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> Given that financial advisors say that Gen Z will need roughly $3 million for a 20-year retirement — a high bar even for smart money managers If we assume a

> Given that financial advisors say that Gen Z will need roughly $3 million for a 20-year retirement — a high bar even for smart money managers If we assume a 2% inflation rate going forward, that's only ~$600,000 in today's dollars. Seems like a relatively low bar, no?

hiatus 3y ago
I think that is 3 million now, not 3 million by the end of the retirement period.
- randomdata 3y ago
  If we assume they have three million now, in 40 years when they have 20 years of retirement left, assuming it sees a 5% annual rate of return, they will have $21 million. Are you suggesting that they actually need ~$21 million for a 20 year retirement?
  - hiatus 3y ago
    I'm saying the article is saying they need 3 million before entering retirement.
    - randomdata 3y ago
      Yes, that's right. Assuming a typical lifespan, they will have 20 years left in ~40 years. Assuming a 2% inflation rate, $3 million in 40 years is equivalent to ~$600,000 today. A 60 year old holding $600,000 today does not seem like that high of a bar.
      - JohnPrine 3y ago
        He means the article is saying they will need $3 million in today's dollars to retire
        randomdata 3y ago
        The needs of retirement should scale with inflation, so that means you also need $3 million today (in today's dollars) – which is rather high. $600,000 is not too far off what is the minimum recommended amount of saving to retire for 20 years on today, so it seems they simply adjusted that figure for inflation and then forgot that the income used to build up those savings also goes up with inflation.
        coldtea 3y ago
        $600,000 for 20 years is 30K per year. They'd get by on those for the next 20 years if they were to retire today?
        jandrewrogers 3y ago
        > $600,000 for 20 years is 30K per month I do believe that would be 30k per year.
        coldtea 3y ago
        Yes, fixed.
        randomdata 3y ago
        $30K per month, even 40 years from now based on 2% inflation, is equivalent to $13k per month today. You'd have to try really hard to not get by on that. I assume you mean $30k per year. The recommended is more like $700,000, and that factors in your pension, but we're just using approximate figures here. Still, $30k per day today is quite doable for a retiree. What are you going to spend your money on, exactly? You've already purchased everything you need by that point in life, so you're just in maintenance mode.
        coldtea 3y ago
        For starters, that's the "point in life" where most medical emergencies arrive.
      - antisthenes 3y ago
        > A 60 year old holding $600,000 today does not seem like that high of a bar. Gen Z isn't 60 years old today. They don't have 600k, and for them, it is a high bar.
        randomdata 3y ago
        That's right. They have ~40 years left to acquire $3 million before they have 20 years left, assuming the typical human lifespan. Which, adjusted for inflation, is the same as someone who saved $600,000 over the past 40 years.
        coldtea 3y ago
        So, like, not so many people, and even less going forward? https://fortune.com/recommends/banking/57-percent-of-americans-cant-afford-a-1000-emergency-expense/ https://fortune.com/recommends/banking/57-percent-of-america...
        jandrewrogers 3y ago
        That article is misleading clickbait. Per the US government (BLS), the median household has ~$1,000 per month left over after all ordinary expenses. That is, after car payments on their BMWs, healthcare, iPhones, etc. The median American can afford to save considerable money but they tend to spend it on lifestyle flexes instead.
        randomdata 3y ago
        I am not sure what emergency savings has to do with retirement savings. Retirement savings are often not very liquid, so they wouldn't be available to use in an emergency, typically. And certainly some people never did manage to save $600,000 over the past 40 years, but it remains that the bar does not seem that high. Even the lowest bar will not be met by some people, but that doesn't mean the bar is high.
        coldtea 3y ago
        You think those without $1000 emergency savings have retirement savings, but they just aren't liquid enough? In any case, if you want the categories separated, here you are: In 2019, about half of American households had no savings in retirement accounts, according to the Survey of Consumer Finances (SCF). These accounts include individual retirement accounts; Keogh accounts; certain employer-sponsored accounts, such as 401(k), 403(b), thrift savings accounts; and pensions. https://usafacts.org/data-projects/retirement-savings https://usafacts.org/data-projects/retirement-savings
ekianjo 3y ago
2% inflation rate is super optimistic. You have seen the levels of sovereign debts?
- randomdata 3y ago
  Could be, but a higher rate of inflation will make attaining $3 million even easier. If inflation is 5%, they will only need ~$400,000 in today's dollars.
  - jjav 3y ago
    > Could be, but a higher rate of inflation will make attaining $3 million even easier. A higher inflation rate also raises the goalpost money you need since life will be more expensive than predicted.
coldtea 3y ago
That's not how it works. They'll need the equivalent of today's $3 million in inflation-adjusted dollars for the time they retire. What you're saying amounts to a Zimbabwean being able to retire with his lunch money AFTER the country got 1000x inflation and everybody had trillions in their pockets just to get some food for the day - based on the purchasing power of that amount before the inflation.
- randomdata 3y ago
  That would imply you also need $3 million today. Retirement will be more expensive then, but scaled in line with inflation.
AmVess 3y ago
People shouldn't pay any attention to these articles. I retired early years ago. It isn't the annual budget that one has to plan for, but the unforeseen expenses. I took care of my mom and dad for a while. He had top notch medical insurance, but no one covers mental health problems. The total for 4 years of that was just into 7 figures. Also how about that medical insurance for yourself and your family? Unless people plan on dying young, medical insurance is a huge expense. And that's just insurance, which doesn't cover all eventualities. Ambulance ride? Not covered. A quick whistle to the ER can leave you $50k lighter without trying hard. And then there's the piles of medications, many of which aren't covered. My friend's grandmother got upper and lower dentures. $40k. Dentures, mind you, not implants. Also, there's the every increasing cost of everything. Houses, cars, food, all types of insurance are seeing vast annual increases. $3 million total for a retirement is a bit of a laugh, unless that person plans on keeling over at 65.
- goo 3y ago
  $40k for dentures? She got fleeced. $3M for retirement right now is plenty, but you have to live like an actually middle class person.
  - jejeyyy77 3y ago
    Assuming you have a paid off house and car, what else are people bleeding money on?
    - jjav 3y ago
      Medical expenses like OP said. If you retire at over 65 then possibly Medicare/etc can cover some of this. But if you're wanting to retire early, it's a huge gamble on medical expenses in the US.
  - randomdata 3y ago
    If you are living like the middle class (i.e. income comes both from capital ownership and labour) then you can't possibly be retired. Retirees are those who have transitioned into the upper class (i.e. income comes from capital ownership alone).
jjav 3y ago
That 3M would be in today's dollars already, so need to adjust up for future (predicted) inflation. Note the catch "for a 20-year retirement". So if you think you might live to be 85, you get to retire at 65. If you want to retire early, you need more decades of runway thus a lot more cash saved.

hiatus 3y ago

I think that is 3 million now, not 3 million by the end of the retirement period.

randomdata 3y ago
If we assume they have three million now, in 40 years when they have 20 years of retirement left, assuming it sees a 5% annual rate of return, they will have $21 million. Are you suggesting that they actually need ~$21 million for a 20 year retirement?
- hiatus 3y ago
  I'm saying the article is saying they need 3 million before entering retirement.
  - randomdata 3y ago
    Yes, that's right. Assuming a typical lifespan, they will have 20 years left in ~40 years. Assuming a 2% inflation rate, $3 million in 40 years is equivalent to ~$600,000 today. A 60 year old holding $600,000 today does not seem like that high of a bar.
    - JohnPrine 3y ago
      He means the article is saying they will need $3 million in today's dollars to retire
      - randomdata 3y ago
        The needs of retirement should scale with inflation, so that means you also need $3 million today (in today's dollars) – which is rather high. $600,000 is not too far off what is the minimum recommended amount of saving to retire for 20 years on today, so it seems they simply adjusted that figure for inflation and then forgot that the income used to build up those savings also goes up with inflation.
        coldtea 3y ago
        $600,000 for 20 years is 30K per year. They'd get by on those for the next 20 years if they were to retire today?
        jandrewrogers 3y ago
        > $600,000 for 20 years is 30K per month I do believe that would be 30k per year.
        coldtea 3y ago
        Yes, fixed.
        randomdata 3y ago
        $30K per month, even 40 years from now based on 2% inflation, is equivalent to $13k per month today. You'd have to try really hard to not get by on that. I assume you mean $30k per year. The recommended is more like $700,000, and that factors in your pension, but we're just using approximate figures here. Still, $30k per day today is quite doable for a retiree. What are you going to spend your money on, exactly? You've already purchased everything you need by that point in life, so you're just in maintenance mode.
        coldtea 3y ago
        For starters, that's the "point in life" where most medical emergencies arrive.
    - antisthenes 3y ago
      > A 60 year old holding $600,000 today does not seem like that high of a bar. Gen Z isn't 60 years old today. They don't have 600k, and for them, it is a high bar.
      - randomdata 3y ago
        That's right. They have ~40 years left to acquire $3 million before they have 20 years left, assuming the typical human lifespan. Which, adjusted for inflation, is the same as someone who saved $600,000 over the past 40 years.
        coldtea 3y ago
        So, like, not so many people, and even less going forward? https://fortune.com/recommends/banking/57-percent-of-americans-cant-afford-a-1000-emergency-expense/ https://fortune.com/recommends/banking/57-percent-of-america...
        jandrewrogers 3y ago
        That article is misleading clickbait. Per the US government (BLS), the median household has ~$1,000 per month left over after all ordinary expenses. That is, after car payments on their BMWs, healthcare, iPhones, etc. The median American can afford to save considerable money but they tend to spend it on lifestyle flexes instead.
        randomdata 3y ago
        I am not sure what emergency savings has to do with retirement savings. Retirement savings are often not very liquid, so they wouldn't be available to use in an emergency, typically. And certainly some people never did manage to save $600,000 over the past 40 years, but it remains that the bar does not seem that high. Even the lowest bar will not be met by some people, but that doesn't mean the bar is high.
        coldtea 3y ago
        You think those without $1000 emergency savings have retirement savings, but they just aren't liquid enough? In any case, if you want the categories separated, here you are: In 2019, about half of American households had no savings in retirement accounts, according to the Survey of Consumer Finances (SCF). These accounts include individual retirement accounts; Keogh accounts; certain employer-sponsored accounts, such as 401(k), 403(b), thrift savings accounts; and pensions. https://usafacts.org/data-projects/retirement-savings https://usafacts.org/data-projects/retirement-savings

ekianjo 3y ago

2% inflation rate is super optimistic. You have seen the levels of sovereign debts?

randomdata 3y ago
Could be, but a higher rate of inflation will make attaining $3 million even easier. If inflation is 5%, they will only need ~$400,000 in today's dollars.
- jjav 3y ago
  > Could be, but a higher rate of inflation will make attaining $3 million even easier. A higher inflation rate also raises the goalpost money you need since life will be more expensive than predicted.

coldtea 3y ago

That's not how it works. They'll need the equivalent of today's $3 million in inflation-adjusted dollars for the time they retire. What you're saying amounts to a Zimbabwean being able to retire with his lunch money AFTER the country got 1000x inflation and everybody had trillions in their pockets just to get some food for the day - based on the purchasing power of that amount before the inflation.

randomdata 3y ago
That would imply you also need $3 million today. Retirement will be more expensive then, but scaled in line with inflation.

AmVess 3y ago

People shouldn't pay any attention to these articles. I retired early years ago. It isn't the annual budget that one has to plan for, but the unforeseen expenses. I took care of my mom and dad for a while. He had top notch medical insurance, but no one covers mental health problems. The total for 4 years of that was just into 7 figures. Also how about that medical insurance for yourself and your family? Unless people plan on dying young, medical insurance is a huge expense. And that's just insurance, which doesn't cover all eventualities. Ambulance ride? Not covered. A quick whistle to the ER can leave you $50k lighter without trying hard. And then there's the piles of medications, many of which aren't covered. My friend's grandmother got upper and lower dentures. $40k. Dentures, mind you, not implants. Also, there's the every increasing cost of everything. Houses, cars, food, all types of insurance are seeing vast annual increases. $3 million total for a retirement is a bit of a laugh, unless that person plans on keeling over at 65.

goo 3y ago
$40k for dentures? She got fleeced. $3M for retirement right now is plenty, but you have to live like an actually middle class person.
- jejeyyy77 3y ago
  Assuming you have a paid off house and car, what else are people bleeding money on?
  - jjav 3y ago
    Medical expenses like OP said. If you retire at over 65 then possibly Medicare/etc can cover some of this. But if you're wanting to retire early, it's a huge gamble on medical expenses in the US.
- randomdata 3y ago
  If you are living like the middle class (i.e. income comes both from capital ownership and labour) then you can't possibly be retired. Retirees are those who have transitioned into the upper class (i.e. income comes from capital ownership alone).

jjav 3y ago

That 3M would be in today's dollars already, so need to adjust up for future (predicted) inflation. Note the catch "for a 20-year retirement". So if you think you might live to be 85, you get to retire at 65. If you want to retire early, you need more decades of runway thus a lot more cash saved.