
For some reason I have been thinking about retirement an awful lot lately. I have discovered some startling facts along the way. Most of them are good as long as I start investing now. If I put 6% of my earnings towards my 401k and add the employer 50% match I will die at age 90 with over 12 million dollars in my nest egg (at 12% interest, which isn’t too hard if invested properly). This is after retiring at age 65 and drawing $60k a year during retirement!
Well this got me thinking about major expenses throughout life and something that came to mind, partly because I am enrolled right now, is college. I want to be able to pay for my children’s (if I ever have any) college expenses, but only after they have earned their degree. This gives me at least 23-25 years to accomplish if I were to become a father tomorrow (which by the way the chances are remote, as I am not willing to take on any more obligations right now). Taking the average household family of 2.4 children and rounding it up to 3 (as I don’t want any .4 children, funny how averages work…) this would cost thousands of dollars.
If I estimate an average year of college at $10-12k dollars (which I know is low, but hey they kids can pay for Harvard themselves) for 3 kids it adds up to $120-144k (3 kids X 4 years X $10-12k/yr). Well that is an awful lot, but I think I have a plan. If I invest just $300 and then $1200 per year afterwards for the next 25 years at 12.5% interest that would yield around $125k. After 30 years it goes to $200k and a whopping $320k after 35 years. This means that if my children get low interest college loans during college and carry them for a few years after the investment will outgrow the college loan immensely. This means that after paying off mature student loans (gotta love that 6 month no payment or interest grace period after graduating) I might even have some money left over for myself!
I figure that this may be the thing to do as even if I don’t have kids a miniscule investment such as outlined above would create a great mid-life crisis present to myself. Here’s to compounded interest and time investing!
Technorati Tags:
Investment,
Invest,
College,
Retirement,
401k,
Investing,
Interest,
Compounded interest,
Future