you one hundred thousand dollars or more; it just depends on the size and type of house that you purchase. Even if you convert dollar euro, it is still not enough. In addition, there are several factors that affect the value of properties and other assets. Inflation, taxes and other economic factors will make things even more expensive.
So if you’re going to retire in ten years, you’ll probably need between a million and two million dollars. But like I stated above, if you plan to retire forty years from now then you will probably need between three and five million dollars. Perhaps even more.
Your Expenses Will Be Different in The Future –
Some of you may be thinking that you’ll own a house in the future, so you will not have to worry about that as an expense in your retirement years. And you’re right. Unfortunately, there will be other new types of expenses. For instance, health insurance. Right now, health insurance can cost several hundred dollars or more for elderly individuals.
And it’s only going to become more expensive as time marches on. In thirty to forty years time, you will probably have to pay a few thousand dollars a month for health insurance thanks to inflation. With any luck, health insurance will be free for you when you retire. But don’t hold your breath. I doubt universal health insurance will become the norm, but one can always hope.
Also, if you decide to have children then that will also become an added expense and could affect your retirement plans. Estimates vary greatly, but many people believe that a child will cost you around four hundred thousand dollars. And that’s just one child. Also, that’s not factoring in a college education. Six to seven hundred thousand dollars is what you can expect to pay per child(including college).
The future is a long way off, and there is no telling what may or may not happen along the way. You may end up winning the lottery, and you’ll be set for life. Or you may die long before you reach retirement, which means all of your hard work will have been for naught. But one thing is for certain, inflation will always be around to make things more expensive.