While traveling recently I picked up a copy of USA Today at my hotel. Reading through the financial section, I saw an interesting question. A reader was asking how much he would have to invest per day to retire in 30 years.
I found the response online and here's what they had to say:
Investors might be surprised to hear that for the average, typical person making a number of back-of-the-envelope assumptions, $82.28 a day may be what you should be shooting for, based on an analysis done for USA TODAY by investment management firm T. Rowe Price. If you save $82 a day and invest it in a fairly aggressive but not crazy portfolio, in 30 years you could amass enough wealth to generate the U.S. average household income for 30 years, even after adjusted for inflation.
As you might imagine, there are a lot of assumptions that go into this answer. Specifically:
- It assumes retirees will need $50,000 a year in retirement
- Inflation is set at 3%
- The investor has 30 years to save and invest (of course)
- The average annual return is 7%
Those look like fair assumptions to me.
The piece also says there are many variables and this is a general response. Each person's actual number will be different based on his circumstances.
That said, the $82 at least provides a ballpark number for those wondering what they need to save for retirement.
One factor they apparently do not take into account is Social Security. The post doesn't mention whether or not it accounts for SS earnings, but my guess is that it does not. That would lower the $82 by a good amount.
Even so, the daily savings amount is almost staggering. Let's assume the real number is $50 a day. That's over $18k per year -- just to have an average retirement. Yikes!!!
Maybe assuming an 8% return is better now that we know that, huh? ;)
I never calculated a daily savings number. I just saved like a mad-man, keeping my expenses way below my income. Then again, I need to save a lot for the type of retirement I'm planning. That's why I've moved into real estate - because it can provide much of the income I need while in retirement without spending any principal.
What are your thoughts on saving for retirement and the amount needed to save per day?