Hi there! It’s a day ending in ‘y’ so it’s time for another study about the importance of saving for retirement early. CNNMoney recently posted an article titled: Retirement: You’ll need far more than you think that’s guaranteed to scare the bejesus out of spendthrift Boomers (and rightfully so).

The article gives the following example:

…say you’re a 40-year-old woman, making $70,000. You’ve already saved $50,000 for retirement and you want to retire at age 67.

I was thinking that seems rather low for a 40-year-old to have saved up, but apparently that’s about the average for that age (actually even a little ahead of schedule, which is depressing)

According to VanDerhei, if you want a 90 percent chance of having adequate retirement income, you should save 26 percent of your income every year.

That’s a pretty signifcant portion of one’s income. It’s entirely possible, but considering she only had $50,000 saved up to begin with, I imagine starting to save 26% of her income is going to require major lifestyle changes. The reality is that most people won’t do that. Again, also depressing.

But let’s look at the numbers. The article is rather thin on details of the study, so we’re going to have to make some assumptions about the calculations.

The woman, who we’ll call Becky–40 years old, likes tennis, and very MILF-ish–currently earns $70,000 a year. She spends too much time playing tennis, so she’s not in line for any promotions at the office. As stated, she’s savying 26% of her gross salary each year from ages 40 to 66 (again, that’s a lot of money, but let’s go with it). The article mentions a 7% annual return. The article doesn’t state if this is adjusted for inflation and since a 7% real return on a diversified retirement portfolio seems high, we’ll assume it’s not adjusted for inflation and use a real rate of return of 4%.

This will leave Becky with about $1 million in inflation-adjusted dollars at age 67, which would probably be enough for a comfortable retirement.

Now let’s talk about what really pisses me off about this article. It goes through this whole song and dance about how Becky isn’t saving enough and won’t have enough for retirement, yet it totally misses the oportunity to drive home the point about what would have happened if Becky started, say, 10 years earlier. Let’s look at those numbers:

Instead of half-assing her retirement savings during her 30s, Becky really took things seriously and started saving aggressively then. This would mean that instead of $50,000 in her retirement account at age 40, she would have about $227,000! If she continued with the same retirement plan as stated previously, she would have $1.5 million at age 67. But who wants to wait until 67 to retire. She could retire at age 60 with about $1.1 million instead! As you can imagine, the numbers get better and better the younger Becky starts.

So, the bottom line is that when it comes to retirement planning, unlike drinking on weekdays, start as early as possible.