An article written by an Atlanta-based certified financial planner and published Tuesday by Forbes indicates that retirement may not be as difficult as many Americans think.
Wes Moss, who hosts the “Retire Sooner” podcast and has 20-plus years of experience as an investment adviser, offered advice that reverse mortgage professionals and their business partners might take into account when working with clients on strategies for a financially secure retirement.
Moss cited a February 2024 report from the National Institute on Retirement Security that backed up other recent research about a pending “retirement crisis“ in the U.S.
Notably, 79% of the respondents to the survey of working-age Americans agreed that there is a ”retirement crisis,” up from 67% in 2020. Ninety percent say that Congress and the next president should prioritize the looming shortfall in Social Security benefits, while 87% say that Congress should ”act now” rather than later to create a funding solution.
Using some basic calculations for retirement savings across a variety of timelines, Moss attempted to reverse the apprehension indicated by these findings.
”Retirement insecurity may be a scary headline, but with self-discipline, some savings, and time, happiness and financial freedom may be within your reach sooner than you think,” he wrote.
Moss began his argument by assuming a target of $1.25 million in ”liquid retirement savings, adjusted for inflation,” along with an assumed return on investment 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 65, Moss devised two retirement scenarios with vastly different starting points. One scenario envisioned the future retiree starting with nothing, while other assumes a starting point of $250,000.
With $250,000 invested at age 40, this person would not need to save anything else to reach their $1.25 million goal. Assuming their nest egg grew by 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 investments. This person would need to save about $1,425 per month — or more than $17,000 per year — to build savings of $1.25 million by age 65. Moss noted that by putting aside an extra $135 per month, this person would get to the retirement finish line a year sooner.
In April, Nationwide released survey data showing that the traditional retirement at 65 may no longer be feasible. A portion of the respondents were ”pre-retirees” who indicated a healthy dose of skepticism about retirement.
“Four in 10 (41%) pre-retirees said they would continue working in retirement to supplement their income out of necessity, and more than a quarter (27%) plan to live frugally to fund their retirement goals,” Nationwide explained in its summary. “What’s more, pre-retirees say their plans to retire have changed over the last 12 months, with 22% expecting to retire later than planned.”
Earlier this month, a Gallup poll raised alarms about the ability of the Medicare and Social Security programs to assist a rapidly aging population. About 75% to 80% of the respondents expressed doubts that either program would exist by the time they were eligible for the benefits.
The Forbes article included a chart that shows the required annual savings needed to achieve 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 on a 10-year timeline to about $11,000 on a 30-year timeline. The chart illustrates that the monthly and yearly savings needed to reach that goal grow exponentially with each year a person waits to save.
”Saving for retirement can be laborious, but the math is simple: the more time money has to compound, the better,” Moss concluded. ”The longer a person waits to start the process, the more challenging it becomes.”
