Oh, yes – for sure. You should have said THAT in the beginning and I would have gotten you a lot faster ;) I don’t know if people are too scared to start there vs savings/cds/etc, but I agree – much better to be in the market from the get go than miniscule interest accounts.

That the thing though, if people start young AND invest in something like a S&P 500 index funds with low fees and good returns they don’t have to save 20-40%

If you run the same numbers above but change the rate of return while working from 3% to 7% that person doesn’t run out of money until they are 82. Up the percentage to 15% and it goes to 91.

The rate of return matters. People only have to save 20-40% if they start late in live or insist on saving in safe but low return investments.

Believe me, I agree with you :) We all need to be saving a lot more than we are in general. But you start with saving *something*, then you continue adding more in over time and get awesome at it. But you tell a person (esp young person) they need to save 20-30-40% off the bat and they shut down cuz it’s too hard sounding. Gotta start small and work your way up.

Yes it is better than saving nothing but it still won’t be enough. Gen Y should expect to provide 100% of their retirement; pensions are a thing of the past. They won’t get there saving in CD’s at 1% interest when inflation is 2%. They are wasting the most precious commodity of all – TIME.

I’ve gone through this with new engineers I work with who are saving 10% of their income in our 401K’s fixed value option. Plug into bankrate.com retirement planner. Age 25 – Retire 67 – Salary $65,000 – Save 10% – Expected Raise 2% – Income Require @ Retirement 90% – Rate of Return 3% – Rate of Inflation 3%.

The result is that they retire at 67 and are out of money at age 72.

it’s not ideal of course, but isn’t it much better than the alternative of not saving at all? baby steps with this stuff…

Gen Y won’t get ahead by putting money in CDs and money market funds that pay less then inflation. They will simply fall behind slower.

In fact, check out this article I just read talking about starting stuff now… pretty fascinating stuff about the internet only a handful of years ago:

https://medium.com/message/you-are-not-late-b3d76f963142

Don’t tempt me!

I’m still gonna go around telling people I am the younger generation :)