You Can’t Save Your Way to Retirement Part II
I find the “advice” that comes from Pop Culture Finance to be so ridiculous that I have to point it out in these pages so that you can interpret it the right way. I already point it out in Part I. Then I come across another article and find I need to respond again. Here is what one recent article had to say about saving money for retirement:
“In order to retire on time, experts suggest that people in their 20s should be saving at least 10 percent of income each year. Those who hope to retire early should be saving 15 percent at an absolute minimum, said Benz.
And folks who didn’t start saving as young adults may need to stash anywhere from 35 percent to 50 percent annually if they realistically expect to retire early. While that might seem like an intimidating hurdle to clear year after year, leaping at chances to accelerate savings during “easy” years can balance out shortfalls during harder ones. “
So just like that all you have to do is save a certain percentage and you are home free? Is it that easy?
Then there is a commercial out that harps on saving just an additional 1% to get to retirement. The problem is that those who don’t intentionally learn about how money really works have a tendency to believe this information. They walk away with the notion that I just need to save a certain percentage and I will retire.
In reality, they may or might not be true. It works more like the following formula:
- You have to have a plan and establish goals
- You have to save
- You have to invest
- You have to manage the money for growth AND risk
- You have to monitor your progress against your goals
Saving is just one aspect of 5 steps to successfully reach your goals. Saving alone won’t get you to retirement if you are failing in the other areas.
Bob Brooks is host of The Prudent Money Radio Show, Financial Advisor, and active money manager that consults and helps people plan.