Since I started teaching econonmics twelve years ago, I have always taught a lesson on saving for retirement, usually called “How to Become a Millionaire.” The basic idea was to begin savings early in life, in your early twenties, save regularly, and take full advantage of tax-favored investment vehicles like IRAs and the like. I’ve become a little more hesitant in the past few years of flatter investment returns at promising a million dollars on retirement, but the basics never have changed: save, invest, rely on compound growth, defer taxes, don’t count on Social Security, and it’s better to rich and old than to be poor and old. You’re going to be old either way, might as well be able to afford it.

So today I saw this article, “80 is the New 65 for Many Retirees.” The article says that a new study shows that middle class Americans are increasingly feeling like they will be unable to retire at age 65, with 25% thinking they will have to work until they are 80. Also, as I have suggested to students, people are more and more focusing on a seet dollar amount rather than a specific age or year. I thought it interesting that $350,000 was the median target amount.

On average, people in their 20s and 30s think Social Security will only cover 20% of their retirement expenses. Also, inheriatance is no longer a sure thing – only 22% of survey respondents thought it was important to leave an inheritance.

So what does this mean? It means what I taught and still teach is still true, and may even be increasing in importance. Even if the 8-10% returns are more difficult and uncertain in today’s economy and stock market, early, regular savings invested in a way to allow compound growth is the absolute wisest thing a young person can do. Don’t trust Social Security – it was never meant to provide a great retirement lifestyle. Save and take care of yourself. Even if the market never returns to 10+% returns, the returns compunded over 40 years will make you richer than most of your contemporaries. You may or may not be a millionaire, but you will definitely be able to retire and take care of yourself.