Ask the Dollar Diva By Dorothy Rosen • Bankrate.com

How do we calculate our 401(k) savings?

Dear Dollar Diva,
My wife and I are 40. If we each contribute $10,000 annually to our 401(k) plans, a total of $20,000, how much will we have at 65?

That depends on the returns you get on your investments. You have 25 years until retirement and a life expectancy of more than 80 years, so you can afford to take some risk in your 401(k)s. Most of your dollars should be going into equity mutual funds.

Twenty-thousand dollars a year equals $1,667 a month or a total investment of $500,000 over 25 years. Here's what that investment will look like at various annual returns:

Annual return

Historically, only a Peter Lynch or Warren Buffet could expect a 15 percent return on his investments; mere mortals could expect around 11 percent. For you, that translates to a retirement nest egg of $2,651,000; not exactly chopped liver.

Asset allocation

Don't put all of your eggs in one basket. Read the Diva's "What is asset allocation?" for ideas on spreading the wealth among various investment categories. Combine steady, systematic savings, a tax-deferred plan, asset allocation and a long time period; voila, you have the winning combination for a very comfortable retirement.

DOROTHY ROSEN has a master's degree in finance, with a specialization in accounting, from the Kellogg Graduate School at Northwestern University in Evanston, Ill. Rosen has more than 15 years of experience in the financial arena, serving in Illinois and Florida as a certified public accountant, financial consultant, expert witness and educator. She is owner of Dorothy Rosen, CPA, a public accounting firm that serves individuals and small businesses.