Despite financial uncertainties, retirement may be easier than you think: Forbes

An article written by an Atlanta-based certified financial planner and published Tuesday by Forbes shows that retirement may not be as difficult as many Americans think.

Wes Moss, who hosts the “Retire Faster” podcast and has over 20 years of experience as an investment advisor, offered advice that mortgage professionals and their business partners can consider when working with clients on strategies for a financially secure retirement.

Moss cited a February 2024 report from National Institute of Retirement Security that supported other recent research about a pending “retirement crisis” in the US

Notably, 79% of respondents to the survey of working-age Americans agreed there is a “retirement crisis,” up from 67% in 2020. Ninety percent say Congress and the next president should prioritize the looming shortage in Social Security benefits, while 87% say Congress should “act now” rather than later to create a funding solution.

Using some basic calculations for retirement savings over a variety of time frames, Moss attempted to reverse the catch indicated by these findings.

“Retirement uncertainty can be a scary title, but with self-discipline, some savings and time, happiness and financial freedom can be within your reach sooner than you think,” he wrote.

Moss began his argument by assuming a target of $1.25 million in “liquid, inflation-adjusted retirement savings,” along with an assumed investment return of 8% per year. Moss noted that the S&P 500 has generated an average annual return of 11.7% since 1928.

Taking a hypothetical 40-year-old American who wants to retire at age 65, Moss devised two retirement scenarios with very different starting points. One scenario envisioned the future retiree starting with nothing, while another assumed a starting point of $250,000.

With $250,000 invested by age 40, this person wouldn’t need to save anything else to reach their goal of $1.25 million. Assuming their nest egg grew 8% per year, they would actually have more than $1.7 million by age 65.

At the other end of the spectrum is the 40-year-old with no investment. That person would need to save about $1,425 a month — or more than $17,000 a year — to build up $1.25 million in savings by age 65. Moss noted that by putting aside an extra $135 a month, this person would reach the retirement finish line. a year later.

In Aprill, On a national scale published survey data show that traditional retirement at age 65 may no longer be feasible. A portion of the respondents were “pre-retirees” who showed a healthy dose of skepticism about retirement.

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“Four in 10 (41%) pre-retirees said they will continue to work in retirement to supplement their income from necessity and more than a quarter (27%) plan to live frugally to fund their goals of retirement,” Nationwide explained in its summary. “Additionally, pre-retirees say their retirement plans have changed over the past 12 months, with 22% expecting to retire later than planned.”

At the beginning of this month, a Gallup the survey raised alarms about the ability of the Medicare and Social Security programs to help a rapidly aging population. About 75% to 80% of respondents expressed doubt that either program would exist at the time they were eligible for benefits.

The Forbes article included a chart showing the required annual savings needed to reach the $1.25 million threshold based on the number of years a person has left to save. These amounts range from more than $86,000 per year over a 10-year time frame to about $11,000 over a 30-year time frame. The chart illustrates that the monthly and annual savings needed to reach this goal increase exponentially with each year a person expects to save.

“Saving for retirement can be arduous, but the math is simple: the more time the money has to accumulate, the better,” Moss concluded. “The longer a person waits to start the process, the more challenging it becomes.”