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Old 02-07-2006, 10:02 AM   #1
 
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401K/Retirement

So, how much money do you need in your 401K to retire at say 50?

When I was 20 I thought $100,000 was alot of money. Now that I'm 26 I realize that $100,000 won't get you very far.

I'm now wondering how many millions do you need set back to retire on?

1 mil, 2 mil???

Any ideas?

Just got to thinking about it and was kinda curious.
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Old 02-07-2006, 10:08 AM   #2
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i don't know, but i know i am far behind on the retirement plan. of course, once the kids are gone, i won't need much to live on.
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Old 02-07-2006, 10:15 AM   #3
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I would think if you invested your 401 K wisely you could live off alot less than a million. Depends on what kind of lifestyle you want to live also.



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Old 02-07-2006, 10:20 AM   #4
 
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I would think if you invested your 401 K wisely you could live off alot less than a million. Depends on what kind of lifestyle you want to live also.
I figured my monthly bills at $3500 a month after I quit working. Gotta figure in house payment, cars, wheelin expenses (hopefully be alot of trips made each year), utilities and misc.

I may be way off on this but I don't think so.

So, if my 401K consists of $4.98 right now, do you think I can retire in 24 years????
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Old 02-07-2006, 10:24 AM   #5
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Originally Posted by Stretch

So, if my 401K consists of $4.98 right now, do you think I can retire in 24 years????
Hey we are close in 401k funds, but you forgot a 1 & a few 0's, $149,800

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Old 02-07-2006, 10:25 AM   #6
 
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why dont you send me the $49,800 and then youll have an even $100,000
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Old 02-07-2006, 10:27 AM   #7
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Quote:
Originally Posted by Stretch
why dont you send me the $49,800 and then youll have an even $100,000
Because when I die my cat get's it all.
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Old 02-07-2006, 10:27 AM   #8
 
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You are right on with how many millions! It seems strange to have all of these people in their young 20's wondering about retirement. With the demise of company sponsored pensions and the uncertainty of the US dollar no one knows. You are off to a better start then some with becoming your own boss, but even with that who says that pans out and provides a breadbasket to live on. Not to crap on any dreams. With my planning and the way the market should rebound and overseas market growth (supported by the loss of AMERICAN jobs) a somewhat larger starting balance coupled with compound interest a smaller amount is technically required to retire. That is if you play that numbers game and believe the hype of an overall average of 12% return from the market. That is the going number for some years now but they call it a bubble for a reason, right. Being as young as I am I am playing that game until a later age with a change into a more balanced portfolio. To make this long answer short I am trying for 1.5 to 2 million as a total asset number, unless I have a personal business to provide an income after my retirement in which my number would be closer to 1 to 1.2 million.
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Old 02-07-2006, 10:35 AM   #9
 
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nice answer 4x4.

I'm pretty sure I can do something after I retire to add to the income a little. just dont want to be working a full time, on call job when I'm 50.

thanks.
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Old 02-07-2006, 10:38 AM   #10
 
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http://www.bankrate.com/brm/cgi-bin/Retire.asp

interesting, this site says I need 2.7 million to retire in 24 years. OMG!!! I'm in trouble.

also says that $45,000 a year will be equal to $130,000 a year.
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Old 02-07-2006, 11:04 AM   #11
 
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Hey thanks, but what is up with that last line? Thanks for the kick in the nuts. I now have to go replan the rest of my life. Oh by the way anyone have any spare change?
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Old 02-07-2006, 11:56 AM   #12
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hmm

Do not worry over it. I am leaving you enough to take care of you the rest of your life! Enough bills that is lol
I would think 2 million is not out of line because with inflation at a rate of 3% each year 1 million will not last long at a moderate lifestyle.
Cosider this: If you're earning 60K a year now then over a 25 year period that is 1.5 million.
You can bet there will be no SSI either by the time you retire and I am betting it will not be there in 2024 when I retire. You are very wise to begin planning for retirement at your age.
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Old 02-07-2006, 01:45 PM   #13
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Not having those big monthly notes at retirement is a good place to start. That was why I bought that land and why I'm going to put trees all over it. That is also why I only made ten year notes on the the land and trailer. I have 20 years before 55, and paying into my 401K is the second largest bill I have after my land note. That way I'll be able to sell my trees, sell the land if needed. Plus, the money in my retirement.
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Old 02-08-2006, 08:14 AM   #14
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Having all the money is a good plan. However, If you keep your debt in control, you will need less at that age.
i.e. 24 years is enough time to pay for a house, only use credit cards if needed and pay them off to keep a zero balance. If you have no bills, you need less money to live.
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Old 02-09-2006, 07:36 PM   #15
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Retiring at 50, assuming you plan to live to the statistical mean age of about 76, will require a pile of cash if you plan to have any sort of lifestyle at all.

I think $3500 as a monthly retirement budget is way low. Even if you have no debt and own your house and car, just look at energy prices and medical prices now and I think you can reasonably postulate that number is way low.

Bear in mind you will not qualify for Social Security until age 62 (reduced benefits), assuming it is left untouched by the Feds over the next 20 years, unlikely. You will also not qualify for medicare. So, you will have to plan to insure yourself somehow if you plan to be able to do anything but go to the ER like all the illegals.

Don't mean to rain on you, but the overwhelming probability is most everyone we know will never be able to retire at 50. More like about 67.

The BEST thing you can do with any dollar you have to spare at this time in your life is pay debt. No 401k can match the return rate you get for paying off debt. After you are debt-free apart from your homestead, then rock on with your 401k or whatever. And, don't forget 529 plans or something similar to the kiddos.

Face it buddy, that's why we men-folks get the big piece of chicken at dinner, because we all are going to be working until we are damned near dead.
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Old 02-10-2006, 05:36 PM   #16
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Ha

OK that is going in my sigline!
Xanthias says:
"Face it buddy, that's why we men-folks get the big piece of chicken at dinner, because we all are going to be working until we are damned near dead."
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Old 02-12-2006, 10:46 PM   #17
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The BEST thing you can do with any dollar you have to spare at this time in your life is pay debt. No 401k can match the return rate you get for paying off debt. After you are debt-free apart from your homestead, then rock on with your 401k or whatever. And, don't forget 529 plans or something similar to the kiddos.
I have a slight disagreement with this statement Xanthias. Most companies offer anywhere from 50% to 100% match on your first 4-6 % you put in. On top of that it comes out pre-taxed. It might only look like your only getting a 2%-6% raise, but in reality it is a 50%-100% return on that money. Plus, you also get to invest it, and anybody who has look at market histroy knows that even though the market goes up and down it is really always climbing up. In 96-97 my 401K grow like crazy. One quarter it grew by 30%. (the good old days of dot com )
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Old 02-12-2006, 10:56 PM   #18
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OK that is going in my sigline!
Xanthias says:
"Face it buddy, that's why we men-folks get the big piece of chicken at dinner, because we all are going to be working until we are damned near dead."
I think it is sig worthy myself...but you got it first. I will remember this for as long as I live(or work)

A old man I once worked with started saving 25 years before he retired,and Im sure he had well over a mill stashed away. This was with a simple job/simple pay. Just pinching every penny. Most of it was dot.com stocks. Plus he had several 'rental' properties. Im quite sure he retired never making over $15/hr......
He always harped on the importance of saving. (I work for a place that offers nada for the future)
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Old 02-12-2006, 11:29 PM   #19
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My mom retired at 50 after 32 years at SBC. She was fortunate enough to have 2 houses paid off, and all of her cars at the time of retirement. Her motto has always been, "pay yourself before you pay anyone else." She started by saving $20/mo at the age of 18. By the time she retired she had enough, and had invested enough to let her money work for her.

Her lifestyle is far from moderate. I managed to talk her into buying her first new car at age 52. She pulls about $2200/mo. and makes a car payment out of that. My dad is disabled and pulls about $900/mo. They aren't extravagant, and her biggest problem is paying the taxes on her money because she's not at the 55 1/2 year old mark yet if she uses the funds from her savings. (extra tax penalties)

Chances are that's how they're gonna get us. Raise the tax levels on our savings until we're closer to 65 and keep us from retiring at 50. With the rest of the business world's cutbacks on retirement and pensions I'd suspect a strong savings will be the only thing that saves us 30 year olds.

I have mixed feelings about Social Security though. The bulk of the "baby boomers" will have put a strain on the funds, but in 35 years a large percentage of them will be dying off as well. This leads me to believe the next 5-10 years are going to be the hardest on SS, and then it'll start to climb back up. I'm praying we won't give into this "Social Security is a sinking ship" ideaology.
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Old 02-13-2006, 05:59 AM   #20
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I have a slight disagreement with this statement Xanthias. Most companies offer anywhere from 50% to 100% match on your first 4-6 % you put in. On top of that it comes out pre-taxed. It might only look like your only getting a 2%-6% raise, but in reality it is a 50%-100% return on that money. Plus, you also get to invest it, and anybody who has look at market histroy knows that even though the market goes up and down it is really always climbing up. In 96-97 my 401K grow like crazy. One quarter it grew by 30%. (the good old days of dot com )
My response would be:

1. You and Tab are probably the most disciplined people I know when it comes to long range financial planning. That is commendable, but not usual. Most of us won't sacrifice the way you and your wife do to achieve long-range goals.

2. That aside, company 401(K) matching, these days, is getting about as common as hen's teeth. Most companies do not offer it, if they offer retirement at all. Your timing is good in that your industry is on a huge upswing again after eating it for 20 years. The companies that do offer matching will usually offer matching 100% only on the first 3% you contribute. This means if you make, for example, 50K a year and you contribute 3% of that gross number, they will match it. After that, usually employer contributions go down on a sliding scale.

3. Companies also offer other plans that are good for taxes, etc., such as "cafeteria plans" in which you set aside money pre-tax to pay for medical expenses. Then there are 529 plans, which people now use in place of the Texas Tomorrow Fund, since enrollment to it is closed, to save for college with pre-tax dollars.

4. All of that is well and good, but the truth is, if you do everything you are "supposed" to do, you're not bringing home a hell of a lot of money after all these deductions are taken out. My mortgage company doesn't give a rat's *** whether I'm saving or not, they just want their money, every month.

5. I'm not suggesting Stretch, or anyone else, should not save. What I am saying is that your rate of return is going to be bigger on paying debt first. Respectfully, matching is not a return on the money. Your rate of return on any money you save is, first any tax savings you realize from taking it out of pre-tax dollars. Second, whatever the annualized rate of return is on the investment. Most 401's are very conservatively invested for long-term growth. This makes sense - no one wants to risk their retirement money on risky investments. So, if your money is sitting in the Vanguard Fund - or whatever - with about a million other people's, you are bringing in about 3% growth per year. Don't confuse overall growth of your investment with rate of return - your 401 grows as it does because you continue to pay into it, mostly. And, as you suggest, riding the bubble of trends like "dot com" is fleeting. For as many people with your story, there are just as many who lost their shirt when the bubble collapsed in about 98.

6. Why do I argue paying debt gives a bigger return? Well first, consider that I am referring to consumer debt like credit cards. Most everyone has that money out at about 18%. When you pay $25 minimum on, say, a 5000 credit card debt at that percentage rate interest, it is going to take you 30 years to pay it off. In that amount of time, you will have paid many multiples of the original debt in interest. However, if you pay it off earlier, not only will you have saved the 18% (find me a 401k that has averaged an annualized 18% return over even the last 10 years), you are then freeing up AFTER tax dollars. Meaning, for every dollar in your pocket, you've already paid 15%, or 28% or whatever income tax on that dollar before you got it, so saving $1 after tax dollar by not having to use it on debt is like earning $1.28, for example, in pre-tax dollars.

So, my point is NOT, "Don't Save". My point is, "pay debt first - especially consumer debt." Real estate is another matter. But credit card debt has got to go first. Then, by all means, save your *** off. Everything in life is a trade-off though and you have to decide how you want to live. That $300 transfer case, do you want it, or do you want to save that money. We all make those little choices every day.

By the way, just so everyone knows - I am NO model to emulate when it comes to these lessons. I had to learn the hard way, so I speak from experience. I'm not lecturing anyone about how to live their lives. But retiring at 50 is a mighty steep hill to climb, particularly if you have young children because their needs aren't going away when you are 50. Chances are, you'll be coughing up big bucks to keep them in college right around that time.
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Old 02-13-2006, 11:16 AM   #21
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Its more $.85 after tax money to the $2.00 401K money you would have in that account. (Assuming a 15% tax bracket) If someone is going to gave you free money I think you should take it.

So, if someone makes $2000 a month, and has a 401K that will match the first 3%. They would be putting $60 a month in that account, the company would match that $60. Thats $120 a month going in that account. Thats come to $36,000 in 25 years. Now lets say that you only invested in only low rate/ low risk areas of your 401K and got a rate of 3% a year. You would have $51,214 in that account. Let me see, that equals $33,214 in profit. Because you only put $18,000 out-of-pocket money in that account. I would let someone hold my $60 a month and they give my money back plus $33,214 at a time end my life when I'll need it, OK
Lets say you get 5% rate over the years. That would come to $63,135 or $45,135 in profit. All that because you choose to take home a little smaller check.

All that being said, yes X is right, but up to a point. You should take part in any 401K plan first. And only put in up to what the company will match. Then you should pay off any credit card debt you have. Because a company match is a return and is the only way to get that money.
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Old 02-13-2006, 12:07 PM   #22
 
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There a couple things that has yet to be really hit on, reduced tax bracket and the origins of the 401K. I do believe to pay yourself before anyone else and that includes paying yourself before yourself, what are you saying? The training that I am required to go through over personal fiancé teaches to you to first start by setting your goal amount then to figure out what amount is needed to reach that goal. After that you will have a figure to live by and you are to consider that your income and make your budget off of that. With a proper budget you would not need to live by using a credit card while still setting aside amount for emergency/ vacations. The 401K programs was first implemented for a tax savings for large companies, then kind of fell more into the private sector as a retirement SUPLMENT to further an employ's retirement savings at the same time lower their tax bracket. That brings me to the tax reduction side of the story. I do not have a matching employer on my retirement fund so I am forced to put aside more for myself to match someone with a matching employer. Kind of sucks but in my eyes work out for the best (That’s me being optimistic instead of pissed) that forces me in invest a higher amount of my own money, thus reducing my total taxable income putting me in a lower tax bracket. This allows me later when I am older and making less money to start removing this money to supplement my income with out taking a hit on increased taxes. This is an often overlooked benefit of the pretax contributions of the 401K a traditional IRA, but if you plan on being rich when you are older I would recommend a Roth IRA or an insurance plan along the lines of a Universal Life Fund where the money you put in is already taxed and your profits are not taxed when removed. I am not trying to say what one should do with their money I am here inputting my opinion take it for what it is worth.
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