Thursday, December 14, 2006

Im On Track

So I checked into my Fidelity 401k account this morning and I am noticing new tabs and things that I haven't really looked at before. Of course, one of my biggest regrets is that I didn't start saving for my retirement earlier and with a higher deduction from my check. But that's water under the bridge and all I can do now is try to catch up. So I was checking out the Fidelity site and just seeing what is there and available. And I noticed that one of the things that was there was a quick checkup type thing that you can do.

A Simple Calculator

The nice thing about the fidelity calculator for retirement is that it lets you see a "monte-carlo" type simulation so that you can figure out how much you will have on the upside and the downside, rather than just giving you a flat average like most plans do. Personally, I am on track to meet my own personal goals, but if I were to rely on fidelity, I would be in way over my head.

Inflation Runs Amok

Quite simply, inflation is going to be the spoiler for retirement. But personally, I think that the big key to being prepared in retirement is getting all debts paid off (including mortgage and cars). This is something that I plan on being able to do by sometime in my late 40s or perhaps early 50s. And with any luck I will be buying cars in cash by my early 40s. I feel like these items will save me tons of money over the final 15 years running up to retirement.

The Estimates are 85% Bunk

One of the ideas that fidelity has for people that don't know how to estimate their cash needs in retirement is to adjust salary by normal pay rate increase and then finally take 85% of the final salary needed at the end to figure out what the monthly cash flow needs are. For people who are paying attention to their finances like I am trying to do, are not spending 100% of their income. And they are also working to pay down debts so that they have to spend less and less each month, not more and more. That is why I think that 85% rule is bunk; I prefer my own estimates of what I will need. And with those estimates, I am in great shape!

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