"Catching up" on retirement

[AJSimon]

So basically, I got a very late start on my retirement investing. I didn't open my Roth until 2019, but have maxed it out each year since. I probably should have started around 2006, when I got secure employment, so I wanted to see what hypothetical number I would need to contribute into a normal brokerage account today, in order to "catch up" (so to speak).

If maxed out my Roth in VTSAX every year from 2006 to 2018, that totals $66,000. I looked at the historical returns for VTSAX and went year by year using the same formula (as follows):

((2006 Contribution x VTSAX 2006 Percentage Return + 2006 Contribution + 2007 Contribution) x VTSAX 2007 Percentage Return + 2007 Contribution....and so on).

Using this formula, it appears the value of my portfolio at the end of 2018 would have totaled $132,980.63. Is that the catchup number I would need to eventually contribute (apart from future Roth contributions)? Is there some math or reasoning that I've neglected here?

[Jluke]

You can’t really go back in time.

focus on the future.

what do you expect your expenses to be in retirement?

if you retire at 65, then multiply that number by 25. That should be your target.

many rules of thumb but that is just one.

[kork13]

FWIW, I've been contributing to my Roth IRA since 2006, maxed out every year with equal twice-monthly contributions, using a 3-fund portfolio mix (70% VTSAX, 20% VTIAX, 10% VBTLX). So my account might be a decent analog, though it has actually probably earned slightly less than 100% VTSAX. My contributions have totaled $78,500, with a current value of ~$214,000.

However, you can't really catch up on missed IRA contributions. You'll never be able to make up that time or investment space in the IRA, due to the annually resetting limits, not to mention the tax-free growth the Roth IRA offers (which would technically require bumping up your mock-IRA's balance by an adjustment for tax impacts upon sale of assets).

Personal opinion: Best not to look backward, but simply do what you can from here forward, whatever that might be for you today and tomorrow. You don't owe yourself anything from what could have been 15 years ago -- don't make that an arbitrary standard for you to meet. You're probably around your mid-late 30s? Plenty of time to build up what you'll need for a comfortable retirement, regardless of what happened in the past.

[disneysteve]

I agree with the others. It doesn't matter how much you might have made had you invested earlier. What matters is looking forward. How much do you need to retire and how much do you have to invest from now on to reach that goal?

[MonkeyMama]

I agree with the others. The ROTH IRA maximum amount is basically a useless made up number. It doesn't mean anything. If you had maxed it out every year it is doubtful that would be enough to retire on.

A better rule of thumb is how many times income you should have saved (based on your age). & of course, the best is to figure out your retirement needs (25x expenses is a good rule of thumb) and work backwards what you need to do to get there.

[myrdale]

It is a shame that the law wasn't structured so we could back contribute towards previous years. I didn't open mine until 2015 or so. That is 10 years of gainful employment I didn't contribute, and 5 years prior to that while I was in school. In the long term I would have been better off investing rather than paying off the mortgage. Its just a calculated decision that you have to make.