Mint has been the go-to software for budgeting over the past year, and it’s helped me keep my monthly spending in check, or at least to not freak out when the unexpected wrecks havoc on my budget. They have a feature called “Goals” that I’ve tried out before, but I found it clunky and, as each goal needed to be attached to its own bank account, it didn’t make sense for me to have separate accounts for cars, houses, etc. I just put everything into my investments, minus my $8k CD emergency fund, and allow the success of those investments to guide my goals.
Then I realized I should at least make one massive lump-sum goal for my monthly investment savings. In the Goals product, Mint has a feature that determines how much money you should be saving monthly to reach that goal. I selected their “Retirement” calculator, and put all of my investment accounts into this massive goal, even though in reality they’re also the same funds that I’ll be using one day as the down payment for a house, and to buy a car, etc. In any case, I figured it’s best to at least be saving the amount I need for retirement, and I can build on that as my income goes up in the coming years, knock on wood.
The calculation results are terrifying. And I thought I was being conservative in my requirements for retirement. If I want to retire at age 65 with $60k a year in “income” and I plan to die at 90 and I expect to earn 5% interest on my investments, I need to amass a retirement portfolio of $3.62M. What if I live to 100? I’ll need $4.65M in investments to retire at 65.
The monthly required installments to meet this goal are $2,149 a month. That is, if I can manage to eek out 5% a year interest on average. There is no guaranteed way to do this. I am not sure exactly what my stock market returns have been year over year since I started investing in 2005, but I’ll be lucky if after calculations they’re positive at all. This makes me very nervous about my future. What if there are months I can’t save $2149 a month? What if I need to buy a new car? What if my rent goes up, but my salary doesn’t follow?
This all reminds me how important it is to negotiate the highest possible cash salary, or, at the least, work an extra freelance job or two to bring in an extra $1000 a month.