The New Retirement Math Gotcha Down?

Is this the new retirement math?

So you save your money until one day you tell the boss Adios! and live happily ever after.  The American Dream – right?  Oh, and of course you have your house paid for so no more mortgage payment!  So, let’s figure you have saved up a very tidy sum in your 401k and you feel confident that your $400,000 will provide a very nice living for you during the time you have left on this earth.  So you take a few weeks to lie around the house and get used to the “good life”.

Then you get your bank statement and realize you’re your old company is not depositing checks in your account anymore. So you finally get around to filling out the paperwork your old boss gave you on the way out the door. It seems you need to tell your old employer where you want the balance in your 401k sent.

So you go down to check things out at your local bank.  The bank you have been using for over 20 years. To them you are not just a number – you are a number with a comma in it! They tell you that they are currently paying interest at a rate of .6%. Six percent – great that means that your $400,000 will generate $24,000 per year. Put that together with your Social Security of $20,000 per year and (without a mortgage payment) you should be able to squeeze by.

Wait! The banker person is trying to say something to you but it is not really making any sense.  It seems that they are not paying 6% but POINT 6%. Wow! You are going to need the calculator on your smart phone to figure this one out.  $400,000 at .006 equals $2,400.  Well that’s just great! So to get $24,000 per year you need to get back down the old boss and beg for your job back because you need to work until you have $4,000,000 in your 401k.  But wait.

Now you remember that you went to some seminar somewhere along the way and they mentioned that the money in a 401k plan is taxed when you take it out.  So the $24,000 is really around $19,000 and that some of your social security is taxable because you are taking money out of your 401k. Ouch! The American Dream ain’t what it used to be. It’s the new retirement math.

I deal with this ALL DAY LONG! Believe me when I say that I enjoy practicing preventive medicine a lot more than Emergency Room type treatments.  If your financial picture looks anything like what I described above – please ask for help – if not from me then from someone. Get the facts and act. Don’t let the new retirement math prevent you from becoming independently wealthy!