Being a new college grad, I am at the beginning of my career making $50,000 a year. I am currently putting 10% of my paycheck into an aggressive 401k portfolio. I have read all these articles about how if I start putting money into my 401k early on, I could potentially have over a million dollars by the time I retire.
However, I have been thinking about what my life will be like after I retire and I seriously think there wont be much I can enjoy in life that requires that amount of money. I wont need a huge mansion, I wont need a ferrari, etc. It would be nice to have those luxuries now while I am still young, but definitely not when I am retired. Sure I could go on vacations all the time after retirement, but that only costs a couple thousand dollars per trip and I probably wont be going all the time. I think I could live comfortably on $20000-30000 a year... maybe even less. So I guess my question is, should I put less into my retirement after 10 years or so?
2007-09-04 14:59:05 · 11 answers · asked by grandmasterlau 2 in Business & Finance ➔ Personal Finance
YES YOU DO!!!!
Why do you want to fritter away the best opportunity to make your money WORK FOR YOU????
When you are young, compound interest is ON YOUR SIDE... turning small sums into BIG amounts.
You cant just start doing that when you are 30.. 35.. 45.. whatever.....
Dont be a fool... you started on the right path.... STAY THERE....
2007-09-08 09:59:04 · answer #1 · answered by I Can Count To Potato 7 · 0⤊ 0⤋
the biggest expense you are forgetting about after retirement is healthcare. You could spend $20k in prescriptions alone by then.
Keep saving, but you may want to check out ROTH IRAs too. 401k is great up to the point where your employer stops matching funds. After that invest in a Roth IRA. The money you make in your Roth IRA will not be taxed when you take it out. At your age that should be a significant amount. all the money that your 401k makes will be taxed when you take it out. Pay a little now or a lot later is the basic theory.
2007-09-04 16:29:55 · answer #2 · answered by Toolman 3 · 0⤊ 0⤋
Trust me! If you put away 100% of your pay towards retirement, it will not be enough. A million dollars to retire on is NOTHING. Even in the most aggressive return rates, you cannot outpace inflation and the rising cost of living. In 50 years, your million will be nothing, spread over the 20-30 years of life after retiring age. and in 50 years, the life-span will be much much longer, so your million will be spread even thinner.
If I were you, while you are young, try living now on $20k a year, and put the other $30k away. Invest it in property now. See how living poor now feels. Then re-evaluate your thoughts above.
Try it for a year. how bad could it be?
2007-09-04 15:07:20 · answer #3 · answered by mezizany 3 · 3⤊ 0⤋
I assume you are about 22 and will retire at age 67. What will inflation average over the next 45 years? Perhaps 4.0% So in 45 years $30,000 in todays purchasing value will be worth $5,135.95. You can expect to live an additional 20 years after retirement. By then the purchasing power of $30,000 will be worth $2,343.98.
I believe you are significantly underestimating what you would need to retire comfortably (in terms of 2007 dollars). You might even be married. Own your own home...property taxes, maintenance, utilities... Health insurance and prescriptions.
2007-09-04 16:09:09 · answer #4 · answered by skipper 7 · 0⤊ 0⤋
There is NOTHING more fun than being able to give money away. It looks like you are investing $400 per month. Assuming you are 25 and you continue at the same rate until age 65, you will have about $4.5 million. That should allow you to draw $360,000/year and still keep up with inflation from that point on. $360,000 in 40 years will be worth about the same as $90,000 today.
2007-09-04 15:31:06 · answer #5 · answered by STEVEN F 7 · 1⤊ 0⤋
Sorry! You really do. Old people buy a lot of boring expensive stuff like nursing home care. It is a big myth among the young that it is cheap to be old. I recommend you save at least twice that, the power of compounding is in your favor if you save aggressively when you're young. By the time you're 40, it is pretty much too late. Suppose you accidentally saved too much (!), you could always cut back on your saving later.
2007-09-08 13:18:43 · answer #6 · answered by ECGRL 2 · 0⤊ 0⤋
$20K to $30K a year will just pay for utilities , property taxes , auto maintenance and groceries now !
40 years from now you will need 5 X that .
Check the price difference on a house , taxes , autos and auto services from 40 years ago !
Replacing a roof now costs $5K to $10K , then it will cost $50K ( not covered by insurance , out of pocket )
35 years ago I bought a new VW super beetle for about $2500 and I remember paying 25 cents per gallon of gas .
Last week I had to pay almost $1K for a fuel pump replacement .
New homes south of San Francisco sold for $10,000 in the 50s .
You totally forgot to factor in inflation .
Maybe a class in practical econ if they offer one ?
>
2007-09-04 15:10:25 · answer #7 · answered by kate 7 · 4⤊ 0⤋
no
you are a wise person to realize that BEFORE you are too old and sick to go on a cruise or are too sick to do anything other than watching TV anyway
put some aside for sure, plots of land area very good option, they will COST you taxes every year instead of nice income increases every year
yet when you sell , or reverse mortgage you will do ok
put 20K into 2 pieces of land, then pay the taxes, spend the rest of your money then
when and if you have to sell that land , hopefully never, then do
2007-09-04 15:23:53 · answer #8 · answered by Anonymous · 0⤊ 2⤋
Another thing - inheritance. Wouldn't you want to leave your kids some money? Or church, charity? I would and will. True millionaires do 3 things with money - invest, give, spend, not just one - all three.
2007-09-04 15:22:15 · answer #9 · answered by gmfeds 2 · 2⤊ 0⤋
Now, no. In 10 years, ask again. How long do you plan to live?
2007-09-04 15:05:12 · answer #10 · answered by Anonymous · 1⤊ 1⤋