何毓琦的个人博客分享 http://blog.sciencenet.cn/u/何毓琦 哈佛(1961-2001) 清华(2001-date)

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Advice to my grand children

已有 2350 次阅读 2019-8-7 19:33 |个人分类:生活点滴|系统分类:海外观察

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Recently the national financial magazine Kiplinger,  published a magic number. It says hat you need  1.7 million dollars of asset to retire comfortably to an upper middle class life. That is, with this asset, you can afford to take multiple vacations every year, eat out when ever you wish, buy your hearts desire on Amazon. Of course you still won’t be able to afford owning a private jet or yacht  and move in the super rich circle of celebrities and jet setters.  But, you should be able to enjoy the good life and not have to worry about running out of the money in your old age. Now to most of the 25 to 30 year old, saving 1.7 million dollars seems like an impossible goal. However, it is entirely achievable. Let me list the ways and the simple mathematics behind the realization.

  1. Some but very few of you who have been working for while have already saves a significant amount of money, say 50,000 dollars. Now if you invest this saving in the stock market, the long term historical  average return on your investment (the ROI) will be around about 8 percent per year. The rule of 72 say that your investment will double every 72/ROI = 9 years. In other words, without saving another cent you will have 1.7 million dollars by the time you retire when you are seventy years old. Lucky you and my congratulations! 

2. If you work for a good and stable company, the company helps you to save by contributing to your retirement pension which can be considerable. Over a period of a life time, this pension can amount to the desired goal of 1.7 million dollars. It is a kind of automatic and enforced saving from you work. Similarly, social security is a government enforced saving which while won’t be much but definitely help. You will be able to check your retirement benefit anytime during your life with the social security administration and with the company. 

3. It is easy to set up an Excel spread sheet and see the result at retirement  of “what if” you put away X percent of your salary per year. This will help to incentivize not spending everything you earn and postpone your gratification for a later day.

 4. Finally, while I don’t recommend that you count on this, you may receive some inheritance from your parents which will help with your reaching the magical goal. Remember , getting there should be all the fun, inheritance is only a surprising gift. Counting on it will only do you no good, believe me! 


 So there you are, have fun and enjoy life but keep your eyes on the magic number goal.    



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