If you think that you will be ok financially without having at least a million dollars, you may be wrong.
Because in 1950 a million dollars was a huge amount of money. Today that million dollars is not worth the same. Our money loses it’s purchasing power. We all hear about inflation and how we need to take it into account, but how often do you run the numbers?
Million Dollar Math
Let’s say in 1950 $1.00 = $1.00
Fast forward 60 years and $1.00 in 2010 = $9.15 (1950’s dollars)
Here is a great website I found to calculate inflation.
What does that mean?
That means $109,289 in 1950 now equals $1,000,000.
The Future of a Million Dollars
If the rate of inflation stays the same as the previous 35 years, when I am hitting retirement, if I saved $1,000,000 in for retirement in today’s dollars, it will only be worth $240,384 in 2045.
Can you live on $240,000 for your retirement*?
The average life span for a woman like me is 81 years old. That would be 18 years for me and my husband to live on $13,333 a year. That’s not even calculating inflation for those 18 years! Even with social security (if it’s around) that is living below the poverty level.
So what does this mean? This means we should all be under the category of Eventual Millionaire. So how are you going to earn your million?
*The stock market has its ups and downs. We all know that, and we know that the previous record shows an uphill track. But what millions of people are realizing (my parents included) is that the stock market crashing a few years before retirement is not a good thing! So in my example, I remove the possibility of keeping up with inflation using the stock market. There is never a guarantee with anything money related!