Let’s say you are 30 now, and you’ve made the maximum contribution each year since graduating at age 21, and thus you have about $144,000 in the account. Let’s also assume your investments can grow at 5% after inflation. What will it be worth by the time you reach 60?
The answer is of course 144,000 x 1.05 to the power of 30 (years). This is about $622,000 inflation-adjusted dollars (i.e., in the year 2041, it will buy you just as much as $622k does today). Since this is more than the $600k we calculated above, it could be said that this person already has TOO MUCH in his 401k, and now he just needs some dough to get him between whenever he retires, and age 60.
Earlier in the post, MMM mentions the caveat of avoiding the 10% penalty for 401(k) withdrawals before 59.5. In some cases, I believe that MMM is wrong in focusing on avoiding the penalty. I’ll explain all of the juicy details, but first, we must address last week’s question when I asked what your financial goals were. Actually, before we even get to that, here is a gratuitous picture of a chihuahua wearing a jacket at a microbrewery:
Financial Goals for 2018
Here is what the readers had to say about financial goals for the new year:
Reader Dora is kicking ass (can I borrow some money, Dora? ):
I’m maxed out on all retirement accounts (TSP, HSA, Roth IRA). My latest money goal is to diversify into long-term treasury bonds, commodities, and maybe corporate bonds. I