The Little Book of the Shrinking Dollar: What You Can Do to Protect Your Money Now

What You Need to Retire!

We didn’t set out writing this book for the wealthy 1 percent. Far from it. But here’s the reality. If you’re going to live well, you’ll have to become a millionaire.

I know it sounds crazy at first blush. But it’s very possible. And it’s never been more necessary to start thinking like you have a million bucks—doing what it takes to achieve it—rather than borrowing as if you have it.

Consider this basic formula. Say you start out earning $35,000 per year. That’s not much. But if you save 12 to 13 percent, get a company match, and earn an annual raise of 3.5 percent or better, you can do it. What it takes is a 7 percent annual return to get you to a million dollars.

Now $1 million won’t actually get you very far. Such a nest egg will give off $50,000 per year. That replaces 75 percent of income for someone making just over $66,600—satisfying the adviser’s rule of thumb. You don’t want to draw down more than 5 percent of the balance per year.

Add in Social Security’s maximum (assuming that holds), and you’ll get an additional $30,156 of income. Add that to the $66,000 and there’s a total of $80,156—the recommended replacement for an income of $106,874.

But now get this: Medical expenses alone for a married couple entering their golden years are around $260,000. So you’ve got to plan for that. Meanwhile, most middle-income American Baby Boomers are sitting on a nest egg of less than $100,000.

Again, we can’t stress this enough, there’s no way that compound ...