How do people have massive retirement accounts if it's a $19,500 (or whatever) limit per year?

[Anonymous]

Matching, profit sharing, started saving at age 23 and have benefitted from crazy gains the last 20 years.

[Anonymous]

DH started his Roth in his teens, and we started maxing out 401k by 25.

Also, when people ask what we have saved by ____ age, I am including non-retirement savings in that (aka, our taxable investment about and our large emergency fund which is in no-penalty CD’s.)

[Anonymous]

Anonymous wrote:I feel like I'm not grasping the basics here... From my read, assuming you don't have your own business and are just an employee, and make enough savings to max out your retirement account, we can only give $19,500 a year, right? Plus $6,000 to Roth.

So how do people end up with these gagillion dollar retirement accounts? Did they start saving from age 20? Is there a way to give more than $19,500 plus $6,000 if you have the income/savings to do so?

Employer match. Compounding investments. My 401(k), which I started contributing to in 1991, is worth $1.8 million now. I have maxed probably 26 of the 30 years, and even when the max was like $7,500, the time value of money takes over.

[Anonymous]

I worked for a company that did 100% match. For a number of years when we had little kids we maxed my 401k and got the 100% match. After that my take home pay went completely to paying for childcare costs and work costs (dry cleaning, gas, parking). But that investment is now worth a lot more due to compound interest. DH also had 100% match for 10 years. And yes we maxed out our 401k starting in our mid 20s. We ate Ramen noodles and didn't go on vacation for the first 8 years of our marriage but it was worth it to be financially secure now.

[Anonymous]

Anonymous wrote:OP, same! We did not invest early. Our employers do not match. And we are limited by max contributions. Obviously I’m kicking myself for not investing early. I was broke all the time so that’s why I didn’t.

You're not alone. Hard to "max" anything when you're making $12,000-18,000 a year, which was my salary the first 3 years out of school. Then I had several more years making in the low 20s. So yeah, investing early is many times contingent on your actual job & salary.

[Anonymous]

I started early - like in high school. My dad took the money I made from babysitting and put it in a roth. I made so little when I got out of grad school that I didn't really maximize my 403b/Roth until I think my mid to late 30's. I don't get any company match. I am a single mom and at 46 I have about 1 million in my Roth/403b and about 150,000 in savings and other investments.

[Anonymous]

PPs have answered. It is time & market returns, mostly, and some other effects.

I will note that some can contribute to both a 457b and 403b, 19,500 each. We are a family that have both partners with that situation, so that is 78k pretax, plus $12k in backdoor Roth IRAs. Pretty nuts.

Still, most of our retirement savings are from before we were in that situation, but that have had time to grow.

[Anonymous]

Longest bull market in American history supercharged by ridiculously low interest rates. Check back on everyone's "massive retirement accounts" in two years when the market is down 75%.

[Anonymous]

returns on rollover IRAs. Gamestop stock went up 30X, the stock options on it went up 100X

[Anonymous]

Early retired biglaw partner here. There are lots of things high earners can do. In addition to the 401k, for example, our firm started defined benefit plans for partners that under IRS rules required 100 percent participation from all partners. The plans were designed to allow high earning partners to shelter more of their income from taxation, but for this to work for them all partners, including the lowest paid ones, had to participate. I remember younger partners with families and private school tuition complaining about it but being given no choice.

Upon retirement, partners are given the option to roll defined benefit plans into IRAs, which I for one decided to do. I had hundreds of thousands of dollars in the account in only a few years.

[Anonymous]

Anonymous wrote:Also when people say they have X dollars in their retirement accounts, they’re probably including all their savings and investments that they have earmarked for retirement, even those that aren’t officially “retirement” accounts for tax purposes.

No, I don't. I am 48, started working at 21. Probably put $1,000 in my 401(k) the first year, when I made $29,000. Have always put in as much as I could, and got employer match each year although it has varies depending on where I work, I usually just did the S&P 500 or "lifecycle"-type funds and have probably maxed for the last 5-10 years. My husband has done the same.

I think we are each at almost a million now, and we are not even 50 years old. So we would say we have about $2 million in retirement (it's probably $1.9M) and it will be double that assuming the stock market doesn't tank in the next 10 years. We have no other stocks or investments other than the house and $50K in the bank.

We also saved $5K a year for each kid in a 529 starting when they were born (in the early years we did the dependent care FSA and then immediately put the reimbursements in the 529) and had $120K when our oldest started college this year, which is enough for his state school.

Compounding and stock market growth have really helped, but you have to put something in during the early years, which are the hardest.

[Anonymous]

Anonymous wrote:Longest bull market in American history supercharged by ridiculously low interest rates. Check back on everyone's "massive retirement accounts" in two years when the market is down 75%.

This doomsday attitude explains why this poster is so far behind so many of us in retirement savings.

I'm 60 and have been retired for 7 years. I invested the bulk of my retirement savings in index funds from the very beginning -- the mid 80s -- and still am. In the last 50 years, the Dow has finished the year down 14 times and up 36 times. It's never come close to dropped 75 percent; the biggest drop in the last 50 years (34 percent in 2008) was less than half that, and with one other exception (1974) it's never finished a year lower than 20 percent ahead.

In contrast, it's finished up more than 20 percent 14 times.

If you're patient and smart and invest with a long haul attitude, and don't allow yourself to get crippled by this poster's thinking, there is no surer way to a healthy retirement than investing in the market.

[Anonymous]

Saved from age 21. I only made $26,000 my first year in 1999. I work for nonprofits. Some have contributed 10% a year; one employer I was at for a decade was 14% (very heavy match). I also contribute to an IRA and I maxed my contribution most (but not all years). I am early 40s. I have about 640k now.

[Anonymous]

Some people also make gobs of money, so just keep that in mind.

[Anonymous]

Anonymous wrote:

Anonymous wrote: Is there a way to give more than $19,500 plus $6,000 if you have the income/savings to do so?

Currently (may change next year), you can put:
19.5k pretax 401k
6k ira traditional or if over income limit, backdoor Roth IRA
7.2k hsa
+ catchup 6.5k for 401k pretax and 1k in IRA if over-50, and hsa 1k if over-55
And company-plan dependent:
+ 401k pretax match
+ 401k aftertax for the balance up to 58k (64.5k over 50)

You can only do the HSA if you have a high-deductible health plan (and you can only just stash $7,200 in it if you don't need the money for health care). That's never been an option for my family; we have too many chronic conditions for an HSA-eligible plan to make sense if there's a non-HSA alternative and too many out-of-pocket costs to leave the money in there for retirement.