> One thing I'll add is that when you start taking money out of your 401K,
>you'll have a lower income than you do now, and therefore you'll be paying
>taxes on the money in a lower tax bracket.
>
> The amount you make really depends on the type of investments you do (or
>can do) with your 401K. I thought the average returns were ~10% yearly for
>stock market investment over the long term. I think 401K automatically
>re-invests your earnings, so...
>
> $100 this year
> $110 next year
> $121 next year
> $133 next year
The rule of thumb is that over any given 10-year period the stock market
should return an average of 10%. I usually give a figure around 8% because
1) It's better to be conservative then overly optimistic
2) I have a feeling with the super-charged global economy that the highs
will be higher and the lows will be lower and depending on when you put
your money in that will drastically effect the total return.
If you invest 100 in the first year and the market tanks 20% you have
$80. The next year the market rockets up 40% and you have $112 in your
account. Your return is about 12% while the market's overall return is
20%. This effect will be less in a 401k since the greater time will
stabilize the volatility but it still exists.
3) There is still cost associated that will eat into returns. The de facto
standard of all 401K is mutual funds or some sort of managed fund. There
are expense fees that you have to pay. Usually they are front loaded so
when you purchase $100 worth of shares into a mutual fund usually $98ish
will go into the shares and $1.5 or $2 will cover administrative and
management costs.
[Todays Threads] [This Message] [Subscription] [Fast Unsubscribe] [User Settings] [Donations and Support]
