Stupid Financial Math

Posted by: Mark Nichols

01 Sep 2010

Here's a quote from a USnews.com retirement advice article featured on Yahoo:

"A 55-year-old earning $80,000 a year could accumulate $444,610 by age 65 if he or she tucked away 27.5 percent of pay each year, according to recent T. Rowe Price calculations. The estimate assumes a 3 percent annual raise, a 3 percent employer 401(k) match, and 8 percent compounded annual returns."

What's the average salary of 55-year-olds? What's the average salary of 55-year-olds seeking to save for retirement? Maybe then you can get to that $80k salary number.

3% employer 401k match - this is probably high compared to what most people get. And most probably don't receive a match at all. (Granted, the article probably isn't meant for self-employed carpenters, but it just sounds so pretentious.)

8% annual returns?! Really? What planet are you on? What year is it for you? How on earth is that an honest or reasonable assumption to make?
© 2010 Dime Brothers

Printed on: 09-24-2023