![]() People are so convinced that an opulent lifestyle is about wasting money, but it's not. If you accept the $6,267.69 paycheck (5 percent contribution to 401k) now, then crank up to a 15 percent contribution five years from now, your balance at 67 would be $1.2 million. "I can always crank up my savings later," you yodel. ![]() How in the heck are you going to survive on $683/month + social security, coming off a $10,000/month income? You aren't. But where I think a vast majority of people fail is when they're unwilling to accept the math I just mathed. I understand that you've likely set your lifestyle based on your current take-home pay, and unweaving your expenses seems about as possible has elegantly deconstructing a shredded wheat biscuit. The monthly retirement income for maxing out your retirement account now by choosing the $5,301.69 net pay would be approximately $2,050, in today's dollars. Factoring in inflation and a healthy withdrawal rate, your monthly income would be about $683, in today's dollars. Can you survive retirement 27 years from now on $570,690? Sure, but it would be ugly. ![]() Compare that to a $6,267.69 net pay, which would result in a retirement account balance of $570,690 at age 67. You understand object permanence.įor some perspective, choosing the $5,301.69 net pay will result in a projected $1.7 million in your 401k at age 67 (based on 8 percent average rate of return, no raises, no match, and no contribution limit increases). It seems crazy to fight a fire which is 40 years away. We never really think in these terms, do we? You and I are both just fighting the fires in front of us. Choose correctly, and you will never worry about money again. Choose incorrectly, and you will run out of money in about 40 years. People typically don't view it that way, but it is. Not to get all dramatic up in this mess, but it's a life or death decision. You can either contribute nothing to your retirement plan and net out $6,750.69 each month, you can max out your 401k and net $5,301.69, or anywhere in between by adjusting your contribution percentage.ĭon't gloss over the decision here. You control that by the amount of money you choose to defer into a defined contribution plan (401k, etc). What we need to figure out is how much of that we should bring home. ![]() Your gross (before tax) monthly income on a $120,000 household income is $10,000. The point of this post isn't tax avoidance, although tax efficiency is certainly appealing. I'm not going to pretend like we don't need roads, school, and other elements of both physical and social infrastructure. Your paycheck can either get crushed with taxes or less-than-crushed with taxes. The only place we can conceivably begin is with taxes. These premiums are not taxable, in our example. Your annual health insurance cost is $4,565 ($380.42/month), based on the average cost for a family of four in the US.You also value the presence of B felonies.For state tax purposes, you're a Hoosier (you live in Indiana). You don't live in one of the crazy expensive cities like NYC or SF.Don't worry, I'll be releasing remixes tackling other household income levels.īut today, I'm going to explain what the proper use of a $120,000 income looks like. Today is the day I drop my jam, If I Ruled Your $120,000 Household Income. I have a liberal arts degree, not a criminal justice degree, so I'm not 100 percent confident as to what I'm about to say: but I have no problem with B felonies. But then he goes on to say he wants to eliminate B felonies. I agree with some of his promises like "Designer clothes, lacing your click up with diamond vogues." Who wouldn't want their friends looking fresh and rolling on jewel-encrusted wheels? I like it, Nas. I like how he lists all the things he'd do if he happened to rule the world. One of my favorite hip hop songs of all time is If I Ruled the World by Nas.
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