Will your 401(k) be enough for retirement?

Assume you need to replace 85% of your pre-retirement income. Where will it come from? According to this article from the Wall Street Journal, Social Security will account for 40% of the post-retirement income for those currently eligible for retirement. No one under 30 (under 40?, under 50?) should plan for this to be available. That means all of post-retirement income will have to come from pensions and self-directed investments. Pensions are hit-or-miss and are likely to become less and less prevalent. This leaves 401(k) and IRA.

I'll assume a salary increase of 3% a year, which does not include promotions (but, unfortunately, is less than the average inflation of 3.31% over the last 30 years). Your salary will be 242% of what it is now. If you have 30 years until retirement, you'll have to have a post-retirement income of just over twice your current income. Assuming, as the WSJ article did, a 6% post-retirement return, you'll need a retirement account worth 34 times your current income.

The article referenced above recommends contributing 12 to 15% into the 401(k) including employer match. The average return for high-risk stocks (which you should be in if you've got 30 years to retirement) are just under 10%, but that's probably unrealistic. If you invest in mutual funds, which is predominant in 401(k) plans, you'll give back 1-2% a year in management fees. Let's assume 7% a year growth. Including the 3% salary growth, investing 12% a year in the 401(k) will result in 16.5 times your current salary in 30 years. Investing 15% results in about 20.8 times your current salary. In other words, your 401(k) will only provide 50 to 60% of your retirement needs with a 12 - 15% contribution.

Where does the rest of the money come from? Consider a Roth IRA. The current contribution limit is $5000/yr (not guaranteed to continue at this rate). Using the above 7% return on aggressive stocks, the Roth IRA will be worth approximately $500,000 after 30 years of maximum contributions. This number is fixed, so how much this will contribute to your post-retirement income depends on your current salary. The multiple of current salary could be anywhere from 5 (current salary is $100k/yr) to 10 or more ($50k/yr or less), which would account for 15 to 30% of retirement income.

Adding the recommended 401(k) contributions and the Roth IRA, these can account for anywhere between 65 and 90% of your retirement needs. This obviously doesn't add up to enough. If your employer has a pension plan, you can add that by using the projected payout amount divided by your current salary. That number divided by 34 is approximately the percent of your retirement the pension will cover. If you don't have a pension plan, investing more in the 401(k) plan is a way to make up the difference. Every 1% increase in your 401(k) contribution should add another 4% to your retirement account after 30 years.

These numbers aren't exact. A slight change in any of the assumed percentages could make a drastic change in the retirement account value, especially over 30 years. A main assumption made was the 6% return on an account post-retirement. This number may be high. Taking a lower assumption of 5%, you'll need 41 times your current salary (20% more) at the time of retirement. Using the current CD rates of 1.25%, you'll need more. Much more. Digging into your principal during retirement can make up for the expected earnings but the money will only last a finite amount of time.

The take-away from this exercise should be that without Social Security, everyone will need to make up a substantial portion of their retirement. The recommended 401(k) contribution, even paired with maximum contributions to an IRA won't be enough. Additional savings needs to come from increased 401(k) contributions, or a company pension.

Funny Links

Sometimes the least expected are the ones that might know the most about coaching searches. If you want to know all about Oregon's search for a new basketball coach just ask this girl...

http://www.oregonlive.com/sports/oregonian/john_canzano/index.ssf/2010/03/canzano_ducks_coaching_search.html

LSU decided to have some April Fool's Day fun which prompted some thinking. What would an ISU field of red and yellow look like?! It would probably be pretty ugly. LSU's new purple field doesn't look too bad though if you are into that sort of thing. I like the quote from the strength and conditioning coach.

http://www.lsusports.net/ViewArticle.dbml?DB_OEM_ID=5200&ATCLID=204919830



This is one of the best April Fool's Day jokes since the "Left Handed Whopper"

http://www.prnewswire.co.uk/cgi/news/release?id=39523

100 Pushups

I am going to do the hundredpushup.com program. The goal at the end of the program is that you can do 100 consecutive pushups. My initial test resulted in 26 consecutive pushups. We will see how it goes.

MLB Predictions

Here are my annual predictions for the upcoming year. Unfortunately, I am not as optimistic about the Cubs this year as I have in the past.

Standings:

NL East
Phillies
Braves
Marlins
Mets
Nationals

NL Central
Cardinals
Cubs
Brewers
Reds
Astros
Pirates

NL West
Rockies
Giants
Dodgers
Diamondbacks
Padres

NL Wild Card
Braves

AL East
Yankees
Rays
Red Sox
Blue Jays
Orioles

AL Central
White Sox
Twins
Tigers
Indians
Royals

AL West
Angels
Rangers
Mariners
A's

AL Wild Card: Tampa Rays

NL Champion: Phillies
AL Champion: Yankees

WS Champion: Yankees (I hope this is not true)

NL MVP: Pujols
AL MVP: Mauer

NL ROY: Stephen Strasburg
AL ROY: Brian Matusz

NL Cy Young: Roy Halladay
AL Cy Young: Jake Peavy

Mack Brown Gets More Green

Texas just made Mack Brown the top paid coach among NCAA men's coaches. They decided to give him a ho-hum 2 million dollar raise up to 5 million dollars. Is he the best coach in America? Certainly not. Has he had the most success? Certainly not. Do I have a problem with this raise? Well, here is a case for what Texas was thinking...
Texas will be playing for its 2nd BCS title in 5 years. That is pretty good but not as good as Urban Meyer's run. The most impressive part of Brown's resume is 9 straight 10 win seasons. Most coaches kill to have 9 total 10 win seasons. The biggest part of that is in most years 10 wins will get you a BCS bowl and that means loads of money for Texas and the Big 12. It is very evident that college sports is just as much business as it is providing an opportunity for student-athletes. Does Texas really think he is the best college in the NCAA like their AD has said? Maybe, but thats only because he brings in loads of money.
Brown started at 750,000 dollars in 1997, his first year on the job. When he came to Texas their football revenue were 21.3 million dollars. They currently stand at 87.5 million dollars. Texas sees Mack Brown as the CEO of their football company and looking at the results he has done a good job. The biggest reason I surprisingly don't completely disagree with this raise? His salary is paid entirely with athletic department revenues. No state tax money is used. If Texas sees him as the guy bringing in the money, with his clock management aside, then I suppose it is smart for them reward him. However, do you think Brown would honestly ever go anywhere if you didn't give him a raise?

Some nuggets of fun for your enjoyment...

Snow Days, Marathon, and Boredom

Having a snow day before winter break is never a good sign. It looks like we will have at least two this year. Yes, I realize this pushes the school year back if we go over three. This may push my work schedule back into June, but to all of you that say “have fun going extra at the end of the year”, I say “have fun working the entire summer!” When you are working in July, I will be golfing and sleeping. Or maybe I will be watching baseball, traveling or enjoying more golf and sleeping. I could also spend eight hours a day thinking about getting stuff done, but having no reason to do so. I may be working into June, but have fun working, commuting and going to school tomorrow because I will be watching my soap operas once again and enjoying another day off. In June? You will still be working. In July? You will still be working. Most of August? You will still be working.

I have decided to run a marathon. Another teacher at my school talked me into it and I decided to do it. It will suck. It will be painful. Hopefully it will be worth it. It has always been something I wanted to do and this seems like the right time. It may mean taking it easy some Saturday nights so I can run 10+ miles on Sunday, but that won’t be the worst case scenario for me. It is a 26 week program (yes business majors that is half a year). It involves cross-training, timed runs and long runs. It started Monday and the race will take place on June 6^th. This training will help me beat Jeremy’s butt in our “Houston to Marion” challenge. It is a one year challenge from Thanksgiving to Thanksgiving to see if we can run, bike, swim, ellpitacize, etc. our way from Houston to Marion (1128 miles). I am currently in the lead by a decent margin.

I have learned (in the middle of watching soap operas) that there is some interesting crap on the internet. You want to know what Rahshon Clark is up to these days? Click this link: http://www.keflavik.is/Karfan/Mfl_karla/ . Best part? His teammate Halldor Halldorson. I am not sure what kind of team this is but I hope it pays well. He kind of reminds me of the old guy from Dodgeball. Sorry, I cannot find a picture of him, but I believe the only difference is their chest size. Good old Halldor. Best of luck to you Rahshon in your current endeavors.

I have also been doing a lot of research in getting down to Arizona for the Cyclones game in Tempe. There are obviously several options. Most of them are rather expensive, mainly the ones that include flying down there. The Alumni Association decided to put together a trip for those interested (which is already sold out). The price for a quad-occupancy trip per person was $1,421! That got me to thinking. What kind of a bowl party could you throw for $1,421? Here is my bowl party:

40” Samsung 1080p LCD HDTV -$700 (which you get to keep by the way)

16 gallons of fun -$100 (which you get to enjoy by the way)

2 liters of Mexican fun- $20 (Price of lime and salt included!)

Saucy Southerners equipped with regular and spicy BBQ sauce along with three sides $120 (enough for 20 people!)

Oh wait the game is on NFL Network…

That’s why I decided to include:

12 months (3 months free) Direct TV package, 150+channels, HD, free installition, etc. - $360

Cyclone Insight Bowl T-Shirt: $20

There is now $100 to spend…

Season Tickets to ISU football 2010 $99

With the last and final two dollars I will put them on a parlay with every possible situation in the bowl game with a chance to have this all paid for.

That sounds like one heck of a bowl party. Keep in mind, that is only the price of one person to go. You could have four times the fun with the real price for four people to attend! With that being said I think I am going to find a way to drive down there and be there in person. Although having one heck of a bowl party sure does sound enticing!

You can look forward to more posts as long as this snow keeps falling!

The Waiting Game

With Kansas' loss to Missouri, ISU is assured a bowl berth. It looks like either Shreveport or Houston unless a Nebraska upset over Texas occurs (Insight then). Most have all signs pointing to Shreveport. Word of mouth through a donor at the basketball game tonight says Pollard is on record as saying the INDY bowl wants TAMU not ISU. This might be a result of their strong showing against Texas. It is still up in the air, but at least it is not up in the air as to if the Cyclones will go or not. A year ago today I was not thinking of a bowl game this year, so I am not going to complain about which bowl ISU goes to or does not go to. At this point I would like to go to Houston for selfish reasons and I don't need to lose money in Shreveport at the casinos. The biggest impact of this bowl berth is the extra month of practice for the Cyclones. It will be huge for the players in the first year of new schemes. Look for them to be really prepared against whoever, whenever they play. Their opponent will be just as prepared, but it certainly will be fun to see ISU bowling around the holidays!

How November 2006 Changed ISU Football

On November 26, 2006 it was expected ISU was going to name Brian Kelly their new head football coach. It seemed logical at the time. He would be getting a 900,000 dollar raise. He was successful at Grand Valley State and Central Michigan. The other known interviews were Jay Norvell, OC at Oklahoma, and Jim Harbaugh. Pollard came out of left field and introduced Gene Chizik as the new head football coach. Meanwhile, Brian Kelly was snatched up by Cincinatti, and Harbaugh caught on with Stanford.

Brian Kelly

Kelly has taken Cincy from 19-17 in the 3 years previous to him taking over to 30-6 in the three years since, with three games left in this season. That was quite the turnaround.

Jim Harbaugh

Harbaugh came from a program that didn't offer scholarships to guiding Stanfords football program. Their record in the 3 years prior to Harbaugh--10-24. Their record since: 15-18. Keep in mind Stanford was 1-11 the year before Harbaugh took over. He also has two victories over Top 10 opponents (at USC, vs Oregon).

Jay Norvell is still searching for a coaching job at this point.

Kelly=+11 wins and counting
Harbaugh= +5 wins and counting


Now, Gene Chizik.

In the two years before Gene got here McCarney went 11-13, including a bowl trip. That is a little better than most people think. Chizik was brought in and went 5-19 in his two years. That is a MINUS 6 win differential. What a hire.

I think people thought ISU football was in a lot worse of a place when Chizik took over. People failed to realize that they were one year removed from a bowl game.

If Pollard had gotten it right...

ISU may have been coming off a bowl trip.
People might be wanting our head coach for the right reasons.
ISU WOULDN'T have wasted the last two years.

Did Pollard get it right? (Part Two)

At the moment it looks like Pollard got this one right. Rhoads already has a +3 win differential, among the best in the nation. Another candidate, Turner Gill has cooled off at Buffalo and isn't quite the coup he was a year ago. Most importantly Rhoads looks like he wants to be here.

Looking back to November 26th, 2006 it is funny to think how much one date could have changed ISU football so much. Kelly had his bags packed and thought he had a contract in hand. Instead he shipped his bags and his coaching ability for the Big East and now appears to have first dibs on whatever coaching job he so chooses. Can you imagine what it would have been like to have Notre Dame trying to steal away our coach?!

Moral of the story:

ISU appears to have finally gotten their hands on a good coach. Does he have the ability to make them more than mediocre? We will see. Pollard put this program back two years with one decision. If it turns out he was wrong on this one, he needs to be out the door as well.