What % of my salary should I be putting in my 401k if I want to retire at 60?

Question

I am 38 and currently earn $65,000/year. My wife earns $32,000. We have a 27 year mortgage and 2 kids under age 9. I have $105,000 in my 401k and contribute 5% of my weekly salary. My wife has no retirement plan. Should I stay put or increase my contribution?

Answer 1

lots of advice....if you want to retire at 60 you'll have to bump it up. Your mortgage will not be paid off and if you start tapping your 401k that early then you won't have enough if you both live to 95....I'd bump it up to at least 10%. I'd also put 5% of your wife's income into an IRA each year.

Your kids are going to school in 10 years. No way will you be able to save enough for you and them now...too short a time frame. Pack as much away for yourself as you can and then borrow for their education. The compounding effect that you'll get on your retirement accounts will be more then enough to take care of any loans you'll have outstanding when you retire. Same goes for trying to pay off the mortgage...instead of paying extra on that, put that extra amount into a ROTH IRA. You have household income of 100k. Adequate retirement will require an income of 75k (assuming SS will provide for rest). That means you'll need 1.9 million dollars in your accounts. Contributing 9k (10%) a year won't get you there...you'll have to bump that up significantly (up to 15k++) or you'll have to consider retiring at 65. That last 5 years of income will be huge!!!!

Answer 2

Try increasing it to 10% and see how you handle that. If you can do that OK, then go up another 5% to 15%. Ideally, try to put the maximum amount into your 401k every year. If you can't do that, then do the 5% increments until you feel that you are putting in the most that you can put. My husband and I used to take half of whatever pay raise he may have gotten that year. If he got a 3% raise, we put 1.5% in or a fixed dollar amount. Maybe your wife could try putting a small amount of her salary every week into a savings plan of some sort, a Roth IRA is a good idea, as you do not make over the $166,000 amount. You both sound like you are right on target and should have a very nice nest egg by the time you choose to retire.

Answer 3

Your family gross income is $97,000. You need assets of 3 times this for on hand contingencies. You have only $105, in the 401k at this time. What equity do you have in the House? You should be putting $12,000 per year into some investment.

Real estate is a good one, putting funds into annuities for your children education now is also something you can look into. Make certain the insurance coverage for you and your wife for the next (15) fifteen years is enough to pay off all the family debts 2 times over. IF AFTER $12,000 is expended for these things, you have funds left over, put it in the 401k.

I FELT LIKE I HAD I MADE WHEN I FACED THE SAME CIRCUMSTANCE. Then there was a loss of income by a spouse and I found myself up against a rock. Thank goodness I had the support of additional real estate.

Answer 4

That totally depends on how your 401K is invested and what return you get on it (how fast it's growing) now and for the next 22 years, and how much you'll need to live the way you want to when you retire. You've made a good start by having that much in already.

You might play around a little with Fidelity's retirement planning tool at http://personal.fidelity.com/planning/retirement/content/myPlan/index.shtml?imm_pid=82&immid=00129&imm_eid=e12647&buf=999999

Answer 5

I think there are some bigger problems to address. Do you have other debt. If you retire at 60 you will still have 5 years left on your mortgage. Will you have enough saved to pay your mortgage plus college for your kids? Pay off all debt - start a college fund for your kids -

www.daveramsey.com

Answer 6

I depends on how much you need for retirement. If you max out 401(k) and you and your wife max out Roth IRAs, then you'll have about 2 million after taxes at 10% interest. At 12% it would be about 2.5 million.

Answer 7

You need lots more.

At your age, and combined income, you should have more than $200,000 in a 401k. Might be more your wife's fault than yours.

Answer 8

You have to send your kids to Harvard first.