On a video posted on The Ramsey Show – Highlights YouTube channel this year, the American personal finance personality offered reassurance to Angie as she didn’t know what to do as they weren’t ready to financially retire. Angie and her husband both have no debt except their mortgage, however they have little retirement savings as they both started earning money late in life.
Five years prior, she explained that she was making minimum wage and had no savings at all, but following Dave’s Baby Steps, she’s been able to make a start.
However, after using retirement calculators, Angie was struggling to see how she could bridge the gap between how much she had saved, and what she needed for retirement.
She was worried as she could not see how her and her husband would be able to retire in the next 20 years.
Angie explained that her house payments would be paid of in the next year and that she had been saving 15 percent of her income into retirement for the last year.
She has £14,710 ($20,000) in her emergency fund, £67,662 ($92,000) in her workplace pensions.
Once her house was paid off, she planned to “maximise” her pension contributions, but she was still confused.
She said: “You always say it doubles but is that really going to happen? It’s just hard to picture.
“I’ve done all these retirement calculators and it’s saying we need £1.5million ($2.1million) to retire and it seems like such a big number.”
As he is based in America, he explained that the basic CPI is at four percent.
So, if his annual returns reach 12 percent, he can withdraw eight percent to live on, and keep the remaining four percent in the shares to balance out inflation.
He continued: “Here’s the other thing about investment calculators, all the calculations you do for 20 years from today, none of them will turn out the way we calculated it.
“One of the things they assume is that you put in a steady amount of money, and you will put in more than that on average and inflation and returns won’t do exactly what we say so it turns out differently.
“In our experience people often end up wealthier than what was calculated.”