I found myself toying around with a retirement calculator on money.cnn.com to see how long it would take for my nest egg to reach $1,000,000. It asks for current amounts in taxable and tax-deferred accounts (check out the May 12, 2010 podcast for more info about these types of accounts), what you anticipate saving for those accounts and your best guess at an annual rate of return. I typed in $5,000 for taxable and tax-deferred accounts each and annual contributions of $12,000 for taxable accounts and $16,500 for tax-deferred accounts [this is the 2010 maximum contribution for tax sheltered annuities such as the 401(k), 403(b), 457)]. I left the federal and state income tax rates unchanged (28% and 6%, respectively), as well as the annual rate of return (8%).
Guess how long it would take before I attained millionaire status? 4 years and 9 months (5 years and 1 month, if adjusted for inflation). Now you might check out this tool and run the same numbers that I did, but I assure you that your answer will be different. Turns out I inadvertently typed an extra “0” in the yearly contributions for the taxable accounts (i.e. my $16,500 became $165,000!). Good thing I had the sense to double check my entry. I mean, I love compound interest, but dang! That calculation was simply astronomical!
At any rate, these calculations got me to thinking about retirement. I was a bit disheartened to read Money magazine (one of my favorite personal finance publications) this month...they published an article on “7 ways to a richer retirement” (reading it spurred my visit to the website’s retirement calculators in the first place). In the accompanying magazine pull-out, the scenarios STARTED for people who are in their early to mid thirties. I recognize that Money is simply appealing to their target audience, but good golly! I think to my 26 year old self “[35] is a bit late to BEGIN seriously planning one’s retirement!”
What do you think? Am I overreacting or is their an "appropriate age" to begin planning one's retirement?
After all, I wouldn't want to be like Frank...
After all, I wouldn't want to be like Frank...
Update: In the previous post, I asked if I should take funds from my savings to stay on track for my debt reduction plan. I did not transfer any funds. Instead, I've made my regular payment ($269.11) and an additional principal only payment of $445.89 (total September payment = $695). The resulting loan balance is $8,483.81. If I remain "on track" (i.e. make no additional principal payments to compensate for this month's payment and go forward paying $1045/month), I will have a balance of $167.97 in April 2011...and I'll be a little late reaching my my anticipated pay off date. I'll keep you posted!
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