How can I possibly retire comfortably?
I'm 35. I have k in an IRA. Using an online IRA calculator, I find that I'll have less than 0k at retirement, assuming I work until I'm 67, and I continue to make the full contribution to the IRA. And assuming a fair (6%) rate of return.
I'm a computer programmer. I probably can't depend on the good income I have now until I'm 67 - programmers tend not to get hired as they grow older. I don't have kids, and I don't want any. Nor would I want them to front the burden of an 80 year old man whose retirement savings has run out.
How can I possibly retire? The reason I'm asking this is, I know I'm not the only one in these shoes. Some say in the US (where I live), the majority of people have no retirement savings. I'm ahead there, but it still seems it won't be enough.
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You're not saving enough, because you're renting. Mortgage repayments are a form of saving, but rent isn't. You need to be putting away savings equal to the mortgage payments on the kind of house you might live in, in addition to your IRA.
By 2049 (your proposed retirement age), it is likely that the retirement age will be higher. From birth years of 1964 to 1970, the full retirement age increases by two months a year from 66 to 67. Assuming that that trend continues, full retirement age will be at least 69 by the time that you retire. That gives you both two more years to add money and two fewer years to support. Presuming you are a man, you can expect to live fifteen years after 69. Extreme range zero to thirty years.
You can currently add ,500 a year to a 401k or similar tax advantaged system. That will increase your accumulation somewhat. Call it .5 million total with your IRA contributions added to the 401k.
At .5 million, if you can average a 4% return (more realistic as a steady income), that's 0,000 a year. That's without touching the principal, so it will last forever (absent something extreme like a Great Depression level event).
A house also offers tax and stability advantages, but if you don't want it then you don't.
You don't mention your income. But this is key. In today's dollars, say you are making K. The 0K at 4% withdrawal rate, will give you K. But social security will also provide another K. That's a total K or near 100% replacement. On the other hand, if you are earning 0K, you are not saving enough. Absolute dollars matter far less than replacement rate.
The maximum IRA contribution isn't enough to get you to a comfortable retirement. It was never intended to be. You're going to have to save more than that per year. You might be eligible for other sorts of tax-advantaged retirement plans depending on your job (401(k), SEP IRA, etc); beyond that, you just pay the taxes and save what's left, in some appropriate investment.
There's really only two ways to save more: earn more or spend less. If you want to share more about your income and expenses, people here might have more ideas about how to increase the one or cut the other.
Many people rely in Social Security and Medicare in retirement, and have very low retirement income. They may take advantage of other programs that help with food, housing, and other costs.
A better picture is someone who has retirement savings and a paid-off house, living off Social Security income and interest from their retirement accounts. The house thing isn't crucial, but owning a home makes retiring on lower income much easier.
Having 0,000 in savings isn't so bad, whether it's enough depends on how you plan to live out your retirement. You might want to talk to a financial planner, to understand what you'll need to change now to afford the retirement you want.
Whether you own or rent is largely irrelevant. It's a lifestyle choice. For some, owning a home makes more sense. For others, renting.
More important is how much your current and expected future lifestyle costs. Taken to the extreme, 0k will last roughly 50 years if your lifestyle only cost k/yr.
According to MMM, if you can save, say 64% of your income -- no matter what it is -- you can retire in 11 years.
First step is to determine what your current lifestyle costs you each year. It might be enlightening. Reducing costs now will have a compounding effect and you may be surprised on how little you actually need to be happy.
Next try to imagine what your "retired" life will consist of. Will your expenses go up or down? What will you do with your time?
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