Just a few weeks ago, I suspect that many of you prepared your brackets for the NCAA basketball tournament. Hopefully, you’re doing well and have correctly picked at least some of the Final Four.
I can say one thing with absolute certainty, though. Not one of my
readers has a chance of finishing with a perfect bracket. That’s because
a DePaul University mathematician calculated that you have a one in 9.2
quintillion chance of having a perfect bracket. And I’m sure I don’t
have quite that many readers.
For those of you not familiar with the term “quintillion,” it’s a number
that has six commas in it. Remember, in math a comma separates every
three numbers. For those who may be mathematically challenged,
quintillion is a number that is so large it’s almost impossible to get
your arms around it. It makes a trillion seem like child’s play.
So don’t feel too badly if, in the next two weeks, you’re eliminated
from having a perfect college basketball bracket. Instead, you can put
your efforts toward building a nest egg that has not one, but two commas
in it. It’s something that many of you have an entire working career to
accomplish. Let me explain.
Fidelity, the well-respected mutual fund giant, administers countless
401(k) plans throughout the country. They recently disclosed that the
average 401(k) balance at the end of 2014 was $91,300. One comma.
They also indicated that the average annual employee contribution
combined with the employer contribution totaled $9,670. For participants
that have been in the Fidelity program for ten years or more, the
average balance was just shy of $250,000.
Again, these numbers are just from the plans that Fidelity handles, but
they show me that people understand that it’s extremely important to set
funds aside for retirement. Unfortunately, it also shows that most
people are not saving enough to enjoy a comfortable retirement.
That’s why the commas are so important to the equation. This may startle
a lot of readers, but I think many households are going to need a nest
egg with two commas in it. That’s right, they’ll need at least
$1,000,000 to maintain a comfortable retirement lifestyle.
I’m not talking about a luxurious retirement, simply one that can keep a
retiree self sustaining for such items as health and long-term care
needs, senior housing and all the other expenses that crop up, often
deep into the retirement years.
As I previously mentioned, the average Fidelity deposit was just over
$9,600 per year. Broken down, that’s $800 per month. If an investor
saved $800 per month and attained a hypothetical, yet very reasonable
rate of return of five percent per year, and did it every year during
their working career of 37 years, the likelihood of having two commas in
their retirement nest egg is very high.
Often I kid and say that, when it comes to spending, if you’re drilling
down to the decimal points, you can’t afford to retire. Conversely, when
it comes to retirement savings, the more commas in your nest egg the
more likely you are to be financially secure during the retirement
Statistically speaking, you will never achieve a perfect basketball
bracket. But if you save consistently for financially secure retirement,
it’s a slam-dunk.