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Don’t Save Yourself Short

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Chances are you’re not saving enough. To find out for sure, do this simple exercise. Calculate how much you expect to save by the time you retire. Then calculate what percentage of your savings you’ll need to spend each year to sustain your standard of living (while factoring in investment returns of course). If you answered more than 4%, you aren’t saving enough.

Take a look at the chart below. An investor retiring in 1946, who put her money in a balanced portfolio of stocks and bonds, would have exhausted her nest egg only 33 years later if she was taking 5% a year from her portfolio. The numbers are uglier for 6%, 7%, and 8%. Withdrawing at those rates would have emptied the portfolio in 25, 19, and 15 years respectively.

A 4% draw would have given the retiree enough spending power to avoid the threat of living on Ramen noodles through her golden years. Don’t save yourself short, make sure you are adding plenty of future purchasing power to your portfolio every year.

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E.J. Smith

Editor-in-Chief
E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zilldjians. He grew-up worshiping Neil Peart of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@youngresearch.com.