YA 401k T: What is my rate of return?

[IntrinsicValue]

Originally posted by: PAB

Originally posted by: IntrinsicValue
I'm not sure where this 7.35% return is coming from, but from my calculations your annual rate of return is closer to 12% -- unless I mis-read your question.

Not bad for conservative investments.

Bonds are conservative, he's holding equities.

I was under the assumption he was investing in mutual or index funds through his retirement plans, and those (to me) are conservative. If he wasn't, then I stand corrected.

My point stays the same - 12% annual return isn't bad.

 

[yuchai]

Not sure how everybody is getting ~7% as well. I agree with the ~12% number.

With a 7.35% growth, I got a total of $173K for his accounts.

 

[Gunslinger08]

I pulled about 7.5% from July to December 31st, but the funds we can choose from are all 1.8% to 2.5% expense rates.

 

[ScottFern]

I just got done watching PBS Frontline Video: Can You Afford to Retire? and it was really depressing for middle income earners.

 

[PAB]

Originally posted by: yuchai
Not sure how everybody is getting ~7% as well. I agree with the ~12% number.

With a 7.35% growth, I got a total of $173K for his accounts.

Total gain - total invested = Gains/14 years = annualized rate of return.

 

[alrocky]

Originally posted by: JEDI
Lets say from 1994 to 2004, i put in $10k/yr in my 401k, so $100k.
Lets also say i put in $2000/yr in my roth since it was created in 1998 till 2006, so $16k.

Lets say on Dec 31, 2006 i had $225k.

$10K year from 1994 to 2004 = 11 years, so $110k.
$2,000 year from 1998 to 2006 = 9 years, so $18k.

1994 - 2006 S&P500 ave annual return ~ 10.9%
1998 - 2006 S&P500 ave annual return ~ 5.9%

$10k @ 11 years = ~ $222k
$2000 @ 9 years - ~ $24k
$222k + $24k = $246k

$246k - $225k = $21k lost by not investing Jan 1st each year.

---

Excel has a XIIR function if you wish to calculate personal rate of return.

 

[IntrinsicValue]

Originally posted by: PAB

Originally posted by: yuchai
Not sure how everybody is getting ~7% as well. I agree with the ~12% number.

With a 7.35% growth, I got a total of $173K for his accounts.

Total gain - total invested = Gains/14 years = annualized rate of return.

Actually we were both wrong. The right return rate is 9.3% annual. I forgot to continue to accrue interest on the 401K even after he stopped contributing.

Your method isn't correct either. He did not have the 'total invested' for the entire length of the loan. He made 'deposits' into his funds that eventually totaled the $116,000 he had at the end of his deposits (not including profits).

Here's a breakdown for how the 9.3% interest actually calculates:
.............[..................401K...................].................[.................ROTH.................]
YEAR.....BEGIN...INTEREST....END.................BEGIN....INTEREST....END
1995.......10000........930.......10930
1996.......20930......1946.......22876
1997.......32876......3058.......35934
1998.......45934......4272.......50206
1999.......60206......5599.......65805.................2000........186........2186
2000.......75805......7050.......82855.................4186........389........4575
2001.......92855......8636.....101490.................6575........612........7187
2002.....111490.....10369.....121859.................9187........854......10041
2003.....131859.....12263.....144122...............12041......1120......13161
2004.....154122.....14333.....168455...............15161......1410......16571
2005*...168455.....15666.....184122...............18571......1727......20298
2006*...184122.....17123.....201245..............22298......2074.....24372

* In 2005 and 2006, even though he is not adding funds to his 401K, it is still accruing interest.