All statistics say that most people do not save enough money for retirement. Are you one of them? What are you going to do? Are you going to work longer? Are you going to cash out your house? Do you plan on taking a reverse mortgage? I may have a solution for you!
The following examples presume you earn an annual gross of $50,000. If you have thirty-five (35) years till retirement, you can contribute as little as $2,000 per year and have $1,217,192 based on a 7% return. Add an additional $1,000, annually your retirement account jumps to $1,615,440. Let’s see how much you could earn if you contribute 10% of your gross income. If you contribute $5,000 per year to your 401K, your retirement account would total at retirement $3,110,975. These examples are without any employer match.
When you retire or after age 70 and a half, you could draw 4% of your balance. Your annual draw (4%) would be $48,688, $64,618 or $124,439 respectively. What do you think of that? Certainly, your income would increase over the years, however in the example your contribution stayed flat. Add in an employer match of 100% up to 3%, your retirement account rises to $1,582,350 based on a 7% return. Add an additional $1,000 annually your balance jumps to $2,100,072. If you contribute $5,000 per year to your 401K, your retirement account will have $4,044,267. Your annual draw (4%) would be $63,254, $84,003 or $161,771 respectively.
Are you ready to contribute to your 401K plan? A contribution of approximately $5.50 to $13.75 per day while you are working for thirty-five (35) years and achieve from $1,217,192 to $4,044,267! Pretty good, right? For the cost of a lunch, you can enjoy an enviable lifestyle during retirement. Is it enough money to make you stop and think? Do I have your attention? If you just consider contributing on the low end, $48,688 is a reasonable retirement. Of course, you should be aware that $48 ,688 will not be much in 35 years, but you are only contributing $2,000 each year! The earlier you start contributing money to your 401K plan, the more you can accumulate! Maintaining a percentage contribution as your income increases is a good way to hedge against inflation.
It is your money, should you miss out on this free money? Remember, this is tax deferred which means the IRS is subsidizing your retirement. Say thank you! The tax savings will help pay for some of your contribution. It is like getting free money. Do you want to leave all that money on the table? What are you going to do?
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