Life Goes On….and on…..and on
by Richard
Check out this latest survey on the financial aspirations of Gen X and the Millennial generation.
According to a recent online survey conducted by the Northwestern Mutual Foundation, among the respondents age 30 and older, 60% indicated that they would need (want?) $1 million in order to retire comfortably.
Call it the democratization of wealth.
In this same age cohort, 27% raised the retirement bar to a targeted $2 million.
But the next generation has set the bar even higher.
85% of those surveyed between the ages of 18-29 are aiming for a million….and nearly half—45% are shooting for $2 million.
The author of the study posits that this has much to do with lengthened life spans–which have increased by more than thirty years over the past century.
This is an unparalleled achievement, due to the advancements in public sanitation, widespread vaccinations, and other medical breakthroughs.
That’s the good news.
The flip side is how to finance one’s lifestyle during a retirement span that may equal or even exceed the time spent in productive wealth building years.
My take is that the younger workers are watching nervously as their spendthrift governments lavish entitlements on the older generations, and understand inherently that the price to be paid will be both a severely diminished entitlement stipend when they finally qualify…
…and that the dollar will be so decimated by inflation and monetization of the national debt that even a six figure nest egg will be grossly inadequate.
This kind of discussion prompts many to log on to the numerous online calculators to see how well they are tracking their savings and investment goals.
Here’s one you can do on the back of an envelope.
- Calculate how much you plan on spending every year in retirement.
- Multiply that number by 25.
That’s your bogey…which will allow a 4% prudent withdrawal rate.
Then, be sure to redo the calculation every year…and don’t be shocked when I tell you that your targeted goal will constantly recede from your reach…
as anyone knows when they attempt to approach the horizon.
October 23rd, 2009 at 4:18 pm
I am not sure to what extent data from the Northwestern Mutual Foundation can be trusted.
The foundation’s ties to Northwestern Mutual Life Insurance make me question its methodology and findings — obviously they want to promote data that makes people want to buy life insurance or annuity (retirement) products.
For example, their sample was self-selected: young adults who actually care to manage their finances and use online tools to do so, thereby a self-selecting sample that may cater to better-educated, (future) high-earners and possibly high-spenders. More importantly, the data on the survey summary
http://www.prnewswire.com/news-releases/young-americans-say-they-need-millions-to-retire-64728007.html
does not even match the data on the supposed source:
http://www.themint.org/polls/index.php?id=22
The former states “A combined total of more than 1,200 respondents nationwide provided insight into their expectations for retirement” while the latter states “Total Votes: 504″. No wonder the latter page also states “This is not a scientific poll.”
As for the interpretation of the data, there’s a large gap between dreams and realistic goals. Obviously when the question is “How much money do you think you’ll need to save in order to stop working some day (retire)?” one may answer based on their dream of retiring in Hawaii, playing golf all day, and eating at Roy’s. There is nothing in the question to suggest what kind of lifestyle one envisions associated with their choice of nest egg size.
Hence I would more likely than not interpret the data as having very little to do with younger people worried about entitlements, the strength of the dollar, national debt, or such other considerations that are, frankly, over the head of an average 25 year old who can barely (unfortunately) manage their checkbook.
Like all statistics, one’s own biases have more to do with the interpretation of the data than the data itself.