Section I - Lesson 2
Financial Plan - How Wealth Can Grow Quickly
How much wealth is really possible from saving small but regular amounts of money over long periods of time on a systematic and consistent basis? Let's become a great deal more specific.
If you're presently 32 years old and earning $36,000 per year, our Financial Calculator would project that you could be worth about $1,756,365 by the time you retire at age 65 if you follow the principles outlined in this course and in the book, Financial Independence 101, A Simple Strategy For Building Wealth.
This is based on the assumption that you contribute 6% of salary to your 401k at work, and that your employer matches 3% of this. Your 401k would be worth $1,053,819 at retirement.
This also assumes that you contribute 6% to a regular (non-401k) account as well, which would provide you with an additional $702,546 by age 65. The two accounts add up to the total of $1,756,365.
Your totals would of course be higher if you earn more, contribute more, work longer before retiring, or if your rate of return proves to be higher than projected.
To check these figures for yourself you might want to click on the Financial Calculator button on the left of this page and familiarize yourself with this estimating tool. The defaults on the calculator are set for age 32 and salary of $36,000, as in our above example.
You can change any or all of the defaults, and If you change the contribution to a combined amount of 0.12 (combining the contributions to the 401k and regular) you'll come out to the above figure of $1,756,365.
We'll be referring to the Financial Calculator often during the course of these lessons (just as we do in our book) to illustrate various points. You'll find it useful to become familiar with the way it works as soon as possible.
Take the opportunity to get on it and enter your own data, or experiment by changing the data in various ways to see how your results change every time you change one of the variables. We'll speak more of this in Lesson 5 about how to visualize results.
A Publication of About Your 401k.com
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