How much would I have to invest if I want to retire by age 60?

Question

I am considering investing in only a 401(k) and and IRA. I would like to know how much should I contribute if I want to retire by age 60(currently 30)? I would also like to know what percentage should I invest in my company stock (Sprint).
Thanks for all the suggestions, I am really clueless about all this...

Answer 1

You left out a few important facts for anyone to be able to answer this. The most important are

1) How much do you need to live on in retirement?
2) How comfortable are you with fluctuations in the market?
3) Will you have any other sources of income after 60? (traditional pension, inheritance, etc.)?

To answer your last question first, be very careful about keeping any of your 401k in your company stock. If your company falters, you may end up losing your job and some of your retirement funds at the same time!

The best thing to do is to go to one of the many retirement calculators and start entering numbers for your 'best guesses'. I like the ones at Fidelity:

http://personal.fidelity.com/planning/retirement/plan_overview.shtml.cvsr?refpr=rrc201

Using of these calculators you can change your assumptions and plans and do 'what-if' analysis on your retirement.

Answer 2

Basically, the answer is as much as you can. But if you want to be safe, invest at least 15% to 20% of your income. That is a lot, but if you consistently save this much, you probably will be able to maintain your lifestyle in retirement largely unchanged from your working years. The webpages listed below explain this in greater detail.

Don't invest more than 10% of your savings in company stock. Even that much may not be a good idea. Diversification of your investments is best for long term growth. Ask former Enron employees about the risks of investing heavily in their employer's stock.

Answer 3

This is a great question, but when analysed fully you begin to see the cracks appear in one of the greatest ‘cons’ of all time. The myth of retirement.

Someone has set up a standard game plan for everyone. It basically goes as follows:
Age 0-5: Baby – Grow Up
Age 6-17: Child – Go to School
Age 18-21: Student – Go to College
Age 22-65: Adult – Work
Age 65+: Senior Citizen – Retire and Die

Why is your question such a great question? Because it challenges the standard plan.

What most people really want to achieve is ‘Financial Independence’. It is not ‘Retirement’.

Retirement usually means that we are no longer dependent on work for our income and daily living needs. Our income is independent from our occupation.

So what you really want is ‘Financial Independence’ much earlier than scheduled for us in the standard game plan. In fact maybe the game plan we really want is more like:
Age 0-5: Baby – Grow Up
Age 6-17: Child – Go to School
Age 18-21: Student – Go to College
Age 22-39: Adult – Work towards Financial Independence
Age 40+: Financially Independent – Enjoy Life

So now that we have a goal of Financial Independence, we need to set a timescale to reach that by and a means of reaching that goal.

In this context we are generally talking about a savings and investment plan that will give us a sufficient amount of money to live off for the rest of our lives.

We will need to equip ourselves with the necessary knowledge and tools to make this work now.
To be successful we will need patience, discipline, and wisdom. But most importantly we need a plan.

It may prove expensive to acquire that much needed wisdom on our own. Learn by other peoples mistakes. Learn from other peoples successes. Read some books. Visit our local book store and find books that we like and feel comfortable with.

Some of the titles I have on my bookshelf include:
One Up on Wall Street by Peter Lynch
How to make money in Stocks by William J. O’Neil (Founder of Investor’s Business Daily)
The Millionaire Next Door by Thomas J Stanley and William D Danco

Check out web sites like fool.com and yahoo finance.
Investigate trading strategies with a proven track record over 3, 5, 10, and 15 years.

Pick something that we understand, find easy to use and will help us realise our goals. Pick a strategy where we can take responsibility for your investments and be in full control of our capital.

Systems like the Stocks Monthly system are definitely worth investigating once we are up to speed with the nuts and bolts of investing.

Answer 4

If you want to live the $30,000 a year in today's income You will need to have $97,000 just to pay off that one year. If you live to be 95, it'll cost you $384,000. My guess is you will need to sock away $7,000 a year to achieve that lifestyle based on 12% average growth which is the historical average of the SP 500. You should never put money in one company for 30 years because few company's grow for that long. Go for an index based on the SP500, the SP 400 and or Russell 2000.

Answer 5

sorry, no hard and fast numbers here, but I do well on tax free munis. I'm 56 and haven't worked in four or five years.

Yeah, I socked every extra buck into them, but luckily with a pretty good inheritance I was able to quit working.

Blows my mind how Yahoo Finance really concentrates on stocks... always blames everything on something the gov does...

I sleep well on my munis,,,, they fluctuate about a dollar a year, if that, and I still get my income.

Answer 6

I have some charts in Appendix A of my free book that will definitely help you out. Click on my profile and read my info to get the website. Download the book and go straight to Appendix A. Let me give you an exerpt from my book:

"So now we come to the chilling conclusion: even people in their early 20's must contribute an absolute minimum of 10% of their annual salary to retirement accounts if they hope to have a somewhat secure retirement. Single digit percentage contributions are inadequate for any age. Let me say this again, and I want you to read this sentence as slow as possible until it sinks in: No matter what age you are, if you (and your employer) are contributing anything less than 10% of your annual salary to your retirement account, and Social Security winds up reduced or gone, then you are SCREWED!!!! I don't have any nice way to say this. And please do not kill the messenger. Instead, kill Professor Gordon and his equation which is predicting mediocre future stock returns. Unfortunately, his equation has been right EVERY time this last century. High stock prices (which they are right now) result in low future returns. This is as steadfast as the law of gravity or laws of thermodynamics." - Appendix A.

The amount or percent you should contribute depends on what kind of income you want to generate while in retirement. This depends on the size of your nest egg, how much you withdraw from it every year, other sources of income, and your Social Security checks. It is hard to get an exact number at this point in your life, especially since life in 30 years might be very different for you. I am in the same boat, since I am 31. However, we need at least some kind of target to aim for, even if it is a blurry target. Having no target means we are just saving some arbitrary amount and hoping for the best. We can do more than hope ... we can estimate.

In addition to my book, go through a few retirement calculators on the web to help you get a ball-park estimate. Here are some free calculators you may find helpful. Be sure to carefully read the assumptions used for the calculations. Most of these ask you to input a nominal return. (I would suggest using a nominal return of 7 - 7.5% in your working years, and maybe 5 - 6% nominal return in retirement. But play around with the numbers.) Use several calculators to get a consensus on your answer.

- http://www.bloomberg.com/invest//calculators/retire.html
- http://money.cnn.com/pf/retirement
- http://moneycentral.msn.com/retire/planner.aspx
- http://apps.nasd.com/investor_Information/Calculators/nasd/retirementcalc.aspx (This site calculates your contribution amount and shows the incremental amounts for each of your working years, based on inflation.)

Each person is unique and a particular rule-of-thumb may not necessarily apply to you. Barring that, we need to start somewhere. Here are some stats that may help you in your planning:

1) It is recommended that you withdraw 4 to 6% of your nest-egg each year while in retirement. Anything above this jeapardizes your principal.

2) It is recommended that you retain 70 - 80% of your pre-retirement income while in retirement. For example, if you made $100,000 per year from your job at age 59, you will want to aim for an income of $70,000 to $80,000 per year while in retirement.

3) It is recommended that you save 10 - 15% of your annual salary for retirement.

(In regards to your company stock, I would recommend only buying that as a non-retirement purchase. Single stocks are not appropriate for retirement investing, IMO. Stick with mutual funds only. Too much concentration in a stock is highly risky. Remember the Enron employees who had a lot of their retirement money in company stock? They are now broke.)

Answer 7

Hi, i recommand you a good and basic tutorial for investing. it covers all Issues related to your Investing and everything around it.

http://www.investingtutorial.info/

wish it will help you.

Good Luck , Best Wishes!

Answer 8

live life to da fullest.
u might not even life to be 60.
do what ya wanna with the moneyyy
whenever ya want.
just dont waste all ur money,
:]

Answer 9

depends on your income and market return - check this tool out
http://www.bankrate.com/gookeyword/calc/401k.asp