401k/Roth IRA Projected Growth by 35
Part of the wealth I accumulate by the age of 35 will be in two 401k accounts (so far…) and my Roth IRA.
Using the 401k project your balance calculator that is provided to me by my company I can project the growth of both the 401k and Roth IRA accounts:
401k #1 – Prior Employer
- Current balance: 16,000
- Time period to grow: 7 years
- Estimated growth rate: 5%/yr (conservative)
- Projected balance by 35 yrs old: $22,688
Roth IRA
- Current balance: 6,000
- Time period to grow: 7 years
- Estimated growth rate: 5%/yr (conservative)
- Projected balance by 35 yrs old: $8,508
401k #2 – Current Employer
- Current balance: 20,768
- Time period to grow: 7 years
- Estimated growth rate: 5%/yr (conservative)
- Company matches 100% up to 5% of salary
- Max out contributions of 15,000/yr
- Projected balance by 35 yrs old: $184,000
Total projected balances by 35 yrs old: $215,196
This is one piece of the puzzle in determining how much in asset value I will have by the age of 35.
Note: I assumed a conservative interest rate of 5% a year to be on the safe side. In addition, this calculation does not take into consideration of whether or not I contribute more money into my Roth IRA in the future. It also does not factor increases in salary (and thus increases in company matching) for the 401k #2 projected balance.
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Hey, nice to see another early-early retiree in the making. I used to do calculations like that, obsessively. It might be worthwhile to consider volatility to get an estimate of future possibilities. 7 years is less than a market cycle and not a long time to estimate “conservative” returns unless of course your allocation itself is conservative, like CDs and bonds where you’re pretty much guaranteed what you get. The SP500 has a monthly volatility of 6%, so over 7 years, that’s 6*sqrt(7*12)=55%. The gain is 1.05^7 -> 41%. So there’s a 68% chance that your returns will be between -14% and +96%. This is from a large sum invested in the beginning. For regular contributions you’re approaching the complexity of option pricing models when you take the volatility into account.
You’re right, I should mention the volatility. Currently I have put my money in a mix of government funds (that has over the long run provided 5%+ in returns), TIPs (due to horizon inflationary concerns), and short-term investment grade funds. I’ve pulled my money out of the stock market for a while now due to the huge volatility we are having currently. That’s not to say I won’t slowly put it back in the stock market in the future, but as of right now I still believe we are in a bear market rally. The calculations I made above was just a general guesstimate of where my 401k/Roth IRA would be in 7 years if I don’t change my allocation.