Quote:
Originally posted by turbo6bar
$4000 per year, or 10% of $40k/yr combined income x 30 years @ 12% return (standard mutual fund) = $437k adjusted for 3% inflation, or $1,000,000 without inflation.
$437k * 6% income fund = $26220
$26220 / 12 months = $2185/month monthly income
This is a bare-bones calculation using only 10% savings rate and 30 yrs of compounding. Even for the poorest Americans, a percentage saved each year, compounded over time = a modest retirement. So, I fail to see the great benefit of Social Security.
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$40k isn't the "poorest americans" - it isn't far below the median household income, plus someone's ability to save $4k/month declines pretty quickly below that $40k.
Owning your own home can help, but over 30years you'd be lucky to beat inflation by 5% (ie, say 8%).
Mutual funds don't get 12% average - I've seen numbers more like 6-7% real (<10% nominal).
And every little percent helps.
I guess at the heart of the problem is the statement above "I consider it an entitlement if 90% of people get out more than they put in". This tends to suggest that it is very very difficult for lower income people can ever save entirely for their retirement...