StickInTheMud
Dryer sheet wannabe
- Joined
- Nov 2, 2013
- Messages
- 15
I just got my annual compensation statement from my employer today, which includes projections for my retirement account. I'm not sure I have any confidence in the figures they are presenting as they conflict dramatically with my own conservative (read: realistic) estimates.
I'm sure their math is sound, so the actual numbers of what I currently have in my 401k and what they are projecting aren't relevant. However, I wanted to give you their assumptions and get the collective wisdom of whether or not they are, as they say, "blowing smoke".
Megacorp's Assumptions:
1. The plan and matching contributions remain unchanged.
2. My eligible earnings increase 3% annually.
3. My contribution rate remains unchanged.
4. The IRS limits increase 2.5% annually (note: I do not max out my 401k and will likely not be able to until far later in my career)
5. The account grows at 6.5% annually.
Based on these assumptions, my account will grow from about $30k presently to $2mil by age 65.
My Assumptions:
1. The plan and matching contributions remain unchanged
2. My eligible earnings increase 3% annually only for the next 10 years before I hit a realistic salary ceiling at my company.
3. My contribution rate remains unchanged.
4. The IRS limits keep pace with my ability to contribute to the account.
5. The account grows at 5% annually.
Based on my assumptions, my account will only grow from $30k to $780k by age 65. I plan on retiring before then with the help of my Roth IRA, but that's another matter.
These are two drastically different estimates and goes to show what a few percentages can do over time.
What do you all think are more realistic assumptions. Am I being too conservative? Is Megacorp being too optimistic? Do you think reality will be somewhere in between?
Assume account performance mirrors the DOW/S&P and my earnings will stay on par with the national average salary over time, maybe a little higher.
P.S. They also tell me I'll be able to draw on Social Security at age 62.
I'm sure their math is sound, so the actual numbers of what I currently have in my 401k and what they are projecting aren't relevant. However, I wanted to give you their assumptions and get the collective wisdom of whether or not they are, as they say, "blowing smoke".
Megacorp's Assumptions:
1. The plan and matching contributions remain unchanged.
2. My eligible earnings increase 3% annually.
3. My contribution rate remains unchanged.
4. The IRS limits increase 2.5% annually (note: I do not max out my 401k and will likely not be able to until far later in my career)
5. The account grows at 6.5% annually.
Based on these assumptions, my account will grow from about $30k presently to $2mil by age 65.
My Assumptions:
1. The plan and matching contributions remain unchanged
2. My eligible earnings increase 3% annually only for the next 10 years before I hit a realistic salary ceiling at my company.
3. My contribution rate remains unchanged.
4. The IRS limits keep pace with my ability to contribute to the account.
5. The account grows at 5% annually.
Based on my assumptions, my account will only grow from $30k to $780k by age 65. I plan on retiring before then with the help of my Roth IRA, but that's another matter.
These are two drastically different estimates and goes to show what a few percentages can do over time.
What do you all think are more realistic assumptions. Am I being too conservative? Is Megacorp being too optimistic? Do you think reality will be somewhere in between?
Assume account performance mirrors the DOW/S&P and my earnings will stay on par with the national average salary over time, maybe a little higher.
P.S. They also tell me I'll be able to draw on Social Security at age 62.
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