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Found my error and ran other scenarios Posted by MI-Roger [Email]  (#882) [Profile/Gallery]
(more from MI-Roger) on Sun, 5 Jan 2014 09:02:17
In Reply to: OT: Feasibility of 401(k) accounts as sole pension source, MI-Roger [Profile/Gallery]
, Sat, 4 Jan 2014 17:02:44
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I had my formulas wrong which resulted in elimination of compounded interest on accummulated savings. Duh!
Remember: These all are based on the assumption of a 45 year career with a 4% increase in pay each year. Raises, Promotions, Bonuses, Job Changes, etc., can all contribute to this average 4% growth in annual pay.
The new self managed retirement funding goal is to finish your career with a nest egg which is between 10 to 20 times your final annual income to allow you to retiree with no reduction in your standard of living.
With a total 401(k) contribution of 16% (employee and employer) of pay, and an 8% average annual return on investments, the final multiplier is 18.6 to 1 High in the recommended range.
16% total annual contribution and 6% return equals 11.3 to 1 Lower but still within range
12% total annual contribution and 8% return equals 13.9 to 1 Good.
12% total annual contribution and 6% return equals 8.5 to 1 Oops, nest egg too small. Those with a low or zero employer match will need to strive for the 8% return.
10% total annual contribution with 8% growth equals 11.6 to 1 Compared to above, less invested but earning at long term market rates places the retiree within the currently recommended range of total assets at time of retirement.
For the few readers who may have pensions from their employer, remember that at the commonly recommended 4% withdrawal rate, a $40K annual pension from your employer is equal to $1 Million in accummulated assets. So you can add that $1M to your other savings to see how you stand.
Now, if I can just convince both of our kids of the importance of steady long term investing, I will have one less thing to worry about.
_______________________________________ Saabs owned: 2008 9-5 Aero Sedan, sold at 227K miles 2006 9-3SC 2.0T - Wife's daily driver 2000 Viggen Convertible - Sold May, 2022 1964 Quantum IV Formula Car - Retirement project 2000 9-5lpt Sedan, sold at 318K miles
, Sat, 4 Jan 2014 17:02:44
, Tue, 7 Jan 2014 10:56:41, Sun, 5 Jan 2014 09:02:17 <-- Viewing This Message, Sun, 5 Jan 2014 21:08:11, Mon, 6 Jan 2014 05:12:47, Mon, 6 Jan 2014 08:21:52, Mon, 6 Jan 2014 09:09:14
, Sun, 5 Jan 2014 09:45:57
, Sun, 5 Jan 2014 03:08:35, Sun, 5 Jan 2014 06:10:10, Sat, 4 Jan 2014 17:30:21
, Sun, 5 Jan 2014 06:15:34
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