Saving for retirement

The New York Times has a fairly decent article on saving for retirement over at CNBC:

What would you do if your financial planner prescribed the following advice? Save and invest diligently for 30 years, then cross your fingers and pray your investments will double over the last decade before you retire.

You might as well go to Las Vegas….

Reaching your goal is highly dependent on the power of compounding — or the snowball effect, where your pile of money grows at a faster clip as more interest (or investment growth) grows on top of more interest….

“What the wise person does is save a large amount of money when they are young,” said William Bernstein, author of “The Investor’s Manifesto: Preparing for Prosperity, Armageddon, and Everything in Between” and other investing books. “And if they can do that, when they are older, they can cut back on their equity allocation. When you’ve won the game, you stop playing the game.”

I have noticed that financial experts such as Dave Ramsey, author of The Total Money Makeover: A Proven Plan for Financial Fitness, or Suze Orman have cut out some of the talk about sky high returns but not enough. If I hear Orman say one more time that the $1500.00 that a viewer wants to spend on a trip would turn into hundreds of thousands years down the line, I think I’ll scream. Seriously, that $1500.00 may not do all that well, given inflation,while the trip may bring lasting pleasure. Saving is a good thing to do, but falsely letting people think that just by saving a few thousand a year, they will be a millionaire someday is often like telling them to head to Vegas.