The human desire for more seems boundless. There is always a newer model or an upgraded version of the latest gadgets to aspire to. Some pursue these upgrades with the relentless determination of a donkey chasing a dangling carrot, while others find inventive ways to sidestep their competitors.
When it comes to finances, regardless of where someone stands on the income ladder, there’s always a yearning for a little extra. A middle-income earner might believe that a $10,000 raise will fulfill their desires, only to find that another $10,000 is what’s truly needed once they have it. Similarly, successful entrepreneurs might consider $1 million in profits satisfactory, but inevitably feel that $2 million would be even better.
At its core, money is merely a vehicle for fulfilling one’s wants. However, these wants extend beyond material possessions to encompass experiences as well.
This brings us to the ultimate commodity: time. While money can always be earned again, time, once spent, is irretrievable.
Consider the tale of 16th-century Spanish explorer Juan Ponce de León. Enchanted by legends of the mythical Bimini and its fountain of youth, shared by the Arawak natives of what is now Puerto Rico, he embarked on a quest for it. Instead of discovering eternal youth, he stumbled upon Florida and passed away just eight years later.
“Myths and legends die hard in America,” remarked Hunter S. Thompson. From Ponce de León’s elusive search to today’s college graduates pursuing the American dream, Thompson’s observation remains relevant. Undoubtedly, the retirement aspirations of aging baby boomers may face a similar fate.
Accumulating Time and Money
Many Americans tend to spend their earnings almost immediately upon receipt. Currently, the personal savings rate hovers around 4.4 percent. This indicates that the majority, approximately 95.6 percent of their income, is spent on living expenses and other costs.
While most people consume their funds quickly, some choose to delay gratification for greater future security. Money, in addition to being a form of property, symbolizes time and the sacrifices made to earn it. Thus, saving money and accumulating capital not only paves the way for future consumption but also grants individuals more freedom in how they allocate their time later on.
Do you relish being overwhelmed by demanding clients daily? Do you enjoy navigating the endless stream of new and frustrating processes mandated by corporate leaders? What about the flood of emails that invades your smartphone at all hours?
By saving adequate capital, you can reclaim your time for more fulfilling and enjoyable pursuits. You may embark on personal projects, chase after your adventures, or simply lounge under the shade of a majestic oak tree if you desire.
Of course, building capital requires discipline and perseverance—traits that not everyone embraces. Many find the sacrifices of self-restraint disagreeable. Furthermore, isn’t it the government’s role to safeguard your money?
Regrettably, this assumption has led many to wander astray…
The Errant Miscalculation of a Generation
After laboring for 40 years or more, many baby boomers find themselves lacking in retirement savings. According to the New York Times, “Seventy-five percent of Americans nearing retirement age in 2010 had less than $30,000 in their retirement accounts.”
According to a quick calculation, this amounts to saving slightly over $2 a day throughout a 40-year career—far from sufficient. So, what is the issue? Isn’t Social Security designed to cover this gap?
Unfortunately, the answer is no. Social Security alone will not suffice…
“To maintain living standards into old age, we need roughly 20 times our annual income in financial assets. If you earn $100,000 at retirement, you require around $2 million in addition to what you will receive from Social Security. If you have a partner generating income and a paid-off home, that figure may be lower. This statistic is startling, considering that most individuals aged 50 to 64 possess little to no funds in retirement accounts and will rely solely on Social Security.”
Could an entire generation have miscalculated so significantly?
The myth persists that everyone is entitled to a comfortable retirement supported by the government, a notion that is likely to fade harshly for most baby boomers. The math tells a clear story. Younger workers may have the opportunity to alter their saving behavior… but not everyone will take that chance.
Sincerely,
MN Gordon
for Economic Prism
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