Where is this investment calculator?? So person A invested (21 years old) $100 a month for 10 years for a total of 12,000 and stopped at 31 years of age? total at 66 years of age is 147K ? @5% Person B, 31 years old invested 100 a month for 35 years for a total of 42,000 invested at 66 years of age, an only has 114K ? @5% Is that correct? Seems like both have the same amount invested 10 years apart, and person B keeps putting in money for 25 more years after. Something about that doesn't seem right.
Yup. Maddening, isn't it? There are plenty of calculators on the internet. Pick one that isn't trying to sell you something. Remember, at age 31 person B has nothing. Person A has north of $14,000 collecting interest. Person A will collect more then $750 in interest in year 11. Person B will get about $30 in his year 1 which is year 11 for person A.
At www.daveramsey.com/blog/investment-calculator#/entry_form Person A (21) 5% 100 dollars for 10 years (12000) is worth 87,418.71 at 45 years later 66 old Person B (31) 5% 100 dollars for 35 years (42000) is worth $113,803.62 at 35 years later 66 old Person B invested 30,000 more and has only 26,390 less. Now if person A had continued to invest for the entire 45 years $201,222.24
Person B could probably put that 12,000 to good/better use in the first part of life by not having to EVER have a credit card. Or perhaps offset a high interest car loan. Make a down payment on a nice town home and pay $200 less in rent as opposed to mortgage/HOA dues and build equity. And have $200 extra a month. Lots of ways to play the game that show on paper. Just sayin.
I rechecked my math carefully, and found that although my numbers and yours don't exactly agree, you are much closer then I. The bottom line however, is that person A gets north of $77,000 on an investment of $12,000; person B gets about $5,000 less on an investment of $42,000, or $30,000 more. It ain't hard to figure out which person you should be.
I don't disagree, although my credit card pays me for the privilege of having yours truly as a customer. I try to put any purchase above $10 on my credit card. Obviously, I wouldn't even consider carrying a balance. I have paid exactly one day's rent in my life - that was to rent a house that I had just sold, so that I could properly clean it for the new owner. I have never spent a penny of any interest or stock dividends that I have ever received except to pay taxes. As of today, my bride and I are comfortable in our retirement. Would I ever take another job? Only if it were something that I loved doing, then I might even work for short money. If it was a job I didn't like, you couldn't afford me. Plan ahead and life can be pretty good.
I did this again at a 7% return. Under the same conditions as before, at age 66 person A would have $200,315.59. Person B would have $180,581.76. Although my math in the initial table is apparently flawed, the results were not. The lessons are: 1. Start early, 2. Interest rate is huge. And you can get 7%. In the SATURDAY EVENING POST (as I recall) many years ago there was a simple question that claimed to predict whether a person was likely to be financially successful or not. The question was simple: Can you save money? A recent FORBES survey found that 34% of Americans have zero savings, 69% have less then $1,000, 4% have between $5 - $10,000 in savings, and only 15% have more then $10,000.
http://www.forbes.com/sites/niallmc...han-1000-in-savings-infographic/#591a501191ee Went to a company Christmas party the other night. A woman was there that worked at our Credit Union. My wife says to her, "Oh, you get to see how much money everyone has". Her response was, "More like how much they don't have".
Yup, people tell me all the time how they can't afford to invest any of their salary towards retirement. I tell them you can't afford not to.
I would totally agree with the above. An inconvenient truth: You probably will live to retirement age. The lifespan of the average American at birth is 79.1 for both sexes (a little less for men, a little more for women). At age 60 you can expect to live another 23 years. At age 70, you statistically have another 14 years before you are looking up at a piece of Vermont Granite.
There have been many days where I wish I had listened to this advice in my youth. ou: It's become my mantra when speaking with younger people to advise them to pay themselves first. Especially since I have no idea when I can comfortably retire. I probably will end up living cheaply in some trailer park. :laugh:
Update on my previous post: CBS reported today that the average American lifespan has actually dropped in the last couple of years. You can now only expect to live about 78.8 years. I am fortunate that my job for the last 23 years of my full-time working career had a great pension program. The one thing that was significant was the employee's contribution. Teachers in Massachusetts now must contribute 11% of their after tax income to the pension plan. Repeat - after tax. The upside - which works for both the government and the employee - is that the pension is tax-free when received, and the government agencies receive the tax money (in many cases) 30 years or more before the employees receive the benefits. It's a win-win situation. The old mantra" You get what you pay for" applies. The Massachusetts Teacher's Retirement Fund is actually in pretty good shape. A decent retirement program can work if both the leaders and the employees will work together.
I deal with a lot of young people at my company .. and almost all of them do not contribute to the 401K. I tell the ones I become friendly with, that it is insane not to contribute because the company matches 50% - so they are basically leaving thousands of dollars on the table. Most of their responses are - I can barely afford the cost of living now .. For years, my suggestion to them is - when they get their raise at the end of the year - take half of it and put it towards your 401K .. over the years as some leave to pursue other jobs, the ones that took my advice ALWAYS thank me for getting them started because they now have something of a retirement base
Hopefully, it doesn't fall on deaf ears. I preach the same thing. My daughter is saving in her 401k for the last 3 years and she'll be 26 in a few weeks. Maybe my conservative views partial soaked into her liberal brain after all and she has realized she is responsible for her own well being. My 401k now equals about 3 years salary with the recent Trump-bump after nearly 30 years with the same company. They cut off the pension when I had 20 years in. It is going to be equal to about 20% of my current salary if I retire at 65. Beer money by then. If Social Security is still around, it will be another 40% of my current salary. If my 401k & Roth IRA do anything at all, we should survive nicely. I'm praying that the stock market goes up, interest goes up, I stay healthy and the housing market doesn't collapse again. If the stars align, I'm hoping to retire in 10 years (currently 54.68) and live comfortably. The house is paid for, I don't own anything but taxes and monthly credit card bills that are paid off in full each month.
Do bear in mind that Social Security was never intended to be a person's entire income. It was instituted to keep people from starving. I paid into it for 25 years and basically it's beer money. Right now I'm getting Medicare plus about $650 per month from SS. I'm happy to get it, but I couldn't come close to living on it. It is a piece of a larger whole for me, as it should be for everyone else.
I am actually more fortunate than most. I worked for NYC Transit for 30 years, and retired 4 1/2 years ago with a pension = to 60% of my best 3 year average. I worked enough overtime in my last 5 years to raise my yearly income about 15% over my base pay. My pension is only taxed federally since the state and city taxed my pension contributions, and it is now state/city tax free. My after taxes income is about 400.00 more a month than what I was bringing home for a 40 hour work week. I was also contributing to a 457K plan for 25 years, and I have 4 additional non retirement mutual funds, and a Roth IRA, that I have been investing in for just as long. Since I don't intend to touch any of this money for 10 years, I can afford to keep my money in the market. As an incentive not to abuse sick time, NYC Transit would pay you for your sick time. If you had 50% of what you should have based on your years of service (12 days/year), they would pay you for half of that at retirement. If you had 70% of what you should have, they would pay you for 60%. I had 70%. I actually opened up a 401K so That I could fit my sick bonus into the K plans. At the time, if you were over 50, you were allowed 22,500 into each K plan. My bonus was 45,000.00. I beat the Federal, State, and local income tax, but had to pay Medicare and SS tax on it. Still dumped in over 42,000.00, well worth it. My last 2 years were without a contract, and when they settled, I was due a retro check, and adjusted sick bonus amount. They allowed me to again to dump 75% of it into the K plans, another 8000.00. I am 60 years old now. In 2 years, I can collect SS. Lots of guys that have retired before me start to take it at 62. They reason that from age 62-66, in 4 years, you collect north of 80,000.00. If I wait until 66, the difference is 600.00/month. You have to live an additional 12 years to break even. I think I will wait until 66. I have a part time job that I really enjoy, and I can make what I would get from SS at age 62. My dad nearly made it to 90, and I know I am in much better shape than he was at my age. There are no guarantees, but I intend to be around at 78 and beyond G-d willing.:grin:
Wow Larry, you certainly took advantage of the opportunities, well done! Shows what some learning and planning can accomplish! Did the pension plan work similar to a 401k in that a percentage was deducted from each paycheck to fund the plan? It appears the pensions of old have been replaced by 401ks, shifting the responsibility from the employer to the individual..... and many are blowing it. Yes, there is still the FICA/medicare deduction on most of our paychecks, but as we see, there isn't much of a payback. Your retirement is up to you, don't expect someone to take care of it for you. While I have always contributed to a 401k, and in recent years also to an after-tax Roth IRA, I didn't take full advantage of it and left a lot of money on the table..... which the IRS was happy to take a chunk out of. Fortunately, I did invest some of my remaining savings so I still gained ground. I've become much more aware of my saving opportunities, mostly due to what I could learn online on the bogelheads site. I have a few more years till an early retirement. I'm maxing out both my 401k and Roth IRA plans (24k+6.5k per year), and hoping to have enough left over to live on. This might even bump me into a lower tax bracket which will mean less federal tax and zero federal tax on investment income (dividends and long term capital gains). The opportunities are there.... you have learn what they are and use them.
It is an old time pension plan. 25 years of service, age 55 to collect. You get 2% a year up to 30 years of service, then 1.5% every year after up to a maximum of 75% after 40 years. The pension is based on your best 3 year average, your FAS, Final Average Salary. Most pick their final 3 years of service, but there is a slight catch. They actually go back 2 years prior. You are not allowed more than 10% more in any year than the average of the prior 2 years. Anything more, and they clip it back. So for example, if your last five years were say, 40K, 40K, 60K 60K, 60K, your final average salary would not be 60K. Your 3rd year would be clipped back to 44K, your second year, would be clipped back to 55K, and your final year would remain at 60K. Your FAS would therefore be 44+55+60/3, or 53K. If you did 25 years, your pension would be 50% of 53K, or 26.5K. To get around that, I started working as much overtime as I could get my LAST 5 years. My salary was within a few thousand dollars, each year, the last 5 years. When I completed my 25th year, I was only 50. When I turned 55, I had 29 1/2 years. I went another 6 months and made it an even 30 years, 60% of my FAS for a pension. While I could have stayed longer and made more, and increased my pension, I was single with no kids, my home was paid off. I left to enjoy my life. In 4 1/2 years that I have been retired, about 15 guys that I worked with have died suddenly never having made it to retirement age, or they retired and lasted a few years. You never know. Yes I paid a percentage of my paycheck to fund the pension. The Federal government allowed me to deduct that, the State and City made me add it back in. As a result, I pay Federal tax only on my pension. It is State and City tax free. While I did take advantage of my opportunities, I did not ever max out on any given year, and NYC Transit does not match at all. If I had maxed out from the time it was available to me, I believe I would be a millionaire by now.
In the two years since I've retired, my stake has dropped a bit. Enough that my money guy is rearranging my investments without commission. I'm not happy at all, at the moment. I know that it will go back up eventually, but going negative is pretty annoying. I would have been better off just leaving it as cash for the last two years. ou:
Larry, we had a good deal with sick time too. If we had accumulated 180 days or more of sick time, they would "buy back" 180 days at $33.33 per day. I got $6 grand. We could apply three years before our retirement date (but we had to retire on that date). The extra $2,000 per year would be added to our salaries. That meant (for me) an extra $1,000 per year for life. This isn't as big a "stick it to the taxpayers" as it might seem. I was a public school teacher, and I think a substitute teacher (in most cases babysitters) got $60 per day. Most of the teachers would come in if they were half-dead. I know of one teacher who had over 400 accumulated sick days. He basically worked for two years for free. I also know of one teacher who did 30 years and left with zero accumulated sick days. Another worked for 35 and left with five. I had about 225 accumulated, but was paid for 180. I have always believed that if I'm being paid to do a job, I should show up for work no matter what. I would have had the same number of accumulated sick days even if I wasn't paid for them. But I'll take the money. :grin:
