Investing

[shotbyspike]

So I'm interested in putting my old 401k from a previous employer into an IRA. It is only a little more than 500$ but I'd rather have it doing something than dieing in the 401k. I remembered in high school being told that putting away 2,000 dollars into and IRA at age 18 you could have somewhere around a million dollars when you retire. Also there was something about a rule of 72. I dunno.

Anyway the guy at the bank just confused me more about investing so I was hoping someone could better explain some options about rolling over my 401k into an IRA.

 

[slacker]

sub'ed to the thread, I am curious too. I just started a 401k in october.

 

[Field King]

I do not know the best investment vehicles as I just let mine ride in a 401k cuz my employer matches and adds profit sharing yearly, but the "rule of 72" is divide the percentage you expect to earn on a given investment into 72 to find out how many years it will take to double, example: $500 invested at an annual return of 6% will take 12 years to double to $1000. (72 divided by 6 = 12). That is assuming you contribute no more, after that the rest becomes a blur to me, I will be watching here to learn more also.

 

[StarbaseSSD]

I forget, but if IIRC, at 6% interest, and putting in $2000/year every year from 18 to 65, you'd accumulate the $1,000,000. However. that presupposes you can get the 6%, and you put in the $2000 each year.

As to the rule of 72, divide 72 by the interest rate, and it tells you how soon you 'double' your money. 6% = 12 years. 12% = 6 years. 3% = 24 years. Now this is 'simple interest, not compound interest (where you leave your interest in place). See: Rule of 72 - Wikipedia, the free encyclopedia

 

[BIG TIM]

The rule of 72 go's something like this: take 72 and divide it by the percentage per year you earn and the result will tell you how many years it will take your money to double. I believe everyone should invest wisely in an IRA while they are young to hopefully take care of themselves when they get older. The (wisely) part is the real trick. As the laws are today, if you have it available, you can invest $5000 per year in an IRA and $15,000 per year in a 401K. Hope this helps ease the confusion some.

 

[shotbyspike]

Blah I didn't know I would have to invest 2,000 yearly. I was lead to believe I could invest 2,000 and forget about it until I was 65.

 

[StarbaseSSD]

Blah I didn't know I would have to invest 2,000 yearly. I was lead to believe I could invest 2,000 and forget about it until I was 65.

65 - 18 = 47
72 \ 3% (Historical average return on savings) = 24
Amount after 48 years with only a single $2000 investment = $8000
That'll probably get you a Starbucks at your retirement party...

Sorry... And Welcome...

 

[jeremy]

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