Recently our
household passed an interesting financial milestone. We now have 1x our annual
salary in retirement savings (The strong market over the last few years has
helped). Evaluating retirement savings can be voodoo math, but several experts
say that you should have 1x your salary at age 30, others put that goal at age
35. Often that milestone sounded out of reach, especially looking at how slowly
we started. Other experts say you should save 15% a year, which is a rate we
have never hit. But as a couple we consistently save for retirement and reached
that important milestone alongside paying off debts and the evil student loans
(I’m getting close). It’s fun to celebrate a milestone and see how far we have
come, but that is not the main reason I’m writing this.
The
Millennial generation has been facing a tough financial environment for years.
We have rising education and health care costs on one side and lower employment
rates and household pay on the other. It also takes some faith to invest,
adjusting for inflation the market is still below the high point that was
reached while I was in college.
It seems
clear that this generation faces a very difficult challenge in finding
financial security. I think the only way for us to do it is to be better
informed and to make wise decisions when it comes to our finances. I think the
Wired generation has the tools to evaluate our spending, loans, and
investments. I hope that we can learn from some of the mistakes around us and
start preparing now.
Note: I
think the 1x by 30 rule is simplified and overemphasizes your current salary.
But even simple projections are better than nothing, if this simple goal
doesn’t help you then find your own goal. Also, to quote J. Scott Armstrong
“One of the most enduring and useful conclusions from research on forecasting
is that simple methods are generally as accurate as complex methods.”
