• Pipoca@lemmy.world
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    1 year ago

    Old people have a lot more retirement savings than young people. It’s often said that a safe withdrawal rate is 4%, so an IRA with $1 million in it can only support a $40k/year retirement.

    Compounded returns also add up over time. Using a retirement calculator, if you have $0 at 20, make 60k/year, contribute 10% of your salary ($500/month) to your IRA, get 6% returns a year, inflation is 3% and you get a 2% raise a year, then at 40 you’ll have saved $282k and at 66 you’ll have saved almost $2 million.

    Due to the way retirement works in this country, you expect older people to have much more wealth than young people if they ever want to retire.

    So yeah, without historical context this comparison is pretty useless.