I can speak to it from a 30 year view - the market goes up & down but in the long term is positive since it's not taxed until withdrawn and a real bonus if your employer makes a match of any kind. Anyone watching it daily will go nuts but after the long haul it's the primary reason my wife and I could retire.

I'd be remiss if I didn't mention the crash of 2008 that seriously hurt/destroyed many folks hope of retirement. On stuff like that you just have to hope for the best and that your target doesn't coincide with that kind of disaster.

Did your portfolio have to 'recover' from the 07-08 mess?

Here's a trailing 10-yr hypothetical illustrating a monthly $1,500 (i.e. $18,000/yr -- the current pre-tax 401k contribution limit) investment in the Vanguard Total Stock Market Index mutual fund. The red line is the mutual fund, and the blue line is the S&P 500 index for comparison purposes (as you can see, they're virtually the same). The green line represents amount invested. In this scenario, the $180,000 invested monthly over 10 years grows to $314,715. Note the 2008 crash and the abysmal start this calendar year are just blips on the radar.

Disclaimer: This is not investment advice. Invest in the stock market at your own peril.

Nice.

So that basically averages out to 7.4% annual return, correct? If I did my math right. Technically some years would be negative, so I know it's not a 7.4+ every single year, but I'm speaking in theory.

Actually, much better than that: 10.92% annualized return (noted on the right side of the image). Remember, the $180,000 was invested monthly over the entire 10-yr period, not a big chunk at the beginning.

Conversely, here's another 10-yr hypothetical with the same fund; this time it starts on 1/1/1999 and ends on 1/1/2009. Quite the difference. The $180,000 turns into ~$155,000. Ouch. Sometimes timing sucks.

Very interesting. Thanks for the data points. Is this tool accessible by anyone?

I bet if they left it alone a few more years... they'd be OK but... imagine on that day in 2009 you are 65 and need to retire.

I guess that is why we heard of stories in 2008 and such about people 'pushing out' retirement another 5 years for example.

Probably trying to wait for the losses to swing positive.

On the flip side, it would be interesting to see a few 30 year runs, if you can do one for me. I assume that's how long most people do a 401k or Roth.

You aren't totally wasting your time. I may end up considering a 401k after this :P

We were very, very lucky when that happened. We decided to change investment companies and our funds were divested into a cash only account for transfer. Coincidentally the transfers were complete when the market crashed so we didn't lose a penny.

Simple dumb luck saved us.

I believe Morningstar has a web-based program in which you can run hypotheticals like these. Looks like you can subscribe for free for two weeks:
https://www.morningstar.com/

There are also free online calculators out there that I like to play with. You can't use specific investments, but they are still very useful: Financial Calculators


Here's $458 invested monthly (~$5,500/yr, the current annual IRA contribution limit) in the S&P 500 over a trailing 30-yr period.

I used to have other points cards including a couple airline milesage cards but in the end I got rid of them all. I got tired of all the restrictions - just gimme the cash, plz. The downside to the cash rewards cards is they generally have a VERY high interest rate so they only make sense for folks who can pay it off on a monthly basis. This being said, the cash back is significant. I put EVERYTHING on my card: gas, groceries, cell phone bill, cable bill, gym membership, hell even California lets you renew your DMV using a credit card without an additional fee.

Cards like the REI and/or Southwest airlines cards are interesting but in the end you can only use the benefits at those locations.

I like to use spreadsheets (Excel or Google Sheets) to map out long-term investment returns. I have multiple accounts (401k, Roth IRA, employee pension, cash/taxable) so I create entries in the spreadsheet for each of them which makes it easy to sum them all up and to get an idea of what everything will be worth 10 or 20 years from now. I've also used it to make "burn-down" charts where I can estimate how many years' worth of cash I have after I retire before I hit rock bottom.

Become familiar with how the PMT, PPMT and IPMT formulas work. You can also use these to map out home mortgages as well and to see how much sooner you can pay something off should you change interest rates and/or make additional monthly payments on top of the minimum.

Also, for the truly dedicated, I recommend taking an online Finance course through something like Udemy or Coursera. It's really, seriously useful sh*t, the kind of stuff they should be drilling into kids' heads in high school before they sign up for $200K in loans to earn an underwater basket weaving degree from some east coast liberal arts college.

Note: I'm an engineer so my idea of fun sometimes involves chugging a Sculpin IPA while playing around with spreadsheets. It's not for everyone.

The good news is that even in this worst-case scenario, the investor is almost certainly not doomed to the local homeless shelter. They'll be making regularly-scheduled withdrawals/distributions in relatively small amounts, not some $155K lump sum all at once. The account would have recovered somewhat as the market made really nice gains from 2010-2015.

saving up is not a big issue for me, cause i don't need much. i'm not used to partying and wasting money like a madman. i'd rather go travelling or buy something worthy and really valuable

Just met with our financial advisor - could retire today if I wanted. We are in good shape.

Good for you! You going to go for it or do you enjoy your job?

going to continue for between 2 and 5 years, depending on what happens with healthcare, etc.

but then again, if things turn bad at work, I have options.

good place to be, takes a huge load off of things.