Retirement money:
Many companies/governments match part of your retirement funding.
This matching in addition to large contributions growing compoundly
over time can amass great wealth.
Let's assume you make $60,000, your company matches 5% of your income
into your retirement account, you invest alot (25% of your income...
which can all be tax deductible in a 401K and IRA) and you make a 12%
rate of return in your aggressive retirement account, and you get a 6%
raise every year.
You invest $15,000 per year (25% of $60,000) and your company matches
$3,000. That's a total of $18,000 the first year and this amount
rises 6% every year.
In 15 years you will have $1,000,000
In 20 years you will have $2,200,000
In 25 years you will have $4,400,000
Also remember that this is all tax deductible when you put it in... so
you will be saving about $5,000 in taxes your first year (and more as
your income goes up). Currently the IRA maximum contribution is
$4,000 per year and the 401K is $15,000. The IRA is scheduled to
increase to $5,000 in 2008 and the 401K is scheduled to increase with
inflation (approximately $500 per year is my guess). |