Retiring & the Problem With Saving $1,000 a Month

Every person who tells you that if you had only been saving x dollars per month for retirement for the last y years does not account for inflation. 100 years ago, in 1907, the real GDP per capita was $5649 of year 2000 US dollars, but actual wages were much lower back then.

The original 1936 bay bridge connecting Oakland to San Fransisco only cost $79.5 million, but that amount is roughly 1 billion year 2000 US dollars.

The same misperception also occurs when you think about saving for retirement and carrying the numbers ahead a few decades. If you think $2,000 a month is enough to live on, what $2,000 are you thinking? $2,000 of today’s currency, or what that will be worth after inflation by the time you retire?

Saving money gets worse when central banks pour money into markets. Last Friday this report came out:

Worldwide, central banks have injected at least $326 billion (179 billion pounds) into their financial systems in the past 48 hours in an effort to prevent a global liquidity crunch that has its roots in the riskiest end of the U.S. mortgage market.

In its biggest single day of temporary open market operations in nearly six years, the U.S. Federal Reserve added $38 billion in reserves in three moves, the first coming before U.S. stock markets began trading.

This week the following numbers were released:

Over the past week, central banks around the world have injected hundreds of billions of dollars in cash into the financial system. The European Central Bank has added over $200 billion to its market, and the Fed added $62 billion to U.S. markets. The banks are attempting to ease tense conditions resulting from troubled lending markets.

Its hard to get anywhere saving money when the printers are running overtime.