If you also have (say) exactly $100k saved, make that four possibilities!
I’m 28 and have been putting 16% of my pay into a pension for the last few years, my employer puts in 4%. Now there’s a baby on the way I may have to reduce this, but I hope not to. I reckon I’ll need at least a million (nominal) before I can think about retiring, there’s such a long way to go and so many variables that all I can really do for now is save as much as possible, try to invest wisely, and hope it turns out OK. I’m pretty happy with how things are going at the moment.
My qualified retirement account itself is a little sparse at the moment. (50-100k is what I answered for the poll). I have about 200k in other assets, though, and I see those as being part of the retirement picture. Qualified retirement accounts have a plan in the overall retirement picture, but they’re not the only answer. You want to diversify the account types and not just the assets within them.
You’d want to do a Net Present Value (NPV is the Excel function) calculation. The discount rate would be based on your expectation of inflation rates, so you might come up with different values depending on which expert you take that rate from.
Lost fully 1/2 of my 401k in the crash, still not back. But that said, I own investment properties. As long as I continue to work, the expenses there offset my income to the degree that I pay almost no taxes while continuing to earn equity. Hoping to see property values continue to improve to the point that when I am ready to retire I can sell them and with SS, be OK.
If I had to retire on my tax deferred plans I would never be able to retire. But I have to put 10% of my salary in my retirement plan. My other plans are what I can afford above that. My 457 and IRAs are extra retirement income.
Please, please, please do whatever you can to have no more than 10-15% of your retirement savings in company stock. We all know about Enron, but it doesn’t take massive fraud and total collapse for investment in a single stock, any single stock, even the company you own and work for, to turn into a nightmare.
True story: my company used to provide the 401k match in stock, which meant that many employees had 50% of their retirement savings in our stock. After Enron, they stopped matching in stock and let us sell off what we had in our accounts if we chose. I immediately sold down until only 10% of the account was in company stock, but many others, following the “never bother to check it” model, did not. I had one friend whom I repeatedly urged to sell down. Her argument was that our huge, successful company was never going to collapse. Finally I managed to convince her, using the argument that it would only take one crook in charge to cause a problem. About 6 months after she sold her stock, the recession hit and the stock dropped by 88%. The company is still going strong, but the stock price has yet to recover. It is currently at 36% of where it was when my friend sold. That would have been half her retirement savings (and still is for some employees). My friend is constantly bringing me food as her way of thanking me for saving her so much money.
Anyway, just a cautionary tale. I would hate to see you have that $950,000, or even half of it, evaporate because of an impact to your company that you couldn’t foresee.
I just delivered a speech to about 500 people yesterday about this exact thing. It was a young men’s conference organized by a few local colleges here in Charleston. My theme was ‘The Cost of Waiting’. It’s significant.
For me? I put down between $100K and $500K. Though that’s significantly reduced due to fun-time divorceland antics last year. Still, I do the best I can and I have both profit sharing and firmwide bonuses every trimester, too.
According to the results so far, only 10% of respondents age 50-65 have over a million in their retirement accounts. But of those over age 65, half of those who responded have over a million. Are the boomers not saving enough?
50-65 is a huge time range, especially when discussing compund interest (or earnings). $500,000 at 50 could reasonably be worth over $1MM at 65, even if we assume 5% annual return and no further deposits. OTOH, under the same assumptions, $500k at age 64 is going to be worth about $525k at 65.
To add to what Doctor Jackson said, another factor is mortgage payments. 50-65 is a time when many people are done making house payments and now have perhaps $20k* a year that can go elsewhere. If you take that $20k mortgage payment and put it into retirement for 15 years, you’ve socked away $300k.
*(I’m using $20k as a sort of average, but I actually know a lot of people with mortgage payments that are more than double or triple that).
I’m 66 and selected between $500K and $1M. But that’s cash assets. Net worth, including house, contents and vehicles is more like about $1.5M. We retired at age 62; in four years we have not touched the retirement accounts other than to consolidate them. Instead, we live on Social Security and several small retirement annuities that total somewhere around $5K/month. It’s more than enough. We did pretty much all the global galloping we wanted to do prior to retirement (part of the jobs we had), so our travel at the moment is in the US, usually by RV. Without that big travel expenditure that a lot of retirees incur, we just don’t have the cash outlay that a lot of them have.
Frankly, unless something catastrophic happens, I don’t know what we’ll do with the money. Cruises don’t interest us; acquiring expensive shit, fancy cars, a second home, etc. doesn’t either. At some point maybe I’ll splurge on a nice guitar. Maybe winter vacations from the rain or something. For the moment, we do as we wish and have all we need. We’re very lucky.