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Parts of the 1970s and the 1980s has very high rates of inflation. Of course we don't know what the rate of inflation will be in the future, so I find it simpler to just work with today's dollars and use real (i.e., after-inflation) rates of return.
Take a look at Jeremy Siegel's Stocks for the Long Run, and you'll see that over long periods of time the U.S. stock market has given real returns in the range of about 4%-8%. So if you want to be cautious use 4% or 5% as the after-inflation return from stocks. At such a young age I would probably just put everything in stocks, since the real return from bonds over the next few years will likely be very poor, and possibly even negative.
Using an $18,000 contribution per year to the 401k in 2016 dollars (and remember this limit gets bumped up according to inflation) and using a 4% real return, and using your starting balance of $28,000...
... in 30 years' time you'll have a little over $1 million in today's dollars. That should be plenty to support your stated needs.
Parts of the 1970s and the 1980s has very high rates of inflation. Of course we don't know what the rate of inflation will be in the future, so I find it simpler to just work with today's dollars and use real (i.e., after-inflation) rates of return.
Take a look at Jeremy Siegel's Stocks for the Long Run, and you'll see that over long periods of time the U.S. stock market has given real returns in the range of about 4%-8%. So if you want to be cautious use 4% or 5% as the after-inflation return from stocks. At such a young age I would probably just put everything in stocks, since the real return from bonds over the next few years will likely be very poor, and possibly even negative.
Using an $18,000 contribution per year to the 401k in 2016 dollars (and remember this limit gets bumped up according to inflation) and using a 4% real return, and using your starting balance of $28,000...
... in 30 years' time you'll have a little over $1 million in today's dollars. That should be plenty to support your stated needs.
Yup this is what I do. I have 3 different models. Real returns of 4%, 5%, and 6% and I see what I need to end up with a 4% swr of $80k/yr or $ 2 million.
Parts of the 1970s and the 1980s has very high rates of inflation. Of course we don't know what the rate of inflation will be in the future, so I find it simpler to just work with today's dollars and use real (i.e., after-inflation) rates of return.
Take a look at Jeremy Siegel's Stocks for the Long Run, and you'll see that over long periods of time the U.S. stock market has given real returns in the range of about 4%-8%. So if you want to be cautious use 4% or 5% as the after-inflation return from stocks. At such a young age I would probably just put everything in stocks, since the real return from bonds over the next few years will likely be very poor, and possibly even negative.
Using an $18,000 contribution per year to the 401k in 2016 dollars (and remember this limit gets bumped up according to inflation) and using a 4% real return, and using your starting balance of $28,000...
... in 30 years' time you'll have a little over $1 million in today's dollars. That should be plenty to support your stated needs.
I guess I'll start looking at the other calculators.
I've put most all my roth ira money in an index fund of the s&p 500 (and some in the commodities market, especially oil and silver. the 401k money is in the 2060 fund which i suspect is mostly stocks. Do you recommend I put it in real company stocks ?
currently have 28k in my 401k and 20k in my roth ira at age 22 (will be 23 soon).
After doing some calculations even if I max out my 401k and roth ira like I've been doing, I'm not going to have enough for retirement (accounting for inflation it will only be around 1 million...I put this money in index funds and company determined mixed funds which will likely only give me a 6% return).
The company I work for offers a pension if I work there for 5 years (going on my second year), but it caps at 3k/month. Honestly, I'm not even looking at it right now. I don't believe social security will be around when I retire.
anyway, besides that, what other tax saving or profitable ways could I save for retirement? should I just suck it up and put the money is high risk funds?
You can save however you want but at your age it makes little sense to be leaning so far into "mixed"(balanced) funds. Is there some reason you aren't will to go something like 80-90% stock funds for at least a few years and then very gradually increase your bond holdings? You have 40 years to recover your losses...and yes, you'll have losses even with mixed funds and less of an upside to recover with.
I'm 26 and you sound a lot like me although I wasn't able to max my 401k quite at your age.
I currently contribute the max to a Roth and roughly $10,000 into an employer traditional 401k and $1800 ish to the Roth 401k. This all come from my second job. I'm a crazy saver that works a second job for that purpose alone. I save another $18,000 a year in a taxable account from my primary income. This has many uses but I'm much more conservative with the taxable account since the money will be used to purchase a home. My goal is to retire at around 45 years old.
I may have missed a mention of an employer 401K match which should also be able to help "drop the nut" further
OP is doing well.. and on the road to early retirement... I hope my kids start off the same way!
It is pretty frightening/daunting that in order to live a "meager" $33K retirement that one actually has to save so much money
I'm not so concerned for myself or people on this board.... but when I look around at all of my friends and college educated folks burdened with student loans, happy to be making $15 an hour, I keep wondering how this is going to shake out.
You can save however you want but at your age it makes little sense to be leaning so far into "mixed"(balanced) funds. Is there some reason you aren't will to go something like 80-90% stock funds for at least a few years and then very gradually increase your bond holdings? You have 40 years to recover your losses...and yes, you'll have losses even with mixed funds and less of an upside to recover with.
my money is in stocks, but just index funds. Should I start investing in specific companies? I would probably start investing in any funeral company out there. Any other companies you would suggest?
my money is in stocks, but just index funds. Should I start investing in specific companies? I would probably start investing in any funeral company out there. Any other companies you would suggest?
Specific companies *can* bring higher return, but absolutely bring higher risk. Most people far overestimate their tolerance for risk and volatility. There's a reason that in 2008 most people sold, despite knowing intellectually that stocks would return.
Index funds that simply mirror the components of an index will return just short of the market return for that index (somebody has to pay the 1 or 2 people running the index fund).
While that average return may sound 'bad', average is a perfectly fine goal to strive for. Over time average, for an investor who puts away money regularly, is more than sufficient, and getting there is very low stress. You won't beat the market-but the market won't beat you.
Bogleheads web site is a good resource for this philosophy.
Some people believe in actively managed mutual funds-it's still a mutual fund, but a professional does the picking. They do the heavy lifting, but you're trusting they're going to do it right. A member of this board has done extremely well with a major actively managed portfolio and a newsletter directing his weighting of actively managed funds.
If you decide you'd like to invest in specific company stocks, you should know the basics of the big 3 financial statements-I personally zero in on cash flow-and have a reasonably held feeling that the company you want to invest in has something going for it that not every investor believes. Note I'm not talking about (illegal) inside information, but you need to believe something besides the generally held market wisdom, e.g. 'Brexit won't actually happen' or 'copper prices are going to rebound,' and think out what that thesis means in the broader market. If most other people think copper is going to stay low, then copper mining companies are a poor bet. If they go up-surprising most people-their stock prices will *probably* go up significantly higher.
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