By Chip Castille, Managing Director, BlackRock
Let's say you're 25. Close your eyes for a moment and try to imagine what it would be like to be 75.
You couldn't do it, could you? What you may not realize is that when your parents were 25, they also couldn't imagine being whatever age they happen to be today. That's why asking you to save money for your retirement is like asking you to give money to a stranger.
So let's think about this in a different way. Start by assuming that you will enjoy pretty much the same things 50 years from now that you do today. You may be older, but you are still you. If you like going out for a beer, burger and a movie today, the odds are you will still enjoy it 50 years from now. So how much will it cost the future you and what do you need to do to ensure that you will still enjoy yourself?
Let's look ahead by looking back. Based on a little web research, I found that in 1964, a movie cost $1.25, a beer cost less than a dollar, and a burger and fries in a midrange restaurant cost around $1.50. This inflation calculator states that US inflation from 1964 to 2014 was 4.12% per year. So let's run the numbers and see if that rate of inflation sounds about right:
That sounds reasonable enough. You could spend less and you could spend more for your night out in 2014, but this quick calculation tells us that we are in range. So while we all know that past performance is no guarantee of future results, let's use the same inflation rate to ballpark the future cost of a night out: