For everyone looking for a company to work for, read this......

Also what a lot of people do not understand about 401ks is the effect inflation has on their money.
Example is some guys see the they will have $600-800k when they retire in 25-30 years and think they're gonna be rich. What they don't understand is that $600-800k will only have about $200-$400k in buying power in today's dollars.
You can't survive your whole retirement with that. You will be a door greeter at walmart after a few years in retirement.

 

Also, on that note: I heard a financial expert advise that you should only withdraw about 4% of your money per year in retirement in order for it to reliably sustain itself. If I managed to save $1 million, that's only 40 grand per year. I wonder what 40 grand will provide for in 20 years?!

 

Inflation is growing at 2.5-3% a year. So technically the numbers are right IF you have your money tied into safe bonds that yield 1-3%. Most diversified portfolios usually yield 5-8%... higher risk growth plans will easily yield double digits annually. Usually when you are closer to retiring, you will switch your funds to a lower risk portfolio that has a higher allotment of bonds.

As for @Bob Dobalina , I got a challenge for ya. Could you live off of $40k a year? Your answer might be "maybe". But let's look at the big picture.

$40k/year doesn't mean you get to be in the front of the conga line at your next cruise. It is just a annual living allowance to draw your money from after you decide you don't want to work anymore. In order to be fully retired, you need to be debt free first. Otherwise you are either breaking even or going broke.

You can live very comfortably off of $40k a year if the following exist.

1. Paid off mortgage
2. Paid off all debt and student loans

If you own your own home, car, zero student loan debt, and no credit card payments, that $40k will go a long way.

Yes, inflation keeps up, but so does the value of the companies your stocks are invested in. A $5 holding in Microsoft stocks in 1990 will increase respectively over time.

Inflation works both ways

 

But $40k a year today isn't much. $40k 25-30 years from now is gonna be pennies.
The point of his comment which is the same point as mine, is you have to really put away a lot of money to retire comfortably with just a 401k. $1 million 25-30 years from now is not enough. Especially if you live longer than 20 years after retirement.
And putting away large amounts of your income takes leaves you with a lot less money to live off of pre retirement.

 

Thanks for the cheery analysis!

(I agree...)

 

Of Two Minds - The War between Public Pensioners and Tax Donkeys Is Heating Up

 

I'm currently throwing 10% of my income in retirement. I don't plan on trucking much longer so I'll sometimes add more.

If you include my company match, and don't account for social security if I recall I'm looking at 37-40k a year by age 64. Just hope I remain debt free.

 

The only thing that stays the same is change. You cant set something up decades ago and it expect it to be the same in the future. Short sighted fools, you get what you deserve for being so dense.

 

Tell us how it's done , Oh Master.