401k questions?
401k questions?
I am currently 22 years old. I put about $100 into my 401k every other week. I plan on contributing more in the future but for now I am just doing $100. My employer matches 50%. I have 2 questions.
1.) If I were to continue for the next 40 years at $100 every 2 weeks how much would I have in my account after 40 years.
2.) When is the earliest I can withdrawl funds from my 401k without being penalized.
Answers:
kevin w: Its too early to do math for question #1 but part 2 is 59 and 1/2. There are exceptions though such as first time home buyer, disability and for your financial welfare. 401K is free money from your employee matching but down the road it may be smart to open a Roth IRA also. You don't pay taxes on the interest from a Roth where you do with your 401K.
2007-06-13 06:33:36
2007-06-13 06:33:36
bradxschuman: Where it is in 40 years will depend on market trends and fluctuations....it could wind up being much MORE than what you put in based on the level of risk....ask your 401k manager.
It's generally a bad idea to withdrawal from any kind of retirement fund before you're of retirement age....the penalties can be huge.
2007-06-13 06:33:56
2007-06-13 06:33:56
MrOrph: Principal in 40 years starting from today = $104,000 but that is not really accurate due to the fluctuations in interest . You may have a lot more, a little more, or even less.
I believe you can begin withdrawals without penalty at 59 1/2 years old.
2007-06-13 06:34:26
2007-06-13 06:34:26
Gymrat: Assuming you get an 8% return on your investment, you will have just over $1 million in 40 years. Thats not adjusted for inflation though, so in real dollars, it will be worth less.
You can withdraw the money at age 59.5. You can withdraw money before that for a specific purpose (qualified higher education expenses, purchase of a first home, medical expenses or 'undue hardship').
For more info on 401(k)s, you can check out the IRS website.
2007-06-13 06:35:21
2007-06-13 06:35:21
John L: Earliest to withdraw is 59 1/2 I think (why the half I don't know) and assuming an agressive 9.6% rate of return you should have about 1.7 million after 40 years
2007-06-13 06:35:39
2007-06-13 06:35:39
MR MONEY: 1) If you earn a 10% return, which is the average for the S&P 500 over the last 50 years) you will have $1,382,000 from just your own money. The company's match will give you 50% more for a total of $2,074,000.
You can withdraw money without charge when you are 59 1/2 years old. If you retire earlier than this, there is a little known rule called 72(t) that allows you to take money outof the plan but once you start to take money out, you can't stop. So you need to make sure you want to continue to withdraw moeny if this is your choice.
2007-06-13 06:45:21
2007-06-13 06:45:21
Joey: Do you honestly think that there is a set return you get for every dollar you put into your 401K.....Not even the grand wizard of all existence would know the answer to this. For how naive this question is, I applaud you for starting to save for retirement now...I know people twice your age that haven't even started yet.
Quick tip: Because 401K's grow by compounding your money, the more money you have into the plan at an earlier age, the better off you are. In other words, although it is very tough, your 401K will grow much more quickly if you put more money into it right now.
2007-06-13 06:51:59
2007-06-13 06:51:59
Chosen Answer
reinkefj: Dear Ms. "melissa126978": (1) It depends. "How much" depend on measured how? (100$ yours + 50$ employer) * 26 weeks * 40 years = 156k$ BUT, you really have to figure rate of return on investments and inflation. Which requires some guess work. Rate of Return is because you are just not going to put them over in the corner or under your mattress. You'll invest in stocks or bonds. You're working hard; your savings should too. Inflation is the evil government printing money dollars making yours worth less. So lets make some assumptions. You'll use the old wall street rule of thumb that says 100 minus your age so you'll put 78% in equity and 22% in fixed income. You'll pick low cost mutual funds from Vanguard if offered. When you start to amass your fortune say at 100k, you'll begin using the other Wall Street rule of thumb "no more than 5% in any one thing" but that's for another day. So let's say your 22% fixed income makes 5% and your 78% equity makes 8%. (0.22*0.05)= 0.0110 AND (0.78*0.08)=0.0624 OR your blended rate of return is 0.0734. Let's assume the evil Federal Reserve has a 0.04 inflation rate. That reduces your real rate of return. SO your real rate of return in todays dollars is 0.0224. That gives you ~317k$ in 40 years. So, my guess is you'd have about ~317k$ in today's dollars or if you ignore inflation ~850k$ in future dollars. Dial in a better or worse rate of return. You're guess is as good as mine. (Mine is based on conservative Wall Street assumptions.) (If you listen to anyone's sales pitch about investments, ask what the assumed rate of return is. I've had bozos tell me to assume 15%! I might as well assume I'm going to retire and win the lotto. Used car salesmen that can't sell cars seem to sell investments.) See the dollar isn't a constant, your rates of returns will vary, and who knows what inflation or your tax rate will be in 40 years. One things for sure, today's common wisdom is that you're better off saving than depending upon some employer, social security, or the tooth fairy to help you in retirement. Pay close attention to YOUR 401k, what it is invested in, and the fees associated. The immediate 50% return of your employer's matching contribution is nothing to be sneered at. BUT, if the investment choices are terrible, the fees high, or the provisions onerous, it may be a bad bargain. On the face, grab it. BUT like the employees at Enron learned not all that glitters is gold. (2) 59? except for certain exception that you may or may not what to use. Remember to take anyone's investment advice, even mine, with a large grain of salt. I'll leave you with two more wall street rules of thumb. "Anyone promises to double your money, do it yourself. Fold it in half and put it in your pocket. Firmly." "If you don't understand EXACTLY how the earnings will be made, don't invest." Good luck, and while I won't be around in forty years, I'll be rooting for you, from upstairs or down, give me a progress report on how my guesses are doing, fjohn Ferdinand J. Reinke Kendall Park, NJ 08824 Webform that creates an urgent email => http://2idi.com/contact/=reinkefj Web page => http://www.reinke.cc/ My blog => http://www.reinkefaceslife.com/ LinkedIn url => http://www.linkedin.com/in/reinkefj
2007-06-13 07:25:49
reinkefj: Dear Ms. "melissa126978": (1) It depends. "How much" depend on measured how? (100$ yours + 50$ employer) * 26 weeks * 40 years = 156k$ BUT, you really have to figure rate of return on investments and inflation. Which requires some guess work. Rate of Return is because you are just not going to put them over in the corner or under your mattress. You'll invest in stocks or bonds. You're working hard; your savings should too. Inflation is the evil government printing money dollars making yours worth less. So lets make some assumptions. You'll use the old wall street rule of thumb that says 100 minus your age so you'll put 78% in equity and 22% in fixed income. You'll pick low cost mutual funds from Vanguard if offered. When you start to amass your fortune say at 100k, you'll begin using the other Wall Street rule of thumb "no more than 5% in any one thing" but that's for another day. So let's say your 22% fixed income makes 5% and your 78% equity makes 8%. (0.22*0.05)= 0.0110 AND (0.78*0.08)=0.0624 OR your blended rate of return is 0.0734. Let's assume the evil Federal Reserve has a 0.04 inflation rate. That reduces your real rate of return. SO your real rate of return in todays dollars is 0.0224. That gives you ~317k$ in 40 years. So, my guess is you'd have about ~317k$ in today's dollars or if you ignore inflation ~850k$ in future dollars. Dial in a better or worse rate of return. You're guess is as good as mine. (Mine is based on conservative Wall Street assumptions.) (If you listen to anyone's sales pitch about investments, ask what the assumed rate of return is. I've had bozos tell me to assume 15%! I might as well assume I'm going to retire and win the lotto. Used car salesmen that can't sell cars seem to sell investments.) See the dollar isn't a constant, your rates of returns will vary, and who knows what inflation or your tax rate will be in 40 years. One things for sure, today's common wisdom is that you're better off saving than depending upon some employer, social security, or the tooth fairy to help you in retirement. Pay close attention to YOUR 401k, what it is invested in, and the fees associated. The immediate 50% return of your employer's matching contribution is nothing to be sneered at. BUT, if the investment choices are terrible, the fees high, or the provisions onerous, it may be a bad bargain. On the face, grab it. BUT like the employees at Enron learned not all that glitters is gold. (2) 59? except for certain exception that you may or may not what to use. Remember to take anyone's investment advice, even mine, with a large grain of salt. I'll leave you with two more wall street rules of thumb. "Anyone promises to double your money, do it yourself. Fold it in half and put it in your pocket. Firmly." "If you don't understand EXACTLY how the earnings will be made, don't invest." Good luck, and while I won't be around in forty years, I'll be rooting for you, from upstairs or down, give me a progress report on how my guesses are doing, fjohn Ferdinand J. Reinke Kendall Park, NJ 08824 Webform that creates an urgent email => http://2idi.com/contact/=reinkefj Web page => http://www.reinke.cc/ My blog => http://www.reinkefaceslife.com/ LinkedIn url => http://www.linkedin.com/in/reinkefj
2007-06-13 07:25:49