If you’ve ever read through the mainstream financial media, you’ve probably seen headlines like these:
Yes, some of them are a little click-baity, and that’s the point. They want to reel you in and read, and make you think that early retirement is entirely within your means. After all, who doesn’t want to retire in the prime of life and spend 20-30 years traveling the world and doing fun things rather than toiling away in an office or in a factory?
But all too often the advice you get from articles like these isn’t in touch with reality. Very often they make it seem like the formula for acquiring wealth and retiring early is simple: find a high-paying job in finance, marry someone who makes as much money as you, save one of your salaries, and within a decade you’ll have millions of dollars in the bank and be ready to live your dreams. It’s so easy that anyone can do it, right?
What about the husband working to support his stay-at-home wife and five children? What about the blue collar family with two incomes struggling to put food on the table in the face of rising inflation? What about the parents working two and three jobs to make sure their family can afford the necessities of life? For too many of these normal people, the advice they get from these articles is completely out of touch. But there are still a few useful pieces of advice you can glean from these articles.
1. Retirement Will Require a Lot of Money
One certainty is that you’re going to need a lot of money if you plan to retire at all, even at age 65. Too many Americans underestimate the amount of money they’re going to need in retirement. And more than half of Americans have no retirement savings whatsoever.
When you see headlines talking about saving $2 million, you may think that it’s laughable to be able to build up that kind of money. But for many middle-class households, that’s just how much they’re going to need to be able to afford to retire.
If you assume that the average household spends $40,000 a year, and that inflation rises at an average of 2.5% per year for the next 30 years, you’ll spend $1 million in the first 20 years of retirement and $1.75 million in 30 years. With the average 65-year-old expected to live another 20 years, the odds are more than 50/50 that you’ll need millions of dollars to survive.
2. Start Saving Early
It can’t be emphasized enough that starting to save early can be the key to retiring comfortably. Of course, some of the financial calculations you’ll see in the mainstream financial media just aren’t readily attainable.
For instance, if you want to save $2 million by age 40, you would need to save over $6,600 per month starting at age 22. That would imply a very generous six-figure income, which no 22-year-old is going to have.
Even saving $2 million by age 55 will require over $2,400 a month in savings. That too is outside the realm of possibility for most 20-somethings, and even those in their 30s and 40s would sometimes kill to be able to save that kind of money.
But these examples go to show that it’s crucial to start saving early if you want to be able to retire. The earlier you start saving, the more money you’ll be able to build up by the time retirement comes around.
3. Maximize Your Investment Growth
One key takeaway is that these calculations also assume a 4% annual growth rate, about half the 8% annual return that many financial commentators used to assume. That’s a nod to the reality that we live in a low interest rate environment that doesn’t offer a lot of good investment choices, and that the next decade could very well see continued subpar investment growth.
The onus will be on investors to make up for that by finding investment opportunities that can offer a return to growth levels seen in the past. That won’t be easy. And it might take a rethinking of the conventional approach to investing that dominates today, namely buy and hold investing. Rather than buying and holding for years or decades, it might end up being smarter to rotate in and out of various asset classes based on market conditions and the prospects for future long-term growth.
In the current investing environment, with stock markets overvalued and overdue for a correction, for instance, it might make more sense for investors to look into investing in alternative assets such as precious metals. Gold and silver have long been viewed as countercyclical assets, those to be invested in when conventional investments such as stocks and bonds enter bear markets. But even in good times, gold and silver can help investors maintain and grow their wealth.
Over the past 50 years, gold has even rivaled stock markets in terms of annualized growth. And over the past 20 years both gold and silver have handily outperformed stock markets. If the next 20 years end up looking like the last 20, with repeated stock market bubbles, low interest rates, and massive amounts of fiscal and monetary stimulus, we could see a repeat of gold and silver’s impressive performance versus stocks.
Start Building Up Your Retirement Savings Today
If you’re looking to protect your investments and to continue to build up wealth for retirement, it might be worth looking into investing in gold and silver. With a gold IRA or silver IRA you can invest in physical gold and silver coins or bars while still enjoying the same tax advantages as a normal IRA retirement account. You can even transfer or roll over existing retirement savings from a 401(k), TSP, IRA, or similar account into a gold IRA or silver IRA without tax consequences.
While growing a multi-million dollar nest egg may be out of the reach of many Americans, you can still save and invest enough money to give yourself a comfortable retirement and pay for food, clothing, medical care and other necessities without having to worry. Call the experts at Goldco to find out how gold and silver can help you achieve your retirement savings goals.