New Investor Returns

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lsbrn1961
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Joined: Tue Jul 27, 2021 12:44 am

New Investor Returns

Post by lsbrn1961 »

I am a relatively new investor (since April 21). I keep hearing the talking heads talk about the index's having these great returns, but my returns on my index funds have been pretty dismal with the exception of VNQ. VTI, VOO, VWO, and BND have all had less than stellar returns thus far. Is this just because of when I entered the market? I'd hate to think these returns are as good as it gets! I have some other positions that are performing better, but after reading David Swenson's book I decided to make my portfolio mainly index funds over different sectors. Can anyone shed some light on this?
Call_Me_Op
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Re: New Investor Returns

Post by Call_Me_Op »

lsbrn1961 wrote: Tue Jul 27, 2021 12:56 am I am a relatively new investor (since April 21). I keep hearing the talking heads talk about the index's having these great returns, but my returns on my index funds have been pretty dismal with the exception of VNQ. VTI, VOO, VWO, and BND have all had less than stellar returns thus far. Is this just because of when I entered the market? I'd hate to think these returns are as good as it gets! I have some other positions that are performing better, but after reading David Swenson's book I decided to make my portfolio mainly index funds over different sectors. Can anyone shed some light on this?
3 months is way too short of a time period on which to base any conclusions. First, you should compare your ETFs/funds against their benchmarks only - not against other benchmarks. For example, if you have a fund that invests in emerging market stocks, you should compare your returns against the appropriate emerging market index. If you hold index funds, you know you are doing about as well as the respective indexes. The only question then is how did you distribute your funds among the different stock index funds, and that is less important than your percentage in stocks versus bonds.
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retiredjg
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Re: New Investor Returns

Post by retiredjg »

Welcome to the forum. :happy

It is natural for a new investor to be watching those first dollars carefully. But the fact is that whatever happens by 3 months or even 3 years is totally irrelevant. What happens in 30 years will matter though.

Just save money on a regular basis, hold a reasonable stock to bond ratio, use tax-advantaged accounts like 401k and Roth IRA, and don't worry too much about the rest of the details.
muffins14
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Re: New Investor Returns

Post by muffins14 »

It’s important to be patient. Those returns happen over decades, not a couple months. Many indices are up +40-50% since 2020 because of the 2020 low point, for example, and we won’t get +50% each year either ;)
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JoeRetire
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Re: New Investor Returns

Post by JoeRetire »

lsbrn1961 wrote: Tue Jul 27, 2021 12:56 am I am a relatively new investor (since April 21). I keep hearing the talking heads talk about the index's having these great returns, but my returns on my index funds have been pretty dismal with the exception of VNQ. VTI, VOO, VWO, and BND have all had less than stellar returns thus far.
What kinds of returns are you getting?
What kinds of returns are you expecting?

Hopefully you don't expect to get "stellar" returns during every 3 month period?
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lsbrn1961
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Re: New Investor Returns

Post by lsbrn1961 »

First I'd like to thank you all for your comments. Although not young, Iam in my infancy on the learning curve. To answer some of your questions:
My returns so far have been:
VNQ: 9.87%
VXUS: -.76%
VOO: 2.76%
VTI: 5.26%
BND 1.63%

My Allocations are:
Domestic Stock: 67%
Foreign Stock: 11%
Bonds 16%
Short Term 4%
Other 2% (limited partnerships)

I realize that seasoned investors are looking at this, and going "oh another Newbie". However I am very serious about this. I have stayed the course through all the recent volatility. I am contributing almost $2K/month in this from a $60K salary. Part of that is my 401K that I have been contributing to for 5 years. If I had 30 years to accomplish my goals, that would be great. However, like many Americans I waited way to long to start this process and I am significantly behind the 8 ball. In 30 years I will either be in a nursing home, or the grave. However, the good news is I have started. I have a pension from the State of North Carolina that I will collect. The goal is to accumulate as much wealth in my 5-7 year retirement window to pad my pension, and Social security so that I can at least retire comfortably. What I would really like to know from you guy's (and Gal's) is where I should be putting my money to make the most of this effort, and not loose my butt in a down turn, I don't have the time to recover from that.
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riverant
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Re: New Investor Returns

Post by riverant »

Better late then never, don't feel self conscious about being "new" or starting late. You're in the right place. There's a few things I suggest to keep in mind

1) As others have said, don't look at such short term returns. On an annualized nominal basis, that is the full year return before adjusting for inflation (Which would be the 'real' return), typical expectations are 5-9% depending on your asset allocation. Eyeballing the returns you've listed, you're in that ballpark after only 3-4 months. Don't count on that. Unfortunately, there are no short cuts to produce large returns without stupid risks.

2) The most important thing to do is determine you asset allocation. You have a relatively short time horizon to retirement, but some ground to make up. Without knowing the full details of you pension, annual expenses, expected retirement length, it's hard to give advice. Knowing nothing else, I'd probably err close to where you are right now, though I might recommend a larger emergency fund.

3) Once you set your assett allocation and glide path (how your AA might change over time), stop thinking about it

4) The most important thing you can do right now is maximize your savings rate, cut excess spending, and figure out if you will implement any changes once you stop working. To optimize, you'll want to take advantage of tax sheltered accounts (Roth vs traditional IRAs, company 401k plans, etc.). If you're older, you can take advantage of catchup contributions

To help others answer your question in more specifics, please update your post to follow the format in the link below. This allows members to evaluate your situation in a standard template that provides most information needed in a standard, quick to understand format.

viewtopic.php?f=1&t=6212
Topic Author
lsbrn1961
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Re: New Investor Returns

Post by lsbrn1961 »

Tjat,
Thank you for your reply. I have printed off the template and your post, so that I can put together an appropriate post for all of you to review. After reading your post, this may take a little time to put together. I want to make sure that anyone who cares to reply has the full picture to be able to give me some meaningful advice. I agree that this is going to be a good learning experience for me, and as soon as I compile these figures, I will repost.
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Re: New Investor Returns

Post by surfstar »

a big x1000 to #4 above

Don't focus on your rate of return - focus on your savings rate! It will dominate how much money you can accumulate in a short (5-7 years) time.
Cut all unnecessary expenditures and invest/save the money instead. Do you need a high(er) speed internet? Can you save by switching? Cell phone and plan? "Subscription" services - Netflix, Amazon Prime, food delivery, ... Eating out too often?
Review your expenditures and look for savings - it can and will add up.

:sharebeer
Doctor Rhythm
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Re: New Investor Returns

Post by Doctor Rhythm »

… my returns on my index funds have been pretty dismal with the exception of VNQ. VTI, VOO, VWO, and BND have all had less than stellar returns thus far.
:shock:

I’ll give you similar advice as other but for a different reason. Don’t judge anything based on the last 3 months of returns, yes. But that’s because the last 3 months have been great. If you expect better long term returns, you’re wildly optimistic.

Just so you have some long term perspective, 5% rise in the total market (your VTI) in 3 months is well above average. The historical return of the market since 2000 is more like 8-9% annually. You should hope that this “less than stellar” performance continues indefinitely.
dboeger1
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Re: New Investor Returns

Post by dboeger1 »

Echoing the previous comment, I don't know what your expectations are, but clearly you need to dial them back a bit. Not only have the past 3 months been great, but I don't know what you're talking about saying you have held through all the recent volatility. You completely missed out on the crash of 2020, which itself was one of the shortest-lived crashes in history, so you really can't claim to have experienced any crazy downturn or volatility yet. I think your perception is clearly colored by recent market drama with meme stocks like Gamestop or cryptocurrencies like Bitcoin. If you think the past 3 months have been crazy and tested your ability to stay in the market, you may seriously want to reconsider your asset allocation.

That being said, in your defense, I think everyone's first time investing feels crazy. I remember when I started investing, seeing my portfolio value go up or down by $50 in a day made me feel like my heart was going to beat out of my chest. Shortly before I started investing, I was actually still keeping almost all of my savings in a major traditional bank account earning like 0.01% interest or something. One of the things that actually got me into investing was that I had about $50k in my savings account after 1-2 years of my career, the end of the year came around, and I only earned like $2 in interest, so I felt there had to be some better way to manage my money. So yeah, going from $2 annually to $50 daily feels like an absolute roller coaster. Several years later, here we are, my net worth probably dropped by $10k or more yesterday, probably went up again by $5k or so today, and neither day registered emotionally for me. You just get numb to it after a while and learn to trust long-term growth. Everything else is noise. I don't need to sell to fund my living expenses tomorrow, so why would I care what happens in the markets tomorrow? Another way to think of it is that the things you thought were serious when you were a kid, you probably realize are pretty meaningless in the grand scheme of things as an adult. I remember my younger sister being absolutely paranoid about starting to use a locker in middle school because she was afraid she would forget her lock combination. Today, she's an independent employed adult. You should try to realize that the things that are making you panic now are really just minor distractions on a greater journey.
hnd
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Re: New Investor Returns

Post by hnd »

i think most people "get serious" at the beginning or middle of bull runs. when everyone is talking about it. oh man, look at those gains, i need to get serious about this. you buy tesla or ARKK last year and are like holy crap, look at how easy this is. in 2009-2010 during recovery people were like oh man this is easy! who gets voluntarily "serious" about their retirement accounts when the stock market looks like it stinks?

Its those time when it does stinks and 70% of active funds and individual stocks are getting trounced and or the grass is greener over here that cause the ole bogle saying "reversion to the means"
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Re: New Investor Returns

Post by sailaway »

lsbrn1961 wrote: Wed Jul 28, 2021 2:58 pm First I'd like to thank you all for your comments. Although not young, Iam in my infancy on the learning curve. To answer some of your questions:
My returns so far have been:
VNQ: 9.87%
VXUS: -.76%
VOO: 2.76%
VTI: 5.26%
BND 1.63%
And you think only one if these is a good 3 month return? The problem seems to be your expectations.
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ApeAttack
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Re: New Investor Returns

Post by ApeAttack »

dboeger1 wrote: Wed Jul 28, 2021 5:03 pm Echoing the previous comment, I don't know what your expectations are, but clearly you need to dial them back a bit. Not only have the past 3 months been great, but I don't know what you're talking about saying you have held through all the recent volatility. You completely missed out on the crash of 2020, which itself was one of the shortest-lived crashes in history, so you really can't claim to have experienced any crazy downturn or volatility yet.
These were my initial thoughts as well. The volatility since April 2021 is nothing compared to March 2020 and all the other crashes before that.

OP, compare the performance of your funds (minus the expense ratio) to the appropriate indices over 10+ years. For example, if you own an actively managed large cap US stock fund, compare it to S&P500 (or VFINX).
May all your index funds gain +0.5% today.
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Re: New Investor Returns

Post by pkcrafter »

lsbrn1961 wrote: Wed Jul 28, 2021 2:58 pm First I'd like to thank you all for your comments. Although not young, Iam in my infancy on the learning curve. To answer some of your questions:
My returns so far have been:
VNQ: 9.87%
VXUS: -.76%
VOO: 2.76%
VTI: 5.26%
BND 1.63%

My Allocations are:
Domestic Stock: 67%
Foreign Stock: 11%
Bonds 16%
Short Term 4%
Other 2% (limited partnerships)

How much (total in retirement savings? How much will the pension provide? What type of accounts are these ETFs in? Is everything in the 401k?
What % of equity is VNQ? What % of equity is VXUS--11% of equity or 11% of total?
You hold both S&P 500 and total stock market. These two are almost equal in performance, so no need to hold both. Use VTI.
Your savings/investing rate is excellent, but portfolio growth takes time.


The goal is to accumulate as much wealth in my 5-7 year retirement window to pad my pension, and Social security so that I can at least retire comfortably. What I would really like to know from you guy's (and Gal's) is where I should be putting my money to make the most of this effort, and not loose my butt in a down turn, I don't have the time to recover from that.

Well, if you are 80/20 with 5 years to go, you are taking on enough risk to really mess up your plans.

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
Doctor Rhythm
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Re: New Investor Returns

Post by Doctor Rhythm »

lsbrn1961 wrote: Wed Jul 28, 2021 2:58 pm
My Allocations are:
Domestic Stock: 67%
Foreign Stock: 11%
Bonds 16%
Short Term 4%
Other 2% (limited partnerships)

The goal is to accumulate as much wealth in my 5-7 year retirement window to pad my pension, and Social security so that I can at least retire comfortably. What I would really like to know from you guy's (and Gal's) is where I should be putting my money to make the most of this effort, and not loose my butt in a down turn, I don't have the time to recover from that.
Have you taken a look at target date funds (TDF)? They are intended for investors like yourself: investing for retirement, less experienced, potentially more vulnerable to behavioral or cognitive errors. These aren’t personal criticisms — it describes the large majority of savers. A TDF tries to do exactly what you’re asking for: make your money grow by taking on only a reasonable amount of risk.

For someone 5-7 years out from retirement, a typical TDF might have 60% in stocks. So your 80% allocation would be considered extremely aggressive for most people at your stage.
csh
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Re: New Investor Returns

Post by csh »

Welcome to the forum!
lsbrn1961 wrote: Wed Jul 28, 2021 2:58 pm What I would really like to know from you guy's (and Gal's) is where I should be putting my money to make the most of this effort, and not loose my butt in a down turn, I don't have the time to recover from that.
The trick is that you need to take the risk to get the reward. The problem is that you can loose a good portion of your butt in a down turn. Typically it is said that you could see the value of your equities decline by 50%. Bonds can decline a bit too but not nearly as much as equities. The bonds and other savings like a money market, CDs, treasuries, serve as ballast in your portfolio but typically do not provide much for gains. A target date fund might be a good option for you. Or you can stick with handling the asset allocation yourself like you are right now. It is hard to say whether or not you are taking too much risk with your 80/20 portfolio. Some people factor in a pension which allows for a more risky portfolio. That said that there is a lot of advice that says that you should be somewhere between 70/30 and 30/70 with a lot of people going with a 60/40. There are different reasons for choosing your asset allocation with the main thing being behavioral. When equities tank, loss aversion kicks in and a good number of people sell out of their equities at the worst possible time an lock in their losses. There is a lot of good advice in this forum and on the wiki. I recommend that you start here with the wiki https://www.bogleheads.org/wiki/Getting_started

As far your current investments, you started out well by going with index funds. You can simplify things a bit by choosing to go with VOO or VTI. No need to go with both since they correlate very closely even though your short term gains do not reflect that. While VNQ was done quite well over the past three months, it should be a minor portion of your portfolio at 10% or less. More on the less side. The gains VNQ has made this year are probably due to fear on overreaction in 2020 keeping those assets priced lower than they should have and now it is making up for that. I would not expect VNQ to out perform VTI or VOO for an extended duration.

For the money you are saving outside of your 401k, are you putting that into a Roth IRA? If not, you should. You can put up to $6k into a Roth and if you are over 50, then you can put up to $7k in the Roth. The advantage of a Roth is that the money that you contributed has already been taxed an the earnings will not be taxed when following the rules on Roth accounts.
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David Jay
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Re: New Investor Returns

Post by David Jay »

What would you consider “stellar” returns? How about double the long term average return? Would that be “stellar”?

Average long term US stock market return is about 10% per year. You have been invested in VTI (total US stock) for 3 months and you have earned more than 5%. That equates to 20%+ per year, or double the long term stock market average.
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lsbrn1961
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Re: New Investor Returns

Post by lsbrn1961 »

Based on all of your comments, i can see i have alot to learn. As tjat has recommended, iam gathering all the pertinant data to post for your consumption. Based on some of the comments so far, iam a little nervous about the responces i might get, but if i want to hear the truth, and get some real advice then i have to get financially naked, and take my lumps. I appreciate the honesty, although it is quite a wake up call. Hopefully i can laugh about this with you all in 10 years.
tomsense76
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Re: New Investor Returns

Post by tomsense76 »

Welcome to the forum! :happy

As you put together additional info, would say the template that is suggested here ( viewtopic.php?f=1&t=6212 ) is quite good. It might be more info than is needed for this case. However it is really helpful in that it forces you to sit-down and figure out where everything lives and what things looks like (this is even useful just for you to know). Some of the answers to the questions you may have will fall right out of the data provided in that template.

Additionally as you are getting close to retirement age (though not sure how close). Would suggest digging up info about your pension. Also would check out Open Social Security ( https://opensocialsecurity.com ). Some more details here ( https://www.bogleheads.org/blog/portfol ... -security/ ). This is useful as it will help you get a handle of what social security will provide you depending on when you start taking it. If this is total gibberish, would focus on the first part and others here can help guide you through this second part.
"Anyone who claims to understand quantum theory is either lying or crazy" -- Richard Feynman
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ApeAttack
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Re: New Investor Returns

Post by ApeAttack »

lsbrn1961 wrote: Thu Jul 29, 2021 1:39 am Based on all of your comments, i can see i have alot to learn. As tjat has recommended, iam gathering all the pertinant data to post for your consumption. Based on some of the comments so far, iam a little nervous about the responces i might get, but if i want to hear the truth, and get some real advice then i have to get financially naked, and take my lumps. I appreciate the honesty, although it is quite a wake up call. Hopefully i can laugh about this with you all in 10 years.
No need to be nervous. We are here to help.

My investment strategy was all over the place until I found this website about a year ago. What I've come to appreciate about the bogleheads is many of them don't post advice, but rather post questions to challenge your assumptions. They force you to defend your positions, and in the process you learn that many assumptions are unfounded.
May all your index funds gain +0.5% today.
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retiredjg
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Re: New Investor Returns

Post by retiredjg »

lsbrn1961 wrote: Wed Jul 28, 2021 2:58 pm I realize that seasoned investors are looking at this, and going "oh another Newbie". However I am very serious about this. I have stayed the course through all the recent volatility. I am contributing almost $2K/month in this from a $60K salary. Part of that is my 401K that I have been contributing to for 5 years. If I had 30 years to accomplish my goals, that would be great. However, like many Americans I waited way to long to start this process and I am significantly behind the 8 ball. In 30 years I will either be in a nursing home, or the grave. However, the good news is I have started. I have a pension from the State of North Carolina that I will collect. The goal is to accumulate as much wealth in my 5-7 year retirement window to pad my pension, and Social security so that I can at least retire comfortably. What I would really like to know from you guy's (and Gal's) is where I should be putting my money to make the most of this effort, and not loose my butt in a down turn, I don't have the time to recover from that.
Your 84/16 stock to bond ratio is probably too aggressive to keep for very long. Having an aggressive allocation can bring better returns but it also brings bigger drops.

You have already realized that you do not have enough time to recover from a significant downturn. For that reason, if you are going to retire in 5 - 7 years, you really cannot try to swing for the fences.

If you could possibly be only 5 years out, I'd add some bonds now. At some point, you have to pivot from trying to make a large return to preserving what you have. In my mind, that is about 5 years, maybe 4.

This problem cannot be solved reliably by stock market returns that may not happen. It can only be solved by saving more, working longer, lowering expenses in retirement, working part time in retirement, and other things like that.

You are doing a good job of saving. There is nothing you can do at this point about starting late....except things like saving more, working longer, lowering expenses in retirement, working part time in retirement and other things like that.
dbr
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Re: New Investor Returns

Post by dbr »

An essential fundamental concept about investing is that returns are highly variable both in the short run and in the long run. Returns can also have longer run "secular" trends and historical shifts. Also see that "time diversification" is a fallacy.

Thinking that one can or is going to "get" certain returns is a basic mistake. At the least one must think of the possibility of getting something unpredictable out of a possible range of returns, and even that range bounded by uncertainties.

Tools like Portfolio Visualizer do some very helpful things but I would not use that tool as some kind of tabulation of what returns to expect. As a tabulation of the variability of returns it might be more helpful. My go to for demonstrating variability in investment outcomes would be the chart in FireCalc or the statistical ranges produced in planning models, including Portfolio Visualizer Monte Carlo Simulation.
hnd
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Re: New Investor Returns

Post by hnd »

lsbrn1961 wrote: Thu Jul 29, 2021 1:39 am Based on all of your comments, i can see i have alot to learn. As tjat has recommended, iam gathering all the pertinant data to post for your consumption. Based on some of the comments so far, iam a little nervous about the responces i might get, but if i want to hear the truth, and get some real advice then i have to get financially naked, and take my lumps. I appreciate the honesty, although it is quite a wake up call. Hopefully i can laugh about this with you all in 10 years.
i rolled over an old 401k used the brokerage guide, read a few kiplinger magazines and went to town. a week later i read little book of common sense investing and discovered this site. I was aghast at how all over the place I was how my portfolio was basically a large cap growth monster. I bought 10 funds with tremendous overlap and it was pretty much a nightmare. the wealth of information this place is as a compliment to Jack's work is tremendous. And while some of the people here can be crotchety at times, they really are trying to help.
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ruralavalon
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Re: New Investor Returns

Post by ruralavalon »

Welcome to the forum :) .

lsbrn1961 wrote: Wed Jul 28, 2021 2:58 pmVTI: 5.26%
That is 21% annualized, which is indeed "stellar".


lsbrn1961 wrote: Wed Jul 28, 2021 2:58 pmI am contributing almost $2K/month in this from a $60K salary.
That is a savings rate of 40%, which is excellent.


lsbrn1961 wrote: Wed Jul 28, 2021 2:58 pmI have a pension from the State of North Carolina that I will collect. The goal is to accumulate as much wealth in my 5-7 year retirement window to pad my pension, and Social security so that I can at least retire comfortably.
What is the current size of your investment portfolio?

When contributing $24k annually, even 5-7 years can give you a significant investment portfolio to pad your pension and Social Security benefits.

Here are calculators you can use to assess the range of possible outcomes at your level of of contributions:
1) www.firecalc.com; and
2) www.i-orp.com.

Be patient and continue your high level of contributions, using low cost index funds.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
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