… if you didn’t read it then, now would be a good time to ask yourself if you really care that weekly contributions of $34 could potentially grow to over $76,000 in 20 years, as proudly proclaimed by Fidelity?
One reader, Concojones, thinks that I have underestimated the ‘power of savings’:
Let’s not dismiss too quickly the good old save-your-way-to-retirement advice. Saving $15k/year for 40 years yields an expected $2.5M in today’s dollars (for what it’s worth: $10+M in retirement dollars), assuming your investments go up 5-6% per year after inflation.
Let’s not dismiss it too quickly, indeed. Retiring with $10 million in your pocket (albeit, ‘only’ worth $2.5 million in today’s purchasing power) is none too shabby.
The only problem that I can see – actually, the only FOUR problems that I can see are:
1. You have to be happy (well, ‘happy’ is a relative term) to work for 40 years,
2. You have to save $15k per year – easy at the end of 40 years, very hard at the beginning … and, even harder in the middle when you might be earning ‘only’ $50k (before tax) and have to put away 15% to 30% of your salary “with four hungry children and a crop in the field” [AJC: if you’re old enough to remember that Kenny Rogers song]
3. You have to average 8% to 10% return on your type of investment – but it has to be one that lets you add $15k annual increments for 40 years (which ties you to ‘standard’ products like, CD’s, bonds, stocks, and mutual funds).
4. You MUST be disciplined enough to stick to this simple strategy for the entire 40 years WITHOUT WAVERING in up/down markets: the Dalbar Study [ http://www.canadiancapitalist.com/investors-behaving-badly/ ] says a firm NO to being able to achieve anything like this rate of return.
So, great on a spreadsheet, but I wouldn’t want to bet my life on it 😉