Here’s one for the baby boomers, our children and our grandchildren.

When it comes to retirement, one of the biggest regrets many baby boomers have is that they’ve waited too long to save. The failure to save has resulted in a huge long-term problem for them. It’s also created problems for this country and for the generations behind us.

[ad#Google Adsense 336×280-IA]If you waited until age 45 to start saving (let’s assume a 7% return), you’d have to put aside 35% of your pay to save an amount equal to 80% of your pre-retirement income, including Social Security.

At age 55, when most folks start taking retirement seriously, that number jumps to 79% of your income. That’s just crazy! No one can put aside 79% of their income.

Even if we lower the savings goal to just 60% of the income you had been earning, you still have to save almost 20% at age 45 and 43% at age 55.

I’m sorry, but if you’ve put off saving for your golden years, you’ll face a pretty grim future. Unless you shift to a starvation diet and put aside a huge amount of money, there isn’t much you can do. Unfortunately, you just have to bite the bullet and lower your expectations.

But, for the 20- and 30-year-olds, there’s still time. I have said repeatedly in past segments, time is the one thing the millennials are throwing away. And it’s time that can’t be replaced.

Assuming the same 7% long-term return, if you saved just 6.4% of your pay at age 25, you’d have accumulated a retirement savings equal to 60% of your prior income. If you bumped your contribution amount up to 12%, your retirement savings would be able to replace 80% of the income you had been earning.

If you’re willing to get really serious and hit the 20% savings mark, you can get out of the rat race years before 67, or full retirement age (for those born after 1960).

And when millennials argue that their student loans or even credit card debts make that impossible, the answer is still the same.

Pay yourself first every month.

When you consider the tax benefit of student loan interest and the reduced tax benefit of contributing to a retirement savings account, the numbers all point to saving first.

And considering the state of Social Security, they had better take their retirement saving strategy very seriously. We, the boomers, will probably get most of what we expect from the Social Security fund… but our kids and grandkids are looking at a very different scenario.

If something isn’t done and soon, they’ll be in serious trouble. Not only will they bear the brunt of funding our retirements, but they’ll also be in the same mess we’re facing now. And unfortunately, it’ll be a much, much worse mess.

Sit your kids and your grandkids down, and show them the facts. If you have to, smack some reality into them. They don’t have to be broke in retirement.

Yes, the situation is that bad.

Good investing,

Steve

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Source: Wealthy Retirement