When you follow what everyone else is doing with their money – beware!
Really? Why?
Let’s take a look. According to the Economic Policy Institute in 2016:
- The median amount of retirement savings for all families is $5,000. Note that just under half of American families have no retirement savings at all, the few super-savers pull the average up.
- Among those families that actually have any retirement savings, their median amount is $60,000.
- For one more reference point: just before entering retirement, when families have the most retirement savings, the median for those with retirement savings is only $163,000.
Let’s take a look at this $163,000; is it enough money to retire on? A common withdrawal rate for retirement accounts, such that you won’t run out of money, is 4% per year. If this 4% withdrawal rate were applied to the $163,000, then your nest egg would give you an additional $6,500 per year, before taxes. This is how much you would be able to add to your social security income: just $541 per month. This small amount of income would likely make for a rough retirement. And this is why you do not want to spend like everyone else spends their money. Because then you’ll be forced to endure a rough retirement like everyone else, on a very low level of fixed income.
According to Bankrate’s annual survey on “What is your greatest financial regret?”
The number one regret for respondents was “Not saving for retirement early enough.” Out of all the possibly problems people have with money, the most painful was not saving enough for retirement. So what do you think is critically important for you to start doing today? Start your retirement savings rate at 15% of your income and slowly increase that rate as your income increases over time.