tcpipcheck[at]yahoo.com wrote:
- quote -

If you just plug in a flat 7% return you'd get about $1.1M by age 67.
Since Bob isn't actually using these numbers for anything, that's as
good a guess as any, though it's not realistic.

- quote -

Or think in terms of real returns, meaning after inflation. The commonly
cited figure is that the S&P 500 has averaged a real return of 7% over
the long haul. So if think the past return will be repeated over the
next 30 years, 7% would be a starting point for your WAG, and that puts
you at about $1.1M in 2004 dollars by 67. Which might well be enough to
support a $45k lifestyle, especially factoring in some dollars from
Social Security, a paid off house, etc. Once you've saved up 20X to 25X
your income need, things look pretty good.

If you buy TIPS right now (inflation-indexed US bonds) the real return
you'd get over the next ten years is a bit over 2%. That might be your
floor for a "zero risk" investment and it puts you at maybe $300k at 67.
Big difference ya?

30-year projections are kind of a waste of time, except maybe as
encouragement to save, once you see "what might happen". But for
predicting, there are too many unknowns - actually, everything is an
unknown.

-Tad

tcpipcheck[at]yahoo.com <tcpipcheck[at]yahoo.com> wrote:
- quote -

He isn't doing well in the index fund if he has $70K after contributing
$60K. He needs to diversify his investment.

- quote -

I think that he will need to keep contributing longer than that and
probably up his contribution proportionate to his salary.

- quote -

He will need to have at least 12 times his annual salary in his 401K
when he retires. But he shouldn't count on working to age 67, he may
have to retire earlier because of health or family concerns.

- quote -

Maximize contribution, contribute as long as possible, and
investigate other funds. I think that it's important to have other
savings that aren't inside a tax-deferred instrument.

--
Ron

In article <d8a393d3.0405260505.67642b53[at]posting.google.com> ,
<tcpipcheck[at]yahoo.com> wrote:

- quote -

Impossible to tell. You cannot predict the future like this.

- quote -

Very unlikely. I would be surprised to see 1/4 of that.

- quote -

Well underfunded. He should max it out, keep contributing, and put
away more money outside of the 401K.

-john-

--
================================================== ==================
John A. Weeks III 952-432-2708 john[at]johnweeks.com
Newave Communications http://www.johnweeks.com
================================================== ==================

Bob is 36 years old. Bob has been contributing $10K into his 401K
account since 1998 when he was 30 years old. The 401K account is 100%
mapped to S&P 500 index fund. As of today, the account has value $70K.
Bob plans to continually contribute $10K every year into his 401K
account for the next 10 years and then he will stop 401K contribution
by the time he is 46 years old.
Bob is making $80K annual salary. He is happy and comfortable with
$45K after tax life style. He has no debts except a reasonable home
mortgage.

Bob plans to not touch the 401K money before he is 67 years old. The
401K money will be his primary source for living for ages 67 and
beyond. For the sake of discussion, let's assume Bob is expected to
live to ages 90.

Questions:

1. How much money will be in his 401K account when he turns ages 67?
2. Will the money enough to support his $45K after tax life style from
ages 67 to ages 90? ($45K is today's $. Let's consider 3% inflation.
Or feel free to plug in reasonable inflation rate if 3% is not)
3. If the 401K plan is over funded or under funded, what adjustment
you recommend?

Looking forward to reading your input. Thanks in advance.

Bob's friend