Quick 401k question

[Parrotheader]

Just for messing around with projection spreadsheet purposes, what's a realistic ballpark for an average annual rate of return to project for ~30 years. I realize it varies according to risk level. But assume I'm your typical, young middle class joe planning to start a family in the next couple years who wants stability and the ability to retire at a reasonable age. So maybe some risk early, but eventually settling into something more stable. Over 30 years - 7.5%? 10%? 12.5%?

I'll be starting my 4th year with my company this year and my numbers are finally getting to the point where I don't laugh when I look at what's in there. Granted I started at one of the worst times for the market, but it was still frustrating. My rate of return for a relatively moderate portfolio this year was 14.5%. I'm probably going to shift a lot of my money to more aggressive areas next year as my snowball has the potential to start building more quickly now.

 

[Murphyrulez]

I have been in my 401k now for 5 years. I haven't broke even yet.

I have less money in there than what I contributed.


Don't count your pickles before they hatch in one basket.

 

[EagleKeeper]

Shoot for 5-7%.

That is close to / below the historic average

 

[orion7144]

I'm at 96% so far for 2 years at my current semiconductor job. It helped that I started when their stock was low and has since more than doubled. We can invest however much of our contributions into company stock or other funds.

 

[FeathersMcGraw]

Originally posted by: Parrotheader
I'll be starting my 4th year with my company this year and my numbers are finally getting to the point where I don't laugh when I look at what's in there. Granted I started at one of the worst times for the market, but it was still frustrating. My rate of return for a relatively moderate portfolio this year was 14.5%. I'm probably going to shift a lot of my money to more aggressive areas next year as my snowball has the potential to start building more quickly now.

It depends what you mean by more agressive; don't radically change investment strategies just because you're back to par again. If you're young, you should be aggressive in your investments (because you have time to make up for problems like, say, 2000-2002), but consider shifting future allocations to more aggressive investments rather than taking your existing balances and moving them into other funds. For one thing, any retirement plans are levying fees on money in an account for less than some period of time (usually 90 days) in order to a) prevent market timing and b) lower fund management expenses. For another, you're already getting a nice double-digit return; suddenly shifting gears doesn't guarantee that you'll match that performance with more aggressive investments.

Originally posted by: orion7144
I'm at 96% so far for 2 years at my current semiconductor job. It helped that I started when their stock was low and has since more than doubled. We can invest however much of our contributions into company stock or other funds.

I'd be wary of putting anything retirement related into company stock. Not to say that your company is the next Enron, but the point is that if something ever turns sour, it can impact both your income stream as well as your retirement. Don't ever put all your eggs in one basket. Ever.

 

[etech]

8-10% are good numbers to use.

vanguard Retirement investing?general - How will I know if I?ll have enough money to retire? - How Much Should I Save for Retirement?

 

[StageLeft]

Originally posted by: etech
8-10% are good numbers to use.

Yes, the market itself - which is what your portfolio should try to mirror - grows at 8-10% historically over the past several decades. I can't remember if the number is really 9, but 8% would be a real conservative estimate and you could quite possibly expect a bit more. Don't forget to account for inflation 😀

 

[Parrotheader]

Thanks everyone. Yeah I understand what some are saying about shifting to more risky investments. I meant to say that I'd be shifting more of THIS year's contributions to higher risk investments, not reallocating ALL my existing portfolio. I was warned/advised about that from our accounting officer here.

Either way, the numbers were encouraging using fairly conservative figures like 7% up to slightly more aggressive percentages like 9%. It's a long way to go yet, but if it pans out even close to that it will validate all my planning and spending/saving habits that I use now and allow me to retire comfortably at a reasonably early age (accounting for inflation) without even taking into account my wife's retirement plan or social security. I've been steadily increasing my contributions and with employer matching and profit sharing it's finally starting to build into a worthwhile number now.