In part two of our 5 part series of why you need a Roth, Jane and Bob Youtube have now reached 60 and 70 years old. Their accounts have grown nicely.
At 60 years of age, they both have around $500k in their 401k plans.
Impossible you say? Well, no, not at all. Remember when they were 50 they started with $150k each in their 401ks. They added a 10k deferral and their company matched 8% of their salary.
So each year $14k was going into the account and it was growing at 7% a year. None of these scenarios are far-fetched
But at 60 let’s say they receive an inheritance or something and decide to quit their crappy old jobs.
They no longer add to their investment accounts but they aren’t taking money out either.
By the time they reach 70 their accounts have grown to around $1,000,000 each! Now they have reached the age for required mandatory distributions. RMDs on $2,000,000 is around $75,000 in the first year!
Wait to see what happens in following years, it’s going to get a LOT worse.