Porter, in fact, helpfully offered this chart showing what a 22-year-old today will pay for milk, a night at a hotel, a dental cleaning and a dental crown. (Porter created this shortly after going to the dentist and learning he needed a crown.)
|Age||Years in Future||Milk||Hotel||Dental Cleaning||Dental Crown|
Even if inflation doesn't rise 3 percent every year, or hotel costs are offset by no longer needing to pay for airfare because teleportation is so much cheaper, Porter's point is the same: The world we live in tomorrow will be more expensive than the world we live in today.
Your retirement plan needs to be flexible. You hear that a lot from financial advisors. The reason is that even if we don't have hovercraft skateboards and space buses to Mars in the near or distant future, the financial products available at age 123 will certainly look markedly different than they do now.
"Whether the time frame in which you're retired is 30 or 60 years, things will change," says Dan Danford, CEO of the Family Investment Center, a commission-free investment firm in St. Joseph, Mo. "Retirees need to maintain enough flexibility to adjust when they do. Inflation-adjusted bonds are one good example. They didn't even exist when my father retired in the mid-1980s. Exchange-traded funds are another example. What other helpful new products will come along before 2043? Without flexibility, how can you include new products when they do come along?"
You need to be flexible, too. If you're going to live off 4 or 5 percent of your nest egg annually, ideally you will have plenty of cushion built in, so you can only take, say, 3 percent if you need to. That's because your retirement fund needs to be robust enough to withstand the Great Recession of 2039 or the Great Depression of 2051 or whatever the economy dishes out.
"Try to cut back in the down years to make your money last," Flader advises.
Of course, it's impossible to offer up an actual number on what someone needs for their retirement. Some people are better at living on less than others.
But if you really want a number, Porter says that if you were to retire right now at age 65 and want to fund retirement until age 123, you will need $2,291,262 in the bank, assuming your nest egg will earn 3 percent annually. If our hypothetical 22-year-old retired today, he or she would need $3.9 million to reach the same goal.
"These amounts could be reduced if the individual is receiving Social Security or a pension," Porter points out. "In my opinion, though, it's best not to plan on Social Security, and the majority of workers don't have defined benefit pensions."