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The Water Cooler
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Trump seeks to update retirement rules, help Americans save more
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<blockquote data-quote="SlugSlinger" data-source="post: 3150503" data-attributes="member: 7248"><p>I can’t beleive anyone would pass on an 11% match. That is insane.</p><p></p><p>Most people just don’t understand the concept of compounding returns or don’t have the patience to wait. Everybody has heard that it takes money to make money but I guess they don’t know how to apply that to retirement.</p><p></p><p>If someone invests, by contributing to a retirement whether it’s a 401k or Ira or something else, especially with the free matching, there’s a point where the money invested over the years will start earning more than what is being contributed each year. It just takes a few years to get to this point and the trick is to never borrow against your retirement money.</p><p></p><p>Say your investment balance is below on the left and the right number is the annual return at 8% which is low for a stock market index fund like the S&P index fund.</p><p></p><p>100,000 - 8,000</p><p>200,000 - 16,000</p><p>300,000 - 24,000</p><p>500,000 - 40,000</p><p>1,000,000 - 80,000</p><p></p><p>Or say you earn the stock market average of 12%:</p><p>100,000 - 12,000</p><p>200,000 - 24,000</p><p>300,000 - 36,000</p><p>500,000 - 60,000</p><p>1,000,000 - 120,000</p><p></p><p>Then you compound those returns and that’s where you really start earning more. </p><p>Year 1 - 1,000,000 - 120,000= 1,120,000</p><p>Year 2 - 1,120,000 - 134,400=1,254,400</p><p>Year 3 - 1,254,400 - 150,528=1,404,928</p><p>Year 4 - 1,404,928 - 168,592=1,573,519</p><p></p><p>It will take years to get to the million dollars. You get there by consistent investing and patience.</p></blockquote><p></p>
[QUOTE="SlugSlinger, post: 3150503, member: 7248"] I can’t beleive anyone would pass on an 11% match. That is insane. Most people just don’t understand the concept of compounding returns or don’t have the patience to wait. Everybody has heard that it takes money to make money but I guess they don’t know how to apply that to retirement. If someone invests, by contributing to a retirement whether it’s a 401k or Ira or something else, especially with the free matching, there’s a point where the money invested over the years will start earning more than what is being contributed each year. It just takes a few years to get to this point and the trick is to never borrow against your retirement money. Say your investment balance is below on the left and the right number is the annual return at 8% which is low for a stock market index fund like the S&P index fund. 100,000 - 8,000 200,000 - 16,000 300,000 - 24,000 500,000 - 40,000 1,000,000 - 80,000 Or say you earn the stock market average of 12%: 100,000 - 12,000 200,000 - 24,000 300,000 - 36,000 500,000 - 60,000 1,000,000 - 120,000 Then you compound those returns and that’s where you really start earning more. Year 1 - 1,000,000 - 120,000= 1,120,000 Year 2 - 1,120,000 - 134,400=1,254,400 Year 3 - 1,254,400 - 150,528=1,404,928 Year 4 - 1,404,928 - 168,592=1,573,519 It will take years to get to the million dollars. You get there by consistent investing and patience. [/QUOTE]
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