The most frequently asked questions about the Social Security phase of your life are things like:

  • Will I have enough money to live on in retirement?
  • How do I save for retirement?
  • How much do I need to save?
  • When should I start saving?

This page is designed to help with the answers to these questions!

Don't eat your seed corn

Farmers have had a wise saying for a long time: Don't eat your seed corn! In simple terms, it means that you can’t live off of everything that you harvest each year, you have to save some of the yearly crop to plant for next year's harvest. You need to make sure that your farm always has enough seed corn to replant the fields on your land so you can enjoy another harvest next year. If you eat your seed corn, you won't have anything to put in the ground and your family starves. You go broke.

25 Age 25
$0 IRAs $0
$80,000 Income $80,000
2.50% 401K 15.18%
2.50% match 2.50%
7.65% ss & Med 7.65%
24.38% 25% rest 21.21%
$4,000 Savings $14,144
$52,380 Income $44,772
67 Retire 67
$26,771 SSB $26,771
$0 Pension $0
$25,609 GAP $18,001
$168,000 401Ks $594,048
6.56 Will Last 33.00
73.56 Go Broke 100.00
$5,091 Till 100 $18,001
$31,862 New SOL $44,772
($20,518) SOL Diff $0

If the farmer makes a mistake and does not save enough seed corn, he can get a second chance. He can borrow some money to buy more seed corn, work harder next year, tighten his family’s belt, and recover from his mistake.

Saving for retirement is a lot like the seed corn example, but there are two major differences. The time frame is your entire working life and your entire retirement life instead of year to year, and of course, you don’t get a second chance.

If you live at your highest possible standard of living and don’t save for retirement; you will not have enough to retire on, and you are now too old to work harder to make up the difference.

The example to the left does not include cost of living increases, promotions, or inflation. It is extremely simplified, but it does illustrate the basic seed corn concept. Two individuals working at basically the same job at companies that have an identical 2.5% 401K match. They both start working at 25 and plan to retire at 67. The person in the first column puts the minimum into their 401K to get the company match and lives off of everything else, a $52,380 standard of living; they are eating their seed corn. When retirement time comes they can continue that lifestyle and go broke at the age of 73 or reduce their standard of living by over $20,500 a year until the age of 100.

The second person did plan for retirement. They were willing to increase their 401k contribution by $10,411 a year which reduced their lifestyle by $7,608 a year, $146 per week, but this is a lifestyle that they can maintain till the age of 100, basically the rest of their lives.

So, your choice is simple: Live at the highest standard of living you can on all your seed corn every year, then basically starve during your retirement years, or cut your standard of living back to a level that you can maintain for the rest of your life.

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