cheapie

according to my estimations, at an average of 12% return, putting 12% of my income in investments, i'll be able to retire at 59 with $3m or so.

will that be enough in 26 years to live comfortably? i'm a bit worried.

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zippyjuan

A 12% average return could be a highly optomistic assumption. If my company still offers a pension then, I will be able to retire about age 59. I plan to have my mortgage paid off in about five more years which will greatly help to lower my expenses and allow me to live on less money. I think that is an important thing about buying a home- to have it paid for by the time you retire. I consider that an important investment for retirement too.

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brainsmile

12% is well above the historic average. My plans are way higher for what I will have when I retire. Zippy if you don't mind me asking... how long until you are 59?

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zippyjuan

About 15 years which does not really leave a lot of time to build up a ton of savings but reducing expenses is as effective and has the same net result. I presently pay $500 mortgage plus $300 homeowners fees and $100 in property taxes so aside from food and things (utilities cost me about $35 a month- no car or its related expenses) so I will be able to live incredibly cheaply. We presently have a Rule of 85 where if your years in plus your age equals 85 you can retire with full pension and I hit that about 59.

I owe about $65k on the condo so if I pay an extra $1000 a month, that along with the normal payment should be close to five years to pay it off. I figure that offers me a 5.85 % return immediately (my mortgage rate) and at the end will earn me a steady 10% return each year after then ($60k spent to save $500 a month or $6000 a year every year). That is a nice return. I do have enough saved to pay it all right now but prefer to leave that money invested and just pay the extra from my monthly income- which I can afford to do.

cheapie

maybe it is a high estimate. but i've averaged far above that the last 5 years.

i'll also have several hundred k in my pension and my house paid off.

zippyjuan

Sounds like you have been doing very well then!

Daedalus

You can discount that value by the expected rate of inflation to get a feel for current value. Say inflation is 3%, the discount factor over 26 years is 2.16, so $3M then would be like $1.39M today. If inflation is 5%, $3M then would be like $844k.

If you keep that money invested during your retirment, you should be fine. $3M * 12% = $360,000/year. Discounted by 3% inflation, that's still almost $170k in today's dollars without even touching the principal. However, I agree that 12% over the long haul is optimistic for the majority. Regardless, the assumptions we input into the retirement calculators are big ones when you're trying to look so far into the future.

Kevster

Between my 401k, pension, IRA and other diverse investments, I should have enough to put a few kids through 4-5 years of college and still have enough to maintain our current standard of living. I've been planning for a while, and even with the recent downturn in the market I'm still doing well. My 401k and IRA did 18% and 16% respectively last year and I review them often.

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