My retirement savings projection was off by $12,000 because I forgot inflation

I was reviewing my 401k projections last night in my home office and noticed the numbers didn't add up. Turns out I had been using the same 3% growth rate for 5 years without adjusting for anything. My buddy at work ran the real numbers and showed me I was short about $12,000 in projected savings by age 65. I had to redo my whole budget and start putting an extra $150 a month into my Roth IRA. Has anyone else found a big mistake in their retirement calculator that threw off their plans?

3 comments

3 Comments

joel_hall1722d ago

Wait, hold on! You were running the same 3% number for five years without ever checking it? That's kind of wild, honestly.

wesley18122d ago

Totally spaced on inflation for like four years straight until my wife asked me why our retirement spreadsheet looked like a bad math problem from 2019. $12k is funny money compared to the fact I had been basically guessing at growth rates while telling myself I was being "realistic." Honestly the biggest shock was realizing my "careful" 3% number was closer to what inflation eats up, so I was projecting gains that didn't even beat the cost of living. I had to laugh at myself when my buddy showed me the math because I literally typed "3% forever" into every cell without thinking. It's like I thought the economy was just going to freeze for the next two decades or something.

michael_jenkins3922d ago

Wait hold on. I'm going to push back on this a bit. If you're 20 years from retirement and only $12k off, that's basically a rounding error over the long haul. People get way too hung up on these tiny projections that are going to change a dozen times anyway. The stock market could drop 20% next year and make that $12k look like pocket change. Plus if you're young enough to adjust your contributions by $150 a month you're probably fine. Most people don't even check their projections at all.

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