Tuesday, April 26, 2011

Viewer Mail

A reader writes...

A reader asks:

"Is putting $10,000 a year into 401k good?"

Answer: yes, it is.

Most Americans cannot put nearly that much into their retirement savings - or chose not to.  Over a 30-year working life, invested at 8%, this will amount to over $1.3 Million at retirement.

Not bad, but of course, that doesn't mean you should rest on your laurels and not try to save more.

On another site, I was reading about a "Mom" trying to save, and she noted that instead of running out and buying a new car again because she made the last loan payment on her old one, she could save a lot of money by banking that amount.

And inevitably, there was a reply from some disgruntled idiot who blathered on about international conspiracy theories and how even if you save a million dollars at retirement, it would make no difference, as with inflation and the international economic conspiracy, it would all be worth nothing.

No doubt, he has zilcho in his IRA or 401(k) and is using these conspiracy theories as self-justification to validate his bad behavior.

And yes, it is true that inflation can wipe out a portfolio over time - particularly rampant inflation.  And this is the the worry that the 401(k) generation has, and the Defined Pension Benefit generation did not.

But regardless, the more you save, the better off you will be.  A million bucks, even if ravaged by inflation, will be better than ZERO dollars.  And probability suggests that inflation will not be that staggeringly high (as in the Wiemar Republic, or in Argentina).

So keep saving.  And if you keep it up, you will likely have a very comfortable retirement.  And if your spouse puts in $10,000 as well, a very, very comfortable retirement indeed!