Hey everyone. First time poster. Age-21 and looking for a retirement plan

[Roger30236]

I am currently on a flight back from Las Vegas to Atlanta, Georgia and I was talking with a passenger next to me about retirement.

He recommended Roth IRA and I was curious what you guys think.

And could you tell me if this is current math and if so, how is this.

After 24years of putting 1k in a retirement fund each of 6 years.
Divide your interest percent into 72. 12%/72=6years double you money.

1k
2k
3k
4k
5k
6k

7k
9k
12k
16k
21k
27k

34k
43k
55k
71k
92k
119k

153k
196k
251k
322k
414k
533k

 

[REWahoo]

I am currently on a flight back from Las Vegas...

Are you seeking advice on how to invest your winnings or recoup your losses?

 

[Roger30236]

LOL

Nope, actually set myself a budget of $700 over the course of 6 days for myself and 13 days for my girlfriend.
I play Texas Holdem and use all my profit for recreational use lol.

Was just wondering how retirement funds work because the post I made at first makes it seem extremely easy to make money through retirement and honestly, Im not sure if I did this correct or not.

Also just looking for recommendations lol.

 

[FIREd]

The math seems wrong to me. If you contribute $1K/year to a Roth IRA for the next 24 years and earn 12% a year on that money (good luck with that!), I get about $133,000 at the end of year 24. With mild inflation this would be equivalent to about $67,000 today.

Hum just make sure your fellow passenger is not trying to sell you anything... This sounds like a financial advisor's sales pitch to me.

 

[Roger30236]

yeah I thought it sounded too high lol.

I'm thinking about doing 1,000 every year, was just wondering how it would look. Thanks guys.

 

[Roger30236]

Does the 12% interest only account for the money deposited into the fund or the total fund.?

Oh and also, if I continue to put 1k a year after 24 years, would you mind doing the math and telling me what it would look like after 5-15 years?

 

[FIREd]

The 12% interest only accounts for money deposited in the account at the time. I assume you deposited $1000 on January 1st the first year and earned 12% on that, so that at the end of year 1 you would have $1,120. Then I assumed you deposited another $1000 on January 1st of the second year, so you start year 2 with $1,120+$1000=$2,120 in the account. At the end of year 2, you will have earned 12% on $2,120 and you should have $2.374. Repeat as necessary.

If you keep adding $1K per year to you account after year 24 you would have:
$271,000 at the end of year 30 (about $112,000 today with mild inflation)
$484,000 at the end of year 35 (about $172,000 today with mild inflation)
$860,000 at the end of year 40 (about $263,000 today with mild inflation)

 

[ziggy29]

Does the 12% interest only account for the money deposited into the fund or the total fund.?

If you use 12% as an expected long term return, there's a pretty good chance you'll be disappointed and working a lot longer than your estimates would predict.

I'd be more comfortable using 8%, but then, I'm pretty famously overconservative when it comes to making guesses about the future. Especially since you probably want to start most aggressively (100% stocks or close to it) and slowly become more conservative over time. Even if you assume 12% on an all-stock portfolio (again, too ambitious for me), you'd probably be moving it down to 11%, 10%, 9% and so on every few years to account for an increasingly conservative asset allocation as you age.

 

[Roger30236]

Oh okay. Again one quick question.
What do you mean about the inflation.

$860,000 being a lower number?

Do you mean in 40 years the cost of one dollar know will be equivalent to .25 cents?

 

[FIREd]

Oh okay. Again one quick question.
What do you mean about the inflation.

$860,000 being a lower number?

Do you mean in 40 years the cost of one dollar know will be equivalent to .25 cents?

Yes. If inflation is 3% per year (close to the historical average), 1 dollar in 40 years will be equivalent to about 30 cents today.

 

[Coach]

Roger, it sounds like your informant was mis-using the old "Rule of 72", which is used to approximate the doubling time of a single, compounded investment. Divide 72 by the interest rate to estimate how long it will take an investment to double. For example, a $1000 investment earning 6% will double to $2000 in about 12 years.

Coach