How to save $1,000,000 for Retirement: The Hard Way
The current market turmoil is providing a good opportunity for individuals to assess their risk tolerance.
For younger individuals such as myself, a little short term volatility will be averaged out over the next thirty years. Thus, the common financial advice is to keep yourself 80% or more in stocks to take advantage of those years of double digit gains in the equity markets.
This is good canned advice for the average person but it lacks the individuality that makes personal finance so personal. What if I am super risk adverse? What if I don’t ever want to see my portfolio or net worth go down? Do I ever have a chance of passing that magical $1,000,000 threshold in retirement?
I will say YES, you can still have a million dollar retirement without ever having to buy a single stock.
All you need is an upper middle class income, a savings account, and time.
If we were able to continue our family’s current average cash savings of $3000/month for the next 35 years and stuff this in a mattress we would have over $1,250,000 to sleep on at retirement.
That my friends is saving for retirement the hard way; the really hard way!
The biggest risk with this approach is the risk of inflation erroding the value of your savings
So, compared to the alternative, It looks like I will be sticking with stocks for my retirement. It’s a lot easier to save $3000/year invested in stocks than $3000/month invested in cash.
February 5th, 2008 at 3:39 AM
my wife puts her ira and 401k funds into tbills!
argh.
of course, of the money we put into the ira’s in the 90s when we were in residency, her tbills have outperformed my tech stocks handily 10 years later. crap!
February 6th, 2008 at 12:44 AM
Quite an example of the tortoise vs the hare, and we all know who wins there.