Reply to Why max out 401k?

Forum Index » Money and Finances

Reply to "Why max out 401k?"

Subject:

Emoticons





More smilies

Text Color: Font: Close Marks

[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]I am in my mid-40 and currently save 10% of my salary towards 401k. My salary is 120k and have ~500k so far. I know these are small numbers compared to what most people post on this board but not bad realistically!

When I run a retirement calculator, it seems like I am on track for retirement and, including SS, I will have around 9k in monthly income. That sounds good to me. I don’t know how accurate the calculator I used is but, supposed it is, if I am on track, why would I want to max out my retirement savings? to have more money when I am old?

I have 2 children, but somehow the thought of a bigger inheritance to them doesn’t feel like a great motivation. I would rather enjoy my time with them now than passing them on money after I am dead! My husband also has his own fund with approximately the same balance and contribution. 
[/quote]

Curious the numbers you used to get to 9k income. If you retire at 62, you'll get maybe 2500 in SS pretax. To get to 9k monthly, (and this is still pretax), you would need to have 2.6m in your 401k to get the remainder (6500) from four 401k. You aren't getting to 2.6 in 20 years if you are currently at 500k. [/quote]

Compound interest would get her almost exactly to 2.6M in 20 years.[/quote]

Exactly. don't know why people were questioning this.[/quote]

Math is hard.  They probably aren't factoring in future contributions, matches and raises. [/quote]

And you are not factoring in inflation and market corrections. Losers have been staggering in the last 2 years. Go ask a retiree. [/quote]

That has zero to do with the question of how does $500k + 10% of income + company match + 20 years compounded interest get someone to
$2.6M. Also, most people use 6% as the average rate over time and that takes into account market corrections.

You are correct that what people cannot do is treat $2.6M in future dollars as equal to $2.6M in today’s dollars due to inflation (I was the poster that previously pointed that out). But that had nothing to do with the actual math involved in determining what $500K will equal in the future based on a certain set of assumptions.

[/quote]

DP. The point is that a lot of economists are questioning whether the 6% return rate over time is a good number. I saw a paper the other day that extended the data window that was covered by the economists that made that calculation back just a few years and the average rate of return dropped significantly. Plus, even if the 6% return # is good over say, a 100 years, there could be 30 year windows in which the return is much lower. It’s why financial advisors will give you a range of probabilities. [/quote]

Agree. The point is don't base your decisions on this $2.6M number alone. That's one of many possibilities, and many things affect what the ultimate total will be.

Also we have no idea how OP is invested. Some people are in stable value fund and don't even know it. Lots of people are in target date funds which will glide away from stocks over time. Even setting aside what OP should be invested in based on her age and risk tolerance, you can't assume an average stock market return when she might not even be in/stay in stocks for the next 20 years.

She should go to Bogleheads if she wants more help.[/quote]

Options

	Disable HTML in this message
	Disable BB Code in this message
	Disable smilies in this message

Review message

Search Recent Topics Hottest Topics