What would $10K be worth in 30 years in a mutual fund?

This is hard to explain, but I'll try, I really need some solid advice. :) -- Thanks in advance, by the way!

Background on me - 31 yo married mom of 4.

I recently left a job that had a State retirement plan associated with it. I socked away $10,387.90 in it during the 5 years I was employed there. I can either roll it over into an IRA or I can leave it in there and when I am 60 I can get a lifetime benefit of $195/month. So if I live to 90 (planning on it!) I'll receive over $70K.

What would the $10K I have be worth in 30 years if I rolled it into an IRA, putting it into like Vanguard's Windsor or Windsor II?

Wish I was good at math and could figure that out myself, but I don't get how interest compounds and all that complicated stuff.

Second part of my ? - which would you do?

An easy rule of thumb is that mutual funds will grow 8% each year on average. At that rate your money doubles every 7.2 years. So you would have approx. 80k + at the end of your 30 years (it would double 3 times plus a little more).

30 years from now $200/month will be nothing.

Math. never works when you money is in others hand. Analyzing a return for 30 years is a fun - the result will be notional. Any investment should be reviewed periodically and changes to be made based on developments. If fund managers chosen are market leaders, you can rest assured a return of 15% p.a. (compounded) and your investment doubles (100% return) over a period of 4 years 11 months (precisely). It will be approx. USD 640K - all are notional.

best of luck

Your $10k over 30 years at 4%, compounded monthly is $33,135 in a "no load" -- meaning no fees you have to pay. Mutual Funds sometimes had 18% annual, way back when. Link below to calc figures for you. You should google -- interest calculators. Some have graphs and things like that.

But, my argument is money is worthless at the moment. Not sure what to do. My hunch is homeowners will get a piece of the federal handouts. I don't know all the tax rules. Investigate and ask around. I THINK mutuals have tax liability whereas an IRA defers to your elder years.

Do a direct rollover to an IRA and there will be no tax liability. Make sure it goes directly to the new IRA folks, do not take possession. You can invest it in any mutual fund once it's in there, or any stock for that matter, and your gains will not be taxable until you start taking distributions.

Assuming an 8% annual return (that's pretty good rule of thumb for stocks and mutual funds), your $10,387.90 will be worth $104,529.87 in 30 years.

You'll do far better with the IRA than the school annuity option. Good luck to you.

Go to my favorite website. They have a calculator available that can figure quickly the compound interest for you.

Go to :

low-cost-stock-recommendations

.com

Click on the "Compound Interest" Button near the bottom of the page. There is a text link within the webpage. I think it says, "Do the Math". This is an easy way to figure your 30 years question. It allows you to put in the interest rate you believe you will receive on average for the next 30 years.

Check it out

I would roll it over tomorrow. Numbers aside. Once you roll it over YOU have control of the money; how it is invested and who it goes to if / when you die. And it is ALL your beneficiary's when you die.

You must decide whether to put it into a Roth IRA or a traditional IRA. When you do roll it, DO NOT take possesion of the money. Have the proceeds from your pension directly transfered to your new account.

Once it is in the IRA, you can then choose what investments you want it in based upon your tolerance to risk. With 30 years to go you can be pretty aggressive initially, and move to more and more conservative investments as it comes closer to needing the money at retirement.

You have a world of about 8,000 mutual funds to choose from. They all have their advantages and disadvantages. The largest portion of you homework right now will be selecting the Mutual fund family and advisor to work with. The mutual fund should have a good track record of 10 years or more.

FIND AN ADVISOR THAT YOU FEEL COMFORTABLE WITH. It will be someone that will tell you exactly how and how much they get paid for helping you.

If they hesitate or if they try to put you into any kind of life Insurance product, politely say no thank you and RUN AWAY. Since you are doing this long term, look for "A" shares. Do not be shy about asking about fees and commssions.

Now as far as the numbers go. There is a rule of "72" that helps one figure how long it takes to double your money. Simply divide your annual percentage of return into 72. e.g. 8% return will take 9 (72 / 8) years to double your money. In 30 years your $10,388 will double 3.33333 ( 30 / 9) times to about $110,805

12% (not too difficult to do) will double 5 times in 30 years to about $332,416.

12.25% (Vanguard II 5 year average) will double 5.10 times to $365,658

6% will double 2.5 times in 30 years to $62,328.

You could probably have your youngest crumbcruncher toss a (rubber tipped) dart at a list of mutual funds and find a fund that will give you at least 8% or $110K. Once again; it is your money and you can move as you see fit and you can't help but do better than your pension will give you.

You've done well so far. Don't get too hung up on the math. If you do your homework now and find someone you can trust and feel comfortable with; then you'll make your decision, not look at your investment except at the end of each year and poof one year you will have 6 figures in there.

I would definitely role it into an IRA. Windsor and Windsor II are good funds. I would not trust a retirement plan although is it most likely safe.

Now to answer your question about 30 yr. return. Windsor has a ten year return of 7.3% and a life to day return of 12.3% more or less. I do not think you will get 12.3% in the future especially over 30 years. You might get 10%. You might also get only 7%. At 10% your 30 year return would be $181,246 yielding $18,100 annually or $1508 a month. Assuming the worse case scenarios of 7%. $79,068 yielding $5534 annually or $461 a month.

Now just for fun what would have to be the annual return to yield $195 a month? About 5.2%

Now here is the kicker. When you kick off at age 90 you will still have at least $79,000 to distribute amongst your 4 children. Maybe as much as $181,000.

It is a no brainer. Stuff it in Windsor.

I will offer some additional advice. Stuff a little into World Equity besides. A little more risk but the reward should be worth it. Do the minimum $3,000. Gives you a little more diversity. Also depending on your tax situation you might consider roling it into a Roth IRA instead of a traditional. You will have to pay taxes on the 10k if you do but all of that fat juicy income in 30 years will be tax free.

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