Did you see this headline in the Washington Post – Millennials May Need to Double How Much They Save For Retirement? Did it scare you? Here’s why it shouldn’t. If you focus on the title you’re probably thinking. ”Double?? How in the world am I going to double what I’ve put in retirement???”
The good news is…
you don’t have to double what you are putting away now to potentially double what you end up with in retirement. Read through the article and they recommend putting away 10% or 15% or maybe 20% or even 25%. Here’s the thing 10% to 20% has been a pretty standard recommended range for as long as I’ve been paying attention (about 15 years). 25% is higher than I’ve heard before, but only 5% more than the upper range – not double.
So why does the title say you need to double your retirement and then the article recommend a relatively slight increase in saving?
Because of the miracle of compound interest, your investments grow exponentially– small changes now mean big differences later. If you have taken any of my workshops or webinars, you’ve heard me explain how that works. You can check out what it might look like if you save 15% vs 10% of your income over the next 30 years, if you get the lower returns the article predicts.
Also another point to note about these type of articles – when it comes to predicting the future remember this saying my dad taught me “Nobody knows nothing.” Seriously, Millennials are many years away from retirement and nobody knows what will happen to that stock market or the economy in that time. Just put away as much as you can afford and then forget about it.
Actually I take that back, challenge yourself to put away 5% MORE than you think you can afford. I’ve found most of my client can do this and it will be easier than you think. So my conclusion – don’t worry about double, just worry about 5%. That’s not so hard.