First Tab: 401K
The assumptions are listed at the top of the sheet — $80,000 salary and starting the year 2021 with $100,000 invested in the 401K. Modify these two numbers to reflect your current situation and the remaining numbers will change as the initial numbers are adjusted. The age column can be modified, as well. Change the first number and the column will update. The cells contain formulas and you will need to download the file to modify the assumptions. The next column is a very conservative growth percentage of 2.2%. Look at your portfolio’s historical performance and modify the growth percentage accordingly. In the contributions column, the contributions are determined by using your personal contribution elections and your employer’s matching. I arbitrarily chose 6% contributions with 3% matching to use a .09 in the formula (D6 will contain .09, or 9%). The remaining cells in the Contributions column contain a formula to incorporate the additional $25 per pay period each year. The corpus reduction column is how much the distribution will be upon retirement. Growth per year column monitors the growth of the cost basis, or corpus.
Play around with the contribution numbers, growth percentage, and distributions until you find a scenario that will balance your lifestyle and dollar amount. Remember, this bucket of money is only one piece of the puzzle that will contribute to the entire retirement picture.
Second Tab: ROTH
Current Roth contributions are $6,000 per person. If you are married, the contribution is $12,000, into different accounts, of course. If you are single, update this number with $6,000. The assumption is the portfolio already has $100,000. Update this number to reflect your portfolio. Growth is assumed at a conservative 4% , once again, this can be modified to better represent your historical portfolio growth. Scrolling down, distributions begin at 59 of $20,000. If you live until 99, there will still be over $1.5 million left in the Roth IRA. Here is the point in which we cross over into generational wealth, ensuring that your family will be provided for long after you have gone.
For TEN more years, the portfolio can grow tax free and then be rolled over into a tax free Roth for your children or beneficiaries.
Third Tab: Retirement Income
Here is where you plug in those numbers you settled on in the previous tabs. For this example’s purpose, 401K distributions are $30,0000 and Roth are $20,000. I’ve included Social Security, but we all know that’s a wild card. The taxes estimated are for ALABAMA. Also, an important note to keep the taxable amount under $90,000 or taxes will increase. Remember, at this point in life, personal expenses will be at a minimum (no mortgage, car payment, kids, etc.) so a little will go a LOT further.
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