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I am 39 and often wonder if i am on schedule for retirement. I started by saving 10% at age 24 and increased that to 15% in about three years in my 401K. My company matches 100% of the first 6%. How do you tell where you are compared to others ?
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I am 39 and often wonder if i am on schedule for retirement. I started by saving 10% at age 24 and increased that to
15% in about three years in my 401K. My company matches 100% of the first 6%. How do you tell where you are
compared to others ?


Sounds like you will be ok if you are investing in stocks.

Go to the large mutual fund or broker sites and look for retirement calqulators. Try a few and you will get a rough idea of where you stand now vs your need.
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A spreadsheet is the easiest way to figure it out, but you can estimate based on the rule of 72, which holds that at 12% average annual return, your money will double every six years.

At 15% contribution plus employers match, at the end of the first six years you should have one years gross pay contributed plus half of that doubled in profits. That gives 2 yrs gross income at 6 yrs.

At 12 yrs, you should have another 2 from contributions and income on that plus 4 from doubling the first 6 yr balance of a total of 6 yrs gross income.

This series gets you to 20 yrs gross in about 25 yrs. Foolish guidelines suggest you can retire with 20 yrs gross.

These figures are approximate but can be refined with a spreadsheet.
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I am 39 and often wonder if I am on schedule for retirement.

Sounds as if you are. Depends, of course, on how soon you intend to retire, what sources of income you might have in addition to retirement investments, how your retirement accounts are invested, what you think your retirement expenses will be, and your rate of return and the rate of inflation. A personal spreadsheet for financial planning is my recommendation. Worked for me. Meanwhile, you can get a quick and free approximation from the Optimal Retirement Planner at http://www.dp-net.com/orp/index.html.

How do you tell where you are compared to others?

That's a very different question from whether you are on the path you want for yourself. You want to know what others are doing, particularly others of your age, if I'm right. Unfortunately, there seems to be relatively little data now to answer that question. There may be better data after the 2000 census results are tabulated and published. Meanwhile, you might take a look at http://blue.census.gov/hhes/www/wealth/wlth93t4.html It shows you the percentages of American households at various levels of wealth tabulated against the age of the householder and other factors, including sex, income level and geographic region. This seems to be the latest data available now.

My hunch is that you are doing so well in preparing for retirement that you have bragging rights among your peers. My further hunch is that, at your age, you have no particular reason to exercise those rights since you don't require the approval of your peer group. Let 'em keep working, if they refuse to plan, and come join us in early retirement.

Regards,

Chips, happily retired for nearly seven years




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How do you tell where you are compared to others ?


There are two comparison tools that I find interesting that offer some insight.

The first is based upon a study done by the writers of the book The Millionaire Next Door. It's a simple calculation that has been open to criticism because it doesn't accurately reflect the comparitively smaller wealth of younger workers (age 39 might still be too young, but try it anyway). The typical millionaire profiled in the book was in their 50's.

Calculation: Take your houshold income * Age / 10. If your net worth is greater than this number, congratulations, you are exceptional and are on the path to wealth. If your net worth is greater than 2X this number, you are elite even among the profiled millionaires ("PAW", Prodigeous Accumulator of Wealth).

The second tool is a calculator that compares your income/age/wealth with statistics compiled from the government (probably the same numbers that were offered in census link). Just type in your numbers and the tool will compare you with everyone else. According to the tool, persons aged 39 have median wealth of 52,000 and a median income of 42,000.

http://jcgi.pathfinder.com/money/howareyoudoing

The measure I like best is the "net worth by income" table. This determines how "efficient" you are at turning income into wealth compared to the rest of the workers.

rustedSoul

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