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How much will you need to invest to match your lifetime spending?

The average 25 year old will need $1,157,492 compounding at 8% a year (or 5.25% above inflation), to match his estimated lifetime spending.  A 45 year old will need $1,132,793 and a 65 year old will need $644,585.

Present Value of Savings to match the Average Consumer Lifetime Spending

AgeAverage Lifetime
Spending		With 2.25%
annual inflation		8% annual return
(5.75% above inflation)
25$3,819,103$7,760,036$1,157,492
45$2,498,923$6,081,902$1,132,793
65$1,030,723$3,201,717$644,585

 A consumer is considered a household (from BLS website: "A consumer unit consists of any of the following: All members of a particular household who are related by blood, marriage, adoption, or other legal arrangements").  

The above table illustrates the value of compounding investments as without compounding and average inflation, the average 25 year old will need $7,760,036 to match his expected lifetime spending (without any additional contributions savings).  While compounding an investment portfolio at 8% annually will only require him/her to currently have $1,157,492 (without any additional contributions to savings).  The amount required for savings does not include any type of pension, government assistance or other benefits consumers may receive.  Also, inflation and annual compounding return could be totally different going forwarded.  The numbers used were based off historical data back to 1871, but going forward, the world could be completely different with big changes in non-financial factors as well, like expected lifetime.  So take all these numbers with a grain of salt.

For those who believe they are in a strong financial position, I provided the same calculations for the Top 10% of Consumers below.

Present Value of Savings to match the Top 10% Consumer for Lifetime Spending  

AgeAverage Lifetime
Spending		With 2.25%
annual inflation		8% annual return
(5.75% above inflation)
25$8,903,987$19,072,145$2,595,856
45$5,984,647$15,416,971$2,413,272
65$3,065,307$9,654,977$1,854,712


Related Posts

How much will people spend in their lifetime? https://www.unpackinvesting.com/2021/09/how-much-will-people-spend-in-their.html

How much do people spend at different ages in the United States? https://www.unpackinvesting.com/2021/09/how-much-do-people-spend-at-different.html

Do you spend too much? or too litte? How much does the average american spend vs the top 10%?
https://www.unpackinvesting.com/2021/08/spending-too-much-or-too-little_0645791283.html


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