Charlie wrote:
- quote -

Spend 4% and the likelihood of running out is little. The goal should
be to have the highest principle amount possible prior to starting 4%
withdraws. I added these numbers to calculations below.

There are others ways to plan, many tools other than 401ks and IRAs to
use... but the 4% draw down is a "rule of thumb" seen on many web sites
(such as T Rowe Price, Vanguard and others).
- quote -

401k 7% contribution, plus 2.5% match (9.5% total contribution), 7%
return off 45k income, age 45, retiring at age 68 (23 years) shows this
amount:
$317,000 (assumes no raises on 45k)

IRA with no match (I am not aware of provisions to "match" an IRA).
Same 7% return, 45k income, age 45, retiring at age 68 (23 years) shows
this amount:
$259,000 (assumes no raises on 45k)

4% of 317k=12k yearly withdraw (25% of previous income)
4% of 259k=10k yearly income (20% of previous income)

"rules of thumb" usually suggest planning to replace 60-80% of income
during retirement. This example is falling well short of this "rule of
thumb".

Charlie wrote:

- quote -

If you look at the S&P, in 1960 it was 58.11. Say you bought one
hypothetical (ETFs didn't exist yet) "S&P Unit". By 2000, it was 1320.
But by reinvesting dividends, you'd have 4.02 Units. Over the 40 years,
the dividends alone gave you 4X your original investment, or 3.5%/yr on
average. To not invest those dividends you'd have missed out on that
much of the gains.

- quote -

The pre-tax saving advantage is true, but the math is different.

- quote -

There is some agreement you may spend 4% of your retirement nest egg
each year to not run a high risk of spending down your savings.

- quote -

He started too late, I'm afraid, he should consider a higher savings
rate. These numbers will return about $300K (at 8% return) or $379K (at
10% return. On a final income of $76K, this will provide only 12-15K/yr
in withdrawals.

(AARP says 60% of the individuals/families resident in the
- quote -

Median family income is just under $50K. Median means half make less.
(as opposed to average which is much higher. this is not a nit-pick, but
an important distinction)

I have an interactive spreadsheet (fussy with certain browsers, i hear)
which let you run your own forecast. It's at
http://www.joetaxpayer.com/spreadsheet.html
I'm happy to forward a copy of the sheet and/or post a downloadable version.
JOE

Charlie, do you have a financial planning question related
to your own needs? The computations you requested can be
performed without much difficulty and with certain
assumptions, but short of there being a real-life point, I
am hesitant to participate. You also have some confusion
over what IRAs are and when retirement contributions are
matched. Please clarify your goal in starting this thread:
What is it you want to know, specifically?

In some of the financial advice in print or on the Internet there is a
theme that says for stocks or mutual funds it is highly desirable to
reinvest dividends or earnings. There are usually tables or graphs
showing how much more money the investor gets over 20 or 30 years by
reinvesting. The same thing is true of IRAs and other tax-advantaged
accounts.

The question for all this is that if a person has any specified income
and invests regularly in a serious savings plan then how much actual
money will that person get to SPEND in retirement after taxes and other
significant expenses? The object of this exercise is not to pick out
all the exotic or peculiar things that might come to be but in todays
real-world environment to look at the most likely real results.

One example would be a guy who is 45 when he starts saving, has a
(median) income of $40K a year and invests, say 7% of his take-home
pay. (AARP says 60% of the individuals/families resident in the
United States make less than that amount and invest nothing.) Let us
have this man use an IRA with 50% matching for his first 5% of base pay
contributions. Then go to his identical neighbor who is an independent
contract worker with no permanent employer but still makes $40K and the
7% retirement investment (did I say with the same reinvestment of
earnings and dividends?) but who does not use a tax-advantaged account.
After 20 years how much money will each end up with, and how much of
it could each spend after taxes if they spent it all over, say, a 10
year period?