1.1  million dollars 30 years from now will not be what it is today, but certainly will be something nice to have.  What can 1.1m do for retirement? If one wanted to supplement there income, and draw out 5k a month (remember its tax free dollars assuming a roth IRA is used, so it’s the same as 8k earned today after uncle sam gets his).

Now after one begins depending on income from investments, sometimes we tend to get conservative. So I ran some drills using 2 different places the nest egg would reside while it was used to produce income.  A savings account/CD/Treasury bond portfolio earning 4%, and a conservative mutual fund earning a consistent 6% return.

1.1m kept in a simple safe savings account (4%) could produce 5k a month for well over 25 years, in fact after 25 years there still would be 375k left.

1.1m in very conservative mutual funds earning 6%, could produce that same 5k a month and have 1.2m left after 25 years.

Regardless of what one does with today’s dollars, you cannot compete with the here and now, in your face pleasures available at the local car dealer. But the last time I checked that car or truck did not produce 5 thousand tax free dollars every month for 25 years, while still preserving the amount saved that is producing the 5k.  30 years is a long time to wait for such freedom, but the alternative is not something worth it when one looks at what can lie ahead, for some small sacrifices today.

For fun I also took that truck payment and decide that each year we likely could add $50 a month to it. After all our debt free life, and the potential for raises each year ought to allow us to squeeze out an additional 50 a month each year. After all uncle Sam allows folks to put 5k each in a Roth every year.  The idea being that each year we would add 50 a month, until we reach doing 833 a month versus the 488.47 truck payment.So as an eaxmple, the next year we would do 538.47  month, a year later 588.47 until we got to 833 a month and were maxing each ROTH.

Now we hit 136k in 5 years, 542k in 10 years and 1.7m in 30 years. That subtle difference, of 50 a month for a few years and then holding at 833 a month changes things. Now we can take out 6 thousand tax free dollars (not 5 thousand) a month from a simple savings account (4%) and have 1.4m remaining after 25 years.  In the conservative mutual fund portfolio earning 6%, we can take out 6k and have 3.1m after 25 years.  Heck if we want to go crazy and take out 10 thousand tax free dollars a month we can do that, and still have 317k left after 25 years.

Oh, and if we hit Dave Ramsey’s magic 12% along the way, the difference is not subtle, instead of 1.7m, we have 2.5m at age 64.

Wow, thanks for the numbers, Dan!  And those numbers prove beyond all doubt that carrying a vehicle note is paying BIG stupid tax!  Now, my challenge is to convince my reluctant spouse not only of this idea, but that YES we CAN pay this truck note off in less than a year!