Comments on: One Easy Step to Retiring with $1,000,000 http://www.nodebtplan.net/2008/04/22/one-easy-step-to-retiring-with-1000000/#utm_source=rss&utm_medium=rss&utm_campaign=one-easy-step-to-retiring-with-1000000 A personal finance blog teaching you how to live debt free and use credit wisely. Fri, 10 Feb 2012 15:18:07 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Buddystipshttp://www.nodebtplan.net/2008/04/22/one-easy-step-to-retiring-with-1000000/#comment-36399 Buddystips Wed, 09 Sep 2009 02:51:14 +0000 http://www.nodebtplan.net/?p=163#comment-36399 I think the best thing in all the dialogue related to this post is JUST DO IT!!! Start saving in a deferred program and add to it each year until you maximize it out, then repeat each year there after. No one should be dependent on one source of retirement income, so diversify your investments and if you are fortuniate enough to have a retirement program at work, work with that too. Good discussion... I think the best thing in all the dialogue related to this post is JUST DO IT!!! Start saving in a deferred program and add to it each year until you maximize it out, then repeat each year there after. No one should be dependent on one source of retirement income, so diversify your investments and if you are fortuniate enough to have a retirement program at work, work with that too. Good discussion…

]]> By: Canadian Equivalent of the Roth IRA - The Tax-Free Savings Account, or TFSA | MoneyEnergyhttp://www.nodebtplan.net/2008/04/22/one-easy-step-to-retiring-with-1000000/#comment-18651 Canadian Equivalent of the Roth IRA - The Tax-Free Savings Account, or TFSA | MoneyEnergy Fri, 24 Apr 2009 09:23:56 +0000 http://www.nodebtplan.net/?p=163#comment-18651 [...] been reading more about the Roth IRA on good posts like the ones over at Financial Nut or NoDebtPlan.  It has struck me — and I could be wrong, I’ll have to gather more details, maybe [...] [...] been reading more about the Roth IRA on good posts like the ones over at Financial Nut or NoDebtPlan.  It has struck me — and I could be wrong, I’ll have to gather more details, maybe [...]

]]> By: MoneyEnergyhttp://www.nodebtplan.net/2008/04/22/one-easy-step-to-retiring-with-1000000/#comment-18608 MoneyEnergy Fri, 24 Apr 2009 03:58:46 +0000 http://www.nodebtplan.net/?p=163#comment-18608 Nice post, this is my first time on your blog. I think the equivalent to the ROTH IRA in Canada is our new "TFSA" appropriately labeled, "tax-free savings account." You can contribute up to $5,000/year of after-tax dollars which not only grow tax-free but you can also use them tax-free whenever you withdraw from it. No penalty for withdrawing, either. I started investing at age 22, but as a student didn't have $400/month for it, that's for sure... I'm still not investing the equivalent of that much per month, but trying to up this figure (and still a student - grad student!). Nice post, this is my first time on your blog. I think the equivalent to the ROTH IRA in Canada is our new “TFSA” appropriately labeled, “tax-free savings account.” You can contribute up to $5,000/year of after-tax dollars which not only grow tax-free but you can also use them tax-free whenever you withdraw from it. No penalty for withdrawing, either.

I started investing at age 22, but as a student didn’t have $400/month for it, that’s for sure… I’m still not investing the equivalent of that much per month, but trying to up this figure (and still a student – grad student!).

]]> By: Kenhttp://www.nodebtplan.net/2008/04/22/one-easy-step-to-retiring-with-1000000/#comment-9370 Ken Sun, 18 Jan 2009 13:29:40 +0000 http://www.nodebtplan.net/?p=163#comment-9370 I have a Roth IRA and am a big advocate of them. I wish I'd known this when I was 24. I am enjoying your info here...great stuff! I have a Roth IRA and am a big advocate of them. I wish I’d known this when I was 24. I am enjoying your info here…great stuff!

]]> By: GHolmeshttp://www.nodebtplan.net/2008/04/22/one-easy-step-to-retiring-with-1000000/#comment-4354 GHolmes Wed, 17 Sep 2008 21:21:28 +0000 http://www.nodebtplan.net/?p=163#comment-4354 Kevin you rock with this post (too bad you are a Vols Fan). This summer my 15 yearold got a summer job and we will open a ROTH IRA which I will match his savings. 7% is very measly return over a lifetime of a mutual fund. If my son invests 2k a year for only 10 years with a 13% lifetime return he would have more net worth at my age than most of my peers. By the time he hit 59 1/2 he would be over $2m Kevin you rock with this post (too bad you are a Vols Fan). This summer my 15 yearold got a summer job and we will open a ROTH IRA which I will match his savings. 7% is very measly return over a lifetime of a mutual fund. If my son invests 2k a year for only 10 years with a 13% lifetime return he would have more net worth at my age than most of my peers. By the time he hit 59 1/2 he would be over $2m

]]> By: Tomhttp://www.nodebtplan.net/2008/04/22/one-easy-step-to-retiring-with-1000000/#comment-4156 Tom Tue, 09 Sep 2008 17:10:03 +0000 http://www.nodebtplan.net/?p=163#comment-4156 Kevin, The point of my earlier post was not to question your calculations, it was to change your mindset about how to invest while you are still young. I believe the largest mistke in retirement planning is to be too conservative early on and as a result too agresive later on. Also; I am not a fan of the ROTH IRA. You are giving up a tax break today for the promise of a larger one in the future. I have seen the government break too many promises in the past to blindly trust them on something as important as my retirement future. I will take my tax breah now with a traditional IRA! thank you very much. After all a bird in the hand is worth two in the bush. Young people, instead of singing its praises, should recognize it for what it really is. It is a way to collect tax revenues today at the expence of future revenues. So the babyboomer club (of which I am a member, sorry!) are not only running up a huge deficiet you will have to deal with, but are collecting tax revenues today at the expence of your tax revenues tomorrow. Kevin,

The point of my earlier post was not to question your calculations, it was to change your mindset about how to invest while you are still young. I believe the largest mistke in retirement planning is to be too conservative early on and as a result too agresive later on.

Also; I am not a fan of the ROTH IRA. You are giving up a tax break today for the promise of a larger one in the future. I have seen the government break too many promises in the past to blindly trust them on something as important as my retirement future. I will take my tax breah now with a traditional IRA! thank you very much. After all a bird in the hand is worth two in the bush. Young people, instead of singing its praises, should recognize it for what it really is. It is a way to collect tax revenues today at the expence of future revenues. So the babyboomer club (of which I am a member, sorry!) are not only running up a huge deficiet you will have to deal with, but are collecting tax revenues today at the expence of your tax revenues tomorrow.

]]> By: Financial Course Bloghttp://www.nodebtplan.net/2008/04/22/one-easy-step-to-retiring-with-1000000/#comment-3799 Financial Course Blog Wed, 03 Sep 2008 13:48:09 +0000 http://www.nodebtplan.net/?p=163#comment-3799 Your calculations are very true and that's the basis to creating your retirement fund. I really would wish more people start saving more instead of getting into debt more... Thanks! Your calculations are very true and that’s the basis to creating your retirement fund. I really would wish more people start saving more instead of getting into debt more…

Thanks!

]]> By: Davehttp://www.nodebtplan.net/2008/04/22/one-easy-step-to-retiring-with-1000000/#comment-636 Dave Wed, 30 Apr 2008 03:20:57 +0000 http://www.nodebtplan.net/?p=163#comment-636 Your inflation adjustment isn't quite right. I modified your spreadsheet to increase the contribution by 3% each year and then converted the end result into today's dollars and I came up with the same result that Tom calculated using a return of 4% ($545k). A return of 10% will get the post-inflation adjusted rate you are looking for. Feel free to plug these equations into your spreadsheet if you aren't convinced: In E1, enter 0.03 as the inflation rate In D9, replace your equation with "=D8*(1+$E$1)" to increase the contribution by 3% each year, and copy that equation down to the bottom. In I8, type "=H8/((1+$E$1)^(B8-$B$8))" which will give your ending balance in today's dollars and copy down. You'll see the final result is $544,711.70 for an interest rate of 7% and an inflation rate of 3%. This is approximately the same value you get if you use an interest rate of 4% and an inflation rate of 0%. I agree with John that this is a great start, but it should be supplemented with additional retirement savings, like taking advantage of the company's match on a 401(k). I appreciate the advice you are giving. I'm afraid that when people in their 20s and 30s reach retirement age, a lot of them are going to wish they could go back and start saving aggressively as early as possible. Your inflation adjustment isn’t quite right. I modified your spreadsheet to increase the contribution by 3% each year and then converted the end result into today’s dollars and I came up with the same result that Tom calculated using a return of 4% ($545k). A return of 10% will get the post-inflation adjusted rate you are looking for.

Feel free to plug these equations into your spreadsheet if you aren’t convinced:
In E1, enter 0.03 as the inflation rate
In D9, replace your equation with “=D8*(1+$E$1)” to increase the contribution by 3% each year, and copy that equation down to the bottom.
In I8, type “=H8/((1+$E$1)^(B8-$B$8))” which will give your ending balance in today’s dollars and copy down.

You’ll see the final result is $544,711.70 for an interest rate of 7% and an inflation rate of 3%. This is approximately the same value you get if you use an interest rate of 4% and an inflation rate of 0%.

I agree with John that this is a great start, but it should be supplemented with additional retirement savings, like taking advantage of the company’s match on a 401(k). I appreciate the advice you are giving. I’m afraid that when people in their 20s and 30s reach retirement age, a lot of them are going to wish they could go back and start saving aggressively as early as possible.

]]> By: Kevinhttp://www.nodebtplan.net/2008/04/22/one-easy-step-to-retiring-with-1000000/#comment-595 Kevin Wed, 23 Apr 2008 21:04:22 +0000 http://www.nodebtplan.net/?p=163#comment-595 @Tom: Well, I've heard this type of argument before. I can't take into account every different little fact -- even inflation. This is just a model. I'm not berating you -- I enjoy the dialog, so let me explain. I'll go back and edit the post, or write a follow up, that takes into account inflation. However! If you contribute the -equivalent- of $5,000 per year each year, then at the end you will end up with the -equivalent- of $1.2 million. So year 1 = $5,000 year 2 = ($5,000 x 1.03) for 3% inflation = $5,150 year 3 = $5,304 ($5,150 x 1.03) etc. etc. In the end you end up with a bigger number, but its equivalence is $1.2 million in today's dollars. @Tom: Well, I’ve heard this type of argument before. I can’t take into account every different little fact — even inflation. This is just a model. I’m not berating you — I enjoy the dialog, so let me explain.

I’ll go back and edit the post, or write a follow up, that takes into account inflation.

However! If you contribute the -equivalent- of $5,000 per year each year, then at the end you will end up with the -equivalent- of $1.2 million.

So year 1 = $5,000
year 2 = ($5,000 x 1.03) for 3% inflation = $5,150
year 3 = $5,304 ($5,150 x 1.03)
etc. etc.

In the end you end up with a bigger number, but its equivalence is $1.2 million in today’s dollars.

]]> By: Tomhttp://www.nodebtplan.net/2008/04/22/one-easy-step-to-retiring-with-1000000/#comment-594 Tom Wed, 23 Apr 2008 20:17:17 +0000 http://www.nodebtplan.net/?p=163#comment-594 While 1.2 Million might sound like a lot right now, I doubt that you will be able to live comfortably of the income it will produce when you reach 66. This is due to inflation. If you figure inflation at 3% you will only net 4% per year. If you put 4% per year into your calculator you will get a picture of what you will have in today’s dollars when you retire. The amount it produces is 545,000 Now take 4% of that a year (the other 3% will need to stay in the account to hold the purchasing power for the continued inflation you will experience) and you get 21,800 per year; a nice supplement to social security for sure, but hardly enough to consider yourself rich. I commend you for taking an early interest in your retirement, but you may want to either contribute more over the years or go for a higher rate of return. At your age I would suggest being more aggressive up front and scaling back as you grow older and your nest egg grows. Many of the targeted date mutual funds do exactly that and may be a good choice for you. While 1.2 Million might sound like a lot right now, I doubt that you will be able to live comfortably of the income it will produce when you reach 66. This is due to inflation. If you figure inflation at 3% you will only net 4% per year. If you put 4% per year into your calculator you will get a picture of what you will have in today’s dollars when you retire. The amount it produces is 545,000 Now take 4% of that a year (the other 3% will need to stay in the account to hold the purchasing power for the continued inflation you will experience) and you get 21,800 per year; a nice supplement to social security for sure, but hardly enough to consider yourself rich.

I commend you for taking an early interest in your retirement, but you may want to either contribute more over the years or go for a higher rate of return. At your age I would suggest being more aggressive up front and scaling back as you grow older and your nest egg grows. Many of the targeted date mutual funds do exactly that and may be a good choice for you.

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