I like spending a few minutes (but not much more) plugging in hypothetical numbers into interactive calculators like this retirement income calculator (Java required). This calculator displays how much monthly retirement income you can expect with assumptions about market return, tax bracket, and contributions.
This morning, I spent a few seconds exploring a few scenarios. It’s interesting that while the market rate of return is an important factor, changes in that variable don’t affect the outcome as much as similar changes in the dollar amount of annual contributions.
This year, I’m contributing the maximum to my Roth IRA and 16% of my day-job income to my 401(k). I’ll also contribute some portion to a tax-deferred SEP IRA, but I’m not sure how much. I still have more than 30 years to go until the standard retirement age, so the more I pile the contributions on now, the less I’ll have to worry in the future… if I make it that long.
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That is a good site. The calc is usefull and accurate (which, unfortunately, is not the norm). The fact that it pre=populates it with a 10% return is a little off.
Thanks for the link!
John: One of the first things I did was change the market return assumptions to 8% pre-retirement and 6% post-retirement.
“It’s just so optimistic of you Harry.”
That’s for pointing out the useful calculator. Is there ever a point where you feel like you’re saving too much for retirement?