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Just want a little feedback on how my wife and I are doing in accumulating a retirement nest egg. I'm 37 and she's 34. Between the two of us we have accumulated about $100K in our 401(k) plans (after the NASDAQ meltdown). We both work and together earn about $175K annually.

I would like for us both to be able to retire in about 18-20 years. We are putting about $20K into our plans annually (including employer contributions).

I know there are tons of variables but do we have a decent start and are we on the right track?
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If you can get ahold of the book "The Millionaire Next Door" there are descriptions (with metrics) of what the authors define as PAWS (Prodigious Accumulators of Wealth), AAWS (I think this was the abbreviation - Average Accumulators of Wealth), Underaccumulators, etc. This may give you a good feel for how you stand relative to others.

jtmitch
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kcwageslave asks,

Just want a little feedback on how my wife and I are doing in accumulating a retirement nest egg. I'm 37 and she's 34. Between the two of us we have accumulated about $100K in our 401(k) plans (after the NASDAQ meltdown). We both work and together earn about $175K annually.

I would like for us both to be able to retire in about 18-20 years. We are putting about $20K into our plans annually (including employer contributions).

I know there are tons of variables but do we have a decent start and are we on the right track?


Scott Burns of the Dallas Morning News had a very interesting article on the distribution of wealth by age group n his Sunday column, see link:

http://www.scottburns.com/000604SU.htm

About 25% of the 30-39 year olds have net worths in excess of $127,000. It looks like you are solidly above average for your age.

If you are earning $175k and saving $20k, the arithmetic says you're spending $155k per year. Using the 4% withdrawal rate in retirement often mentioned on this board, you'd need $3.9 million to safely provide $155,000 in retirement income in today's dollars. Twenty years of inflation could easily double that number. You'll probably have to save more than 11.4% of your combined salaries to get there.

intercst
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Just want a little feedback on how my wife and I are doing in accumulating a retirement nest egg. I'm 37 and she's 34.
Between the two of us we have accumulated about $100K in our 401(k) plans (after the NASDAQ meltdown). We
both work and together earn about $175K annually.


You do not mention children, college savings etc. Assuming none I think you should be saving alot more. You have to balance your life style and savings but I would try and cut expenses and increase savings.
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One child, a 4 month old. No savings earmarked for college yet, but we do have about $20,000 in non 401(k) after tax savings.
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To intercst:
I wonder how the Scott Burns table was derived. Do you suppose the decrease in net worth for older people is caused by older people dieing and leaving their wealth to the people in the 50-60 year range?

-rkm
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rkmacdonald:

<<<<To intercst:
I wonder how the Scott Burns table was derived. Do you suppose the decrease in net worth for older people is caused by older people dieing and leaving their wealth to the people in the 50-60 year range?>>>>

I am not intercst, nor have I checked out the URL, but I did see the article in the Houston Chronicle, and the hard copy of the article discussed the data source, and IIRC, its compilation. I suspect that the WEB version would, too.

Do not forget lifetime giving and estate planning as another reason for the decrease; in addition, do not forget increasing medical care (drugs, hospitals, assisted living, etc.) as another reason for the decline.

Just my $0.02. Regards, JAFO


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rkmacdonald asks,

To intercst:
I wonder how the Scott Burns table was derived. Do you suppose the decrease in net worth for older people is caused by older people dieing and leaving their wealth to the people in the 50-60 year range?


The table was compiled from data collected by a financial planning firm that specializes in "high net worth" individuals and families.

I suspect the decrease in the "Top 1%" figures for people older than age 70 are a result of gifting to children or charities as part of their ongoing estate planning.

intercst

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KCW posted..

"we have accumulated about $100K in our 401(k) plans (after the NASDAQ meltdown). We both work and together earn about $175K annually.

I would like for us both to be able to retire in about 18-20 years. We are putting about $20K into our plans annually (including employer contributions)."

A quick and very rough estimate...

PV (Present Value) $100K
PMT (payments) $20K
Assumed rate of return 11% (Equity average)
Time period 20 years (compound annually)

This will yield $2,090,300.

Using the 5% withdrawal rate this would yield a bit over $100K/year - not enough to continue your lifestyle.

I saw a number of $3.9M to make up close to $155K/year will this would require saving at the same rate for 26 years instead of 20.

With only some small changes like going to $25,000/yr and trying to getting a yield of 12.5% instead of 11%
and saving for 22 years, you will have over 3.8M.

Do not be too discouraged. Your incomes should increase over the next 10 years and you will find ways of saving more. Your home will be come part of you assets.

The biggest thing is to keep your debt low and don't carry a balance on any credit card.

My wife and I didn't really begin until about the same age as you are now. We are within striking distance of retirement within 5 to 6 years.

Persistence pays off.

BGP

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