[randomdata]

> 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?

[AmVess]

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]

$40k for dentures? She got fleeced.

$3M for retirement right now is plenty, but you have to live like an actually middle class person.

[randomdata]

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).

[jejeyyy77]

Assuming you have a paid off house and car, what else are people bleeding money on?

[jjav]

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.

[charlie0]

That's why medical tourism exists.

[coldtea]

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]

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

[hiatus]

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

[randomdata]

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]

I'm saying the article is saying they need 3 million before entering retirement.

[randomdata]

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.

[antisthenes]

> 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]

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.

[JohnPrine]

He means the article is saying they will need $3 million in today's dollars to retire

[randomdata]

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.

[ekianjo]

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

[randomdata]

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]

> 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.

[jjav]

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.