I have $165,000 in my 401k. I'm 31, will I be able to retire when I'm 55? I have no debt other than my mort.

Question

I contribute $14,000 per year to my 401k and make too much to contribute to a Roth IRA. We have our vehicles paid for and no credit card debt.

I have 25% in Emerging Markets, 20% in Small Cap, 40% in Large Cap and 15% in Mid Cap funds through Vanguard.

Answer 1

Okay -- I'm not sure if you're married or not, but let's assume you're not, which means you make about $110k+, if you don't qualify for a Roth. If you're only putting $14k towards your retirement, you're really missing an opportunity to retire earlier than that.

But as it is, your plan will pile up about $4M over the next 24 years. But your expenses will rise too, and you'll need about $250k per year to live like you currently do. You'll have 16 years expenses saved up, with 30 years or so left to live. That'll probably won't be enough (even given that you continue to make money on your savings).

Of course, if you save $20k per year, you make it to $5M and you have 20 years expenses at age 55. That's probably enough.

Of course, if you decide to have kids, you can kiss these calculations goodbye! Ditto if you marry and she takes half your money at some point.

Good luck,

Doug

Answer 2

At the rate you are going, you could have over $2,000,000 at the age of 55. (That is assuming an average 8% return which is actually a little on the low side and that you never increase your $14,000 contribution). Lets say that you go with a 5% return on that after retirement and live off of the interest then you will have over $100,000 a year for the rest of your life. Adjusting for inflation will lessen the impact this money brings though. However, you should have no problems living off of that. Also, you might be able to find better performing investments and make better money.

If you have 1.2 million then you would have over 9 million when you retire. Much nicer scenario but expecting a person to have a savings of 1.2 million at the age of 31 is ridiculous.

Answer 3

what are you going to live on between 55 and 59 1/2??? do not stop putting all you can in the 401K but remember that you can not touch it until you ar 59 1/2. i figure as a rule of thumb it takes about 2/3's of what i made to live a very very worry free retirement.

i will keep it really simple you will need to do two things -- first you will have to worry about health insurance from 55 to 65 -- that can be the big kicker -- remember even if you have insurance coverage that pays 80% == 20% of a super big hospital bill can really put a dent in your savings. second get all of your toys out of your system now, that little sports car or the speed boat. if you take care of those two and keep doing what you are doing you will find that once your retire two things will happen -- because you have totally changed your life the first year you will spend a little more than maybe you planned for but after the first year you will find that you will have more money than you can spend (unless you just go out and give it away) in fact you will be buying cd's with leftover cash.

one other thing i did -- even thought i did not need to take out any money from my 401K when i was 591/2 i looked down the road and did some figuring and i saw if i waited until i was 71 i would have to pay so much in cap gains taxes i was better off switching some of the 401k money from my untaxed account to my tax account.

Answer 4

That all depends on how smart, or how stupid, you are with your 401K money. Put it in a reliable mutual fund such as Dodge & Cox International, and you can plan on it doubling in value approximately 4 times (at a 12% annual growth rate) between now and 55. That would be approximately $2.6 million by then. Can you live the rest of your life off of that amount? Depends on your lifestyle.

If you put it in a fund that only returns 7% annually for the next 24 years, then the money will only double about 2.4 times. So you would have more like $924,000.

One or two percentage points of earnings each year will make an enormous diffference in what you have at 55.

Also, if you're maxed out on your 401K in terms of contributions, find other, non-retirement things to invest in - real estate, individual stocks, etc. Retirement investing is great, but you don't want to live your whole life preparing for your last 10-15-20 years on the planet.

Everyone says "oh but you need to save for retirement - defer paying income taxes now and pay them when you retire - you'll be in a lower income tax bracket then." Says who? Congress can change the income tax rates by a simple vote, so there are no guarantees of any kind regarding lower tax rates in the future.

Answer 5

It sounds like you are definitely on the right track.

That really depends on a few other factors.

What is the money invested in? Make sure you are diversified enough so that as the market moves up and down, you don't loose much.

How much money will you want/need to live on per year when you are 55? Most financial stuff I have read says that you should figure on 70-80% of your "just prior to retirement" salary to live comfortably without any significant changes in your lifestyle.

You are doing great at 31 years old.
You probably have more saved than a lot of people that are within 10 years of retirement!

Answer 6

Sure, God willing.
Just remember, one big health problem and you could be wiped out financially.
I expected to work for at least another 15 years. My body had other plans.
Save like mad, but be generous to God!

Answer 7

No, at 31 y.o. you should have closer to at 1.2 M for a retirement @ 55

Answer 8

My cousin did although he did inherit his moms estate just before he did.
He he