1) Mutual funds have averaged 11+% annual return since their beginning.2) 8% is not hoping for what's happened in the past...it is a conservative estimate and so is not an "outstanding" return.3) "Real returns" are always less than the return because it includes inflation. Certainly something to look at, but too many people use that as a way to excuse themselves from investing. I prefer to look at how much money in future dollars I will have and then consider how my expenses will change by the time I need that money. Inflation cuts into that money, but then no dependent kids living at home increases the power of that money. Paying a lower tax rate increases the power of that money. Owning my home outright by then increases the power of that money.4) Investing for the future is just all about percentages. Working poor people HAVE saved and invested for their futures so that they have a brighter retirement, and so if they can do it, then more of them can; I submit that with rare exception, all of them can. Working poor on a bigger scale than they should do the following: buy cigarettes and other tobacco products, buy alcohol, buy lottery tickets, use rent-to-own and pay day lending services, GIVE MONEY TO CHARITY. Studies show that the working poor give more of their money to charity as a percentage of their income than any other group...they need to quit doing that...get themselves OUT of the working poor first and THEN give money.5) My first full-time job after graduating from college, I made $12,500 (then it went up to $14,500 in 3 months), and this was working in the very wealthy town of Los Gatos, CA. I was definitely working poor. Yes I had a degree, but nothing is guaranteed in life. Working poor people can position themselves to be highly skilled and qualified at what they do.
MonkeyMan wrote:
Flagpole wrote:2) 15% of even a meager income over 40 years still returns the money needed for that person to continue their lifestyle in retirement, and that is the goal...to be able to retire. If you make $25,000 a year, then you need to live as if you make that. If you do 15% of your income from age 22 to age 62 and you never get a raise during that time, you'll have $1,049,178.90. Doesn't seem like a lot, and it's not really, but on that meager income that never increased, that's pretty good. Take 4% of that, and that's $41,967.15...way more than the person's salary while working. AND, at age 62, they get to add Social Security also. What if they only did 10%? They'd have $594,853.05. 4% of that is $23,794.12...almost as much as they made while working, and since taxes would be different, it's better...also, they would get to add Social Security to that. Sets them up to be better off than they were while working. This was done with 8% annual return which is well below the average of mutual funds. It was also done with no raise in income for 40 years. Assuming they get some sort of raises in there, they'd have more. If they returned more than 8% annually, they'd have more.
I don't suppose you have any sources that back up the claim that an 8% average annual return is a reasonable expectation going forward? Yes, historically that may be accurate, but past performance does not guarantee future returns. Most of what I've been reading says to expect somewhere between 3-4% real return over the next few decades.
The simple fact of the matter is that if you are among the working poor who never makes over $25K (in today's dollars), you'll probably be SOL when it comes to retirement simply because you will not make enough over your working life to meaningfully save. You'll be dependent on the (imo very slim) chance of outstanding market returns over the next 3 decades. Course, you might get lucky and the market might take off. Hell, even SS and medicare might still be around in 30 years, who knows.