RETIREMENT Primer – #3 SAVING CASH MONEY

How much Cash do you need to retire?

  Social Security is not the widest safety net possible, and everyone is waiting see what happens when the large Baby Boomer generation empties out the nation’s S.S. funds.

The amount of cash needed in retirement must equate to a monthly payout.  Retirement savings usually needs to be involved with some investments, during life, and even during retirement.   

        We should have a look at the hypothetical situation that someone saves money, yet never use investments – we must take an ALL-CASH look at retirement…

When it comes to retiring, certain needs must be met, your greatest priority should be:

  1. Securing housing that is paid for – including future repairs – utility costs – and property taxes
  2. Securing some kind of (infallible) medical insurance plan for older-age needs.
  3. If you plan on transporting yourself anywhere, then those costs would need to be factored in (Also remember that at some point, we will probably lose the ability to drive!)
  4. Ensuring that you have ZERO debt if possible.

Sure, food is important, clothing, entertainment of some kind, but compared to the major bills mentioned above, those costs are mild, and can be reduced significantly, such as clothing (Goodwill) and entertainment ( talking, laughing, and starring at walls)

Life gets a lot more expensive
when you cease making income.

LET’S LOOK AT HOW CASH SAVINGS SPREAD OVER YOUR RETIREMENT

If you want to retire at 65
and plan to live until you’re 95
A span of 30 years is what’s ahead.

See the chart below to see the monthly payout you get from each amount of savings.

CASH ONLY RETIREMENT CHART

Saved: $50,000      —   $1,667 / year  — $139 / month
Saved: $100,000    —   $3,333 / year  — $278 / month
Saved: $200,000    —   $6,667 / year  — $556 / month
Saved: $400,000    —   $13,333 / year  — $1111 / month
Saved: $1 Million  —   $33,333 / year  — $2778 / month
Saved: $2.5 Million  — $83,333 / year  — $6945 / month

While having this amount of savings in investments will yield MUCH more money, this is the Cash-only picture of retirement savings – and the picture is bleak.  By this chart you need enormous amounts of money saved to even reach $1,000+ per month: some people would consider that very, very modest income: it’s about the same amount earned at 40/hours a week at minimum wage.

Investments can give this cash a bigger life, and your retirement income will continue to grow, even as you start taking from it.

         When you invest money for long-term growth, you earn interest (or profits), and if you use those profits back into those savings to re-invest, then the fund grows considerably in a snow-ball effect over the years.  We’ll look at examples of compound interest and life-long investment later – but taking this look at how poorly cash spreads by itself is very important.

         With investment, less cash will eventually yield a higher slot in the CASH ONLY RETIREMENT CHART above.  That means you can save $25,000 in younger years, and hopefully with the right investments, it will expand considerably when you’re 65 years old.

         Even the most passive way of investing money, like mutual funds can yield a 4% – 6% return every year. Some funds like the Vanguard funds assert 8%, but you never know.

As Big Commerce threatens to roll you over, remember, everyone is working for a paycheck, and none of them are signing their check over to you.  Do good in this lifetime, but remember, for this moment in time, with this economic structure, no one else is watching your back for you!

SAGA can save your friends! Feel free to like and share!

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