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Starting a retirement fund in your mid 30’s?
Posted on 8/6/20 at 9:33 pm
Posted on 8/6/20 at 9:33 pm
If someone were to start a retirement account in their mid 30’s do you think they’d be prepared to retire by 65? Company matches 6% (and the person is only contributing the 6%) and annual salary is 80kish.
14
Posted on 8/6/20 at 9:36 pm to GAFF
Do a 401k calculator
Posted on 8/6/20 at 9:39 pm to GAFF
Too many variables to say. Such as what other investments this person has, single / married, estimated monthly expenses in retirement, etc
But no question this person would be more prepared if they do vs if they don’t.
Not to mention the fact that if this person does not participate they are giving away a free 6%
But no question this person would be more prepared if they do vs if they don’t.
Not to mention the fact that if this person does not participate they are giving away a free 6%
Posted on 8/6/20 at 9:45 pm to GAFF
Way too many variables but the most important is expenses. I played out a scenario below just to give you an idea.
Assumptions:
starting salary = $80K
raise = 4% per year
contributions = 12% per year (6% employee and 6% employer)
returns = 7% per year
At 65 (assuming the full 12% of $80K for 2020) the total balance would be $1.5M at the end of 2050 (assumed 35 in 2020). The safe withdrawal rate is hotly debated but a relatively safe rate is 4% per year meaning that you could spend $61K in the first year of retirement and increasing for inflation after that.
Realize that $61K in 2050 is a lot different than $61K in 2020. That would all be pre-tax so you would have to pay taxes but you might get social security at some point (big unknown due changes due to solvency).
Assumptions:
starting salary = $80K
raise = 4% per year
contributions = 12% per year (6% employee and 6% employer)
returns = 7% per year
At 65 (assuming the full 12% of $80K for 2020) the total balance would be $1.5M at the end of 2050 (assumed 35 in 2020). The safe withdrawal rate is hotly debated but a relatively safe rate is 4% per year meaning that you could spend $61K in the first year of retirement and increasing for inflation after that.
Realize that $61K in 2050 is a lot different than $61K in 2020. That would all be pre-tax so you would have to pay taxes but you might get social security at some point (big unknown due changes due to solvency).
Posted on 8/6/20 at 9:47 pm to GAFF
Assuming everything stays the same over the next 30 years (your 6% contribution level, your income with 2% annual growth, employer matching 100% at 6% of your salary, a 6% rate of return, etc) you’d have ~$974k without fees at age 65.
Can you retire on $974k?
Can you retire on $974k?
Posted on 8/6/20 at 9:51 pm to GAFF
I’m 34. I started saving two years ago and maxing. I better hope it’s possible.
This post was edited on 8/6/20 at 9:53 pm
Posted on 8/6/20 at 10:16 pm to DiamondDog
Start saving more than the 401k match and invest in a Roth as well.
Posted on 8/6/20 at 10:26 pm to MikeD
Every raise I get I increase my contribution 1%.
I’m working my way to the max and my match is 3%.
I’m working my way to the max and my match is 3%.
Posted on 8/6/20 at 10:27 pm to GAFF
How much do you spend? How much do you plan to spend in retirement?
Posted on 8/6/20 at 10:30 pm to MikeD
quote:
Start saving more than the 401k match and invest in a Roth as well.
I can’t. Make way too much money
Posted on 8/6/20 at 10:36 pm to DiamondDog
Backdoor Roth
Posted on 8/6/20 at 10:39 pm to DiamondDog
I think you are missing a point.
The retirement accounts are simply tax advantaged to encourage personal saving for retirement.
If you make too much to contribute to a Roth, you would hopefully also be saving in another account for retirement.
The retirement accounts are simply tax advantaged to encourage personal saving for retirement.
If you make too much to contribute to a Roth, you would hopefully also be saving in another account for retirement.
Posted on 8/7/20 at 5:32 am to GAFF
quote:
If someone were to start a retirement account in their mid 30’s do you think they’d be prepared to retire by 65? Company matches 6% (and the person is only contributing the 6%) and annual salary is 80kish.
Easily by 65. You are talking 30 years of investment. You do need to vote people with common sense into office.
Posted on 8/7/20 at 6:10 am to GAFF
You've provided too little info to answer accurately.
Just getting company match probably wont get you to a comfortable retirement. Good rule of thumb is you need 25 times your spending at retirement (adjusted for inflation) minus any pension,SS etc... so if you are looking to replace $80k spending you would need 2 million to retire today. In 30 years you may need ~$168k to replicate that spending (assuming 2.5% inflation) $168k annual spend times 25 is $4.2 million. Cut annual spending or cover some of it with other income sources and you lower that number. Figure out your target and work back from there using conservative assumptions for inflation and returns.
I'd work towards maxing 401k and Roth contributions and if you get there eventually start investing in non retirement accounts and/or real estate.
Just getting company match probably wont get you to a comfortable retirement. Good rule of thumb is you need 25 times your spending at retirement (adjusted for inflation) minus any pension,SS etc... so if you are looking to replace $80k spending you would need 2 million to retire today. In 30 years you may need ~$168k to replicate that spending (assuming 2.5% inflation) $168k annual spend times 25 is $4.2 million. Cut annual spending or cover some of it with other income sources and you lower that number. Figure out your target and work back from there using conservative assumptions for inflation and returns.
I'd work towards maxing 401k and Roth contributions and if you get there eventually start investing in non retirement accounts and/or real estate.
Posted on 8/7/20 at 6:49 am to TorchtheFlyingTiger
quote:
annual spend times 25 is $4.2 million.
The average person isn’t retiring a multimillionaire. They are just low fixed income
Posted on 8/7/20 at 6:54 am to DiamondDog
The goal at the start is to get the low fixed income as large as possible
Posted on 8/7/20 at 7:23 am to GAFF
Even if you were starting at age 22, IMO, you would want to be putting at least 15% of your own money (not counting match) into retirement. If you are starting in the mid 30s, I hope you plan on retiring on a much lower income than your current or else you may need to be putting 20-25% of your own money into retirement accounts to catch up.
Posted on 8/7/20 at 7:43 am to notsince98
The person also has a company pension but not sure if he should count on that. He works for a Fortune 500 so maybe it’s safe. He does add 1% percent to his 401k each raise he gets and his company routinely gives yearly raises.
His wife and him are considering pulling out 30k and 40k respectfully from their 401k’s to pay off every single debt but their house. This will leave both with less than 10k in each account. He’s 33 she’s 29. He’s confident that they both can make up the loss before they retire. Says it’ll drop their monthly debt by $1500+.
His wife and him are considering pulling out 30k and 40k respectfully from their 401k’s to pay off every single debt but their house. This will leave both with less than 10k in each account. He’s 33 she’s 29. He’s confident that they both can make up the loss before they retire. Says it’ll drop their monthly debt by $1500+.
Posted on 8/7/20 at 8:32 am to GAFF
quote:
His wife and him are considering pulling out 30k and 40k respectfully from their 401k’s to pay off every single debt but their house. This will leave both with less than 10k in each account. He’s 33 she’s 29. He’s confident that they both can make up the loss before they retire. Says it’ll drop their monthly debt by $1500+
This sounds like a really dumb idea. Are they calculating the lost return they might make on that 70k?
Posted on 8/7/20 at 8:32 am to GAFF
quote:
The person also has a company pension but not sure if he should count on that. He works for a Fortune 500 so maybe it’s safe. He does add 1% percent to his 401k each raise he gets and his company routinely gives yearly raises.
His wife and him are considering pulling out 30k and 40k respectfully from their 401k’s to pay off every single debt but their house. This will leave both with less than 10k in each account. He’s 33 she’s 29. He’s confident that they both can make up the loss before they retire. Says it’ll drop their monthly debt by $1500+.
The pension helps a ton. As for the rest....ugh. Easy to see how the situation developed. Kudos to them for wanting to eliminate debt but paying penalties and extra taxes now might be a long term issue.
This post was edited on 8/7/20 at 8:33 am
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