Originally Posted by Laszlo
I can't stand 401k conversations. Reality check people. Sure, it's nice to know that when you're sixty, or even sixty-five, that your 401k nest egg is going to be worth a whopping $1.5 million…. or less for others.
Well…. when you take that fat egg out in 2036, you get taxed accordingly on that $1.5 million. I wonder if taxes will be more or less in the year 2036? I'll bet that they'll be higher. So, it's 2036 and you've just got taxed on your $1.5 million, so let's assume now you have around 700k. Not bad! Or is this a delusion of grander?
Did you ever consider future inflation adjustments into the entire 401k scheme? No, because you were too busy looking at those happy elders on the cover of the 401k brochure who are millionaires. And you're going to do the same. But you forget about the tax on that $1.5 millions, so you really have 700k. Not such a millionaire after all.
Now, 700k still sounds like a lot of money, because today, you can buy a 1000 square foot salt-box house in shoddy Sacramento (on the other side of the tracks) with leaky pipes and broken toilet. And a loaf of bread is only $2.99 and a gallon of gas is $3.10 a gallon.
Okay, back into the time machine – it's now 2036. And you've got that 700K. And that 700k home in shoddy Sacramento on the other side of the tracks (still has that damn broken toilet and leaky pipes), is now worth a huge and outrageous amount of 1.8 million! Wow!
But a loaf of bread is $9.50, a gallon of gas (if you can still get some) is $15.90 a gallon, and a round-trip plane ticket from San Francisco to New York is $2,100.00 (and that's on JetBlue) and a pack of smokes is $13.99 -- you started smoking because you thought you were going to be a millionaire living the high-life at ripe old 60 or 65, but in fact, you're basically forced into a 30 foot trailer in New Orleans, on the other side of the tracks, and you're eating hotdogs for dinner until you teeth fall out.
I'm 35. And I remember 25 years ago, when I was 10, a candybar was 25 cents. It is now over $1.00.