Re: Retirement account and buying car
2) In what planet can a dude making $4k monthly would have saved up $1Million? If he always made 4k monthly, paid 10% tax and saved 30% of after tax, he saves a bit over 1K monthly. At that rate it will take him a 1000 months (not counting interest or capital gains). Or atleast 500 months if you allow him compound interest and capital gains. In those 40 years he would reach 60+ and would make a lot less than 4K, so he will start withdrawing from his savings.
Planet earth.
its the power of compounding
if someone is making 48K, i.e. 4K/month gross
and saves 6% pretax in a 401K
has a 3% employer match (fairly common) and
has an avg gain of 7% each year
each year the person has a 3% salary increase
if this person particpates in the 401K for 37 years
they would have over a million dollars pre-tax in their retirement account :)
if the same person puts away 10% pretax for 37 years, he would be at $1.5M
and if the same person has an avg increase of 5% instead of 3% and he does not change anything else he would be almost at $2M
as I tell people, start finding your 401K early, even if it is a couple of hundred a month, the sooner you start the better results you will see.