Will not be investing for the next 7-9 years, can I still catch up?

[lhexisneal]

@ari3l654 Sounds like there's more of a spending problem than a savings problem here.

 

[pymntffc]

@ari3l654 Just invest the post tax money in a general investment account of the country you are going to work in. Definitely better than nothing.

 

[swat]

@ari3l654 Would the overseas job give you pension funds in that country? In most European countries, 7 years would render a small retirement income disregarding where you live. (Afaik)

 

[leira]

@ari3l654 At 40, $200k at 7%, inflation adjusted, growth would put you at ~$400k at 50. At 60 ~$800k. At 65 ~1 million. This is with no additional contributions.

In order to achieve your projected $120k yearly distributions for retirement (roughly $3 million at 4% withdrawal rate) Let's do some math with a 7%, inflation adjusted, growth rate.

400k to start at 50. If you retire at 60. You would need to contribute roughly $13k/month.

If you retire at 65, you would need to contribute roughly $6,500/m

If you retire at 70, you would need roughly $3k/m

You aren't necessarily screwed, but you may want to manage your expectations a bit if you do this. I would try to invest at least a little during those 10 years. The early compound growth starts, the better the money works for you. But your 3 million goal is attainable, if you are willing to take lifestyle cuts until retirement and retire slightly later. This will be pretty difficult. I think the wisest course of action is to adjust your spending expenses in retirement closer to 80k. This would make everything much more attainable if you cannot invest right now.

 

[jessicaaddslove]

@ari3l654 Hope you can contribute 20k/mo when u get back at 50 bc you wont be living off 120k/yr in retirement. Not even close.

For some perspective, i save 6500/mo. I have 275k currently. At 8% annual returns i would hit 3.5M in 16yrs.

Adjust your expectations or increase your income.

 

[nonehere]

@ari3l654 It will be incredibly difficult to catch up, time in market and the nearly decade of not saving will be a challenge to overcome and likely mean that you'll be working into your 70s.

Good luck!

 

[returntotheway]

@ari3l654 What is the point of this overseas work adventure?

7+ years is a long assignment & it sounds like it could be very detrimental to your plans.

Is "not going" an option?

 

[lesangeles97]

@returntotheway They said for family reasons. That could mean a lot obviously. But if it’s something serious like taking care of a parent, etc - could absolutely be worth a significant financial hit, which this sounds like it will be.

 

[waterlily3422]

@ari3l654 I have the option to live in Europe and the U.S. at will. My take is that if you struggle financially then Europe is the place to be. If you have financial potential or capacity, then you want to be in the U.S. Moving to Europe in the 40s to 50s is the worst of both worlds (while having a very good time though). The advantages you have in the U.S. for building wealth through tax advantaged investments is unmatched. Flip side of the coin is that when you have not much for retirement, you are screwed in the U.S. That being said, you still can catch up a lot 50-70 even if retirement at 65 may not be in the cards. Perhaps you will have to be a bit more frugal to maximize your investment power but the absolute amounts you can place in tax advantaged accounts is limited.
I would make the time in Europe as short as possible during work life and rather enjoy Europe after leaving the traditional workforce.

 

[nessmisfit]

@ari3l654 Your investment options are limited as you are not in the US however I would make the most of it by investing wisely. Since you are still young and have many years till retirement I would go aggressive with investing by putting 100% of your 401K to the S&P 500 Index fund which has the best track record of index funds since 1950 averaging 10%. It also has the lowest expense ratio (fees). The other 50K I would also put in VOO which is a VanguardETF (a fund that trades like a stock that mirrors the S&P 500 index) which charges the lowest fees. Every 200K will double every 7 years so your 200K will be about 500K in 10 years which isn't a bad place for a 50-year-old.

 

[lisastreet]

@ari3l654 Do you plan on staying outside of the US for more than 330 days out of the year? Depending on your circumstances, you may qualify for something call the foreign earned income exclusion, which essentially reduces your earned wages by $120-130k.

Go talk to a CPA for some planning advice.

 

[lisastreet]

Be careful of making any new contributions, strongly advise talking to a CPA about your situation so they can figure out what makes the most sense for you, since IRA contributions require "earned income".

Also talk to your CPA about Roth conversions, so you can rollover enough from your 401k/traditional IRA to a Roth IRA, this is a taxable event. Rollover enough into your Roth IRA upto the standard deduction.

 

[atyar]

@ari3l654 There is not enough time for you to have a meaningful retirement savings (3 mil). You have to invest long term and let the compound growth get you to the target number. Starting at 200,000 usd, the amount needed to get to 3 million by 65 is substantial. I’d plan to work well into your 70s unless you start saving monthly now.

 

[gharlant]

@ari3l654 You won't make up time value lost for those 10 year of not investing will have to save 35% of your pay returning to attempt a catch up.

 

[nanipardhu]

@ari3l654 3,000,000 divided by 25 years is not really how you determine your retirement income. Wouldn’t you expect to earn say 4% per year interest on your $3,000,000? There’s your $120k. Not reducing the principal balance.

 

[angelicnwaiting]

@ari3l654 Hey, despite the pause in Social Security and 401K contributions due to your overseas job, there are still avenues to catch up on retirement savings. Your previous work in the U.S likely earned you Social Security credits, which can contribute to your benefits. Consider rolling over your existing 401K into an IRA for continued growth.

 

[evooirer]

@ari3l654 Even if you continued to save/invest 25% of your 135k income for 20 years you wouldn’t get to $3M. Assuming a 7% average rate of return.