Two Million Dollar 401ks

[Anonymous]

I’m in my 40s and am just hitting $1 million 401(k). It was a goal but suddenly doesn’t feel like that amount will go far in retirement sadly.

[Anonymous]

I have 450k in mine (I’m late 30s) and it says on my statement that an annuity would give me 2700 a month. That’s not bad! $2700x2 (Dh also has a 401k) + social security of 3k x 2= $11,400 a month in retirement. Who wouldn’t be comfortable living off that amount, especially with a paid off house, don’t have to pay daycare anymore?

[Anonymous]

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Anonymous wrote:Because everything is so much more expensive now. For example, food price has doubled since the pandemic. Your one million dollar at retirement translates only to $40k per year, which isn't much as you can imagine.

Doubled? In 4 years? Definitely gone up a lot but let's not go crazy here. Got a gallon of milk yesterday for $3 and 12 eggs for $1.50.

And you need to hit a retirement calculator before you say $1 million is $40k/year. The money will grow, of course.

Funny you only picked the cheapest milk and eggs. I know it has doubled for me because I rarely spent more than $100 each week at Costco before pandemic. Now I rarely spend less than $200 with the same type of stuff. For example, a pack of 40 bottles of water was $3 pre-pandemic and is now $7.39.

Why are you buying 40 bottles of water a month?

Because we have a family of four and don't drink tap water.

Unless you live in Flint or someplace, bottled water is worse for you than tap water— it’s just tap water with microplastics.

Also the 4% rule is conservative— it was based on the worst markets ever. And it allows for annual increases with inflation so you don’t need to keep it flat for 10 years. Bogleheads have been tracking a mythical retirement of someone who started drawing down funds in the 2000 recession/crash and it’s worked out fine.

That's false too. 4% rule is there to minimize retirement income fluctuation and the risk of being wiped out. This is especially true if you only have one million dollars at the time of retirement.

Not sure what your point is here. Some people in the thread were suggesting the 4% rule is outdated and should be 3.5%, or should be 4% with no inflation adjustment and my point was it has been back tested thru some pretty bad market conditions (although IIRC the 4% assumes a decent chunk of bonds in retirement).

NP, but to assume going above 4% is okay because market conditions have somehow permanently changed is a good way to blow up your retirement account. Over any 20-30 year period, you are going to have some really bad markets not unlike ones in the past.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

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Anonymous wrote:Because everything is so much more expensive now. For example, food price has doubled since the pandemic. Your one million dollar at retirement translates only to $40k per year, which isn't much as you can imagine.

Doubled? In 4 years? Definitely gone up a lot but let's not go crazy here. Got a gallon of milk yesterday for $3 and 12 eggs for $1.50.

And you need to hit a retirement calculator before you say $1 million is $40k/year. The money will grow, of course.

Funny you only picked the cheapest milk and eggs. I know it has doubled for me because I rarely spent more than $100 each week at Costco before pandemic. Now I rarely spend less than $200 with the same type of stuff. For example, a pack of 40 bottles of water was $3 pre-pandemic and is now $7.39.

Why are you buying 40 bottles of water a month?

Because we have a family of four and don't drink tap water.

Unless you live in Flint or someplace, bottled water is worse for you than tap water— it’s just tap water with microplastics.

Also the 4% rule is conservative— it was based on the worst markets ever. And it allows for annual increases with inflation so you don’t need to keep it flat for 10 years. Bogleheads have been tracking a mythical retirement of someone who started drawing down funds in the 2000 recession/crash and it’s worked out fine.

That's false too. 4% rule is there to minimize retirement income fluctuation and the risk of being wiped out. This is especially true if you only have one million dollars at the time of retirement.

Not sure what your point is here. Some people in the thread were suggesting the 4% rule is outdated and should be 3.5%, or should be 4% with no inflation adjustment and my point was it has been back tested thru some pretty bad market conditions (although IIRC the 4% assumes a decent chunk of bonds in retirement).

NP, but to assume going above 4% is okay because market conditions have somehow permanently changed is a good way to blow up your retirement account. Over any 20-30 year period, you are going to have some really bad markets not unlike ones in the past.

The 4% rule is that you take out 4% the first year and then increase your withdrawal rate by inflation every year after that. So if inflation is 5% the next year you withdraw $42000, etc.

That is exactly what has been backtested as very safe through lots of bad markets.

[Anonymous]

Has anyone found a calculator online that allows you to play around with different scenarios both in terms of investment growth/performance over a time period and then stage in withdrawals to weigh resulting RMDs/tax implications, considering that you may have available the 401k and regular brokerage to fund retirement prior to RMDs kick in?

[Anonymous]

The 4% rule is not withdrawing 4% of the balance of your savings every year— that strategy lasts 30 years a lot of the time but is more likely to fail.

[Anonymous]

Anonymous wrote:Has anyone found a calculator online that allows you to play around with different scenarios both in terms of investment growth/performance over a time period and then stage in withdrawals to weigh resulting RMDs/tax implications, considering that you may have available the 401k and regular brokerage to fund retirement prior to RMDs kick in?

Cfiresim is my favorite calculator.

Firecalc is similar— not quite as easy to use but might be worth checking if cfiresim doesn’t have the capabilities you are looking for.

Or if you really want to dig in you could look at pralana— they have both a free and paid version.

[Anonymous]

This is a DCUM problem. The average person only has like a $100k total net worth and usually most of that is home equity.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Has anyone found a calculator online that allows you to play around with different scenarios both in terms of investment growth/performance over a time period and then stage in withdrawals to weigh resulting RMDs/tax implications, considering that you may have available the 401k and regular brokerage to fund retirement prior to RMDs kick in?

Cfiresim is my favorite calculator.

Firecalc is similar— not quite as easy to use but might be worth checking if cfiresim doesn’t have the capabilities you are looking for.

Or if you really want to dig in you could look at pralana— they have both a free and paid version.

I-orp is another powerful calculator

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Because everything is so much more expensive now. For example, food price has doubled since the pandemic. Your one million dollar at retirement translates only to $40k per year, which isn't much as you can imagine.

Doubled? In 4 years? Definitely gone up a lot but let's not go crazy here. Got a gallon of milk yesterday for $3 and 12 eggs for $1.50.

And you need to hit a retirement calculator before you say $1 million is $40k/year. The money will grow, of course.

Funny you only picked the cheapest milk and eggs. I know it has doubled for me because I rarely spent more than $100 each week at Costco before pandemic. Now I rarely spend less than $200 with the same type of stuff. For example, a pack of 40 bottles of water was $3 pre-pandemic and is now $7.39.

Why are you buying 40 bottles of water a month?

Because we have a family of four and don't drink tap water.

That's stupid.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Because everything is so much more expensive now. For example, food price has doubled since the pandemic. Your one million dollar at retirement translates only to $40k per year, which isn't much as you can imagine.

Doubled? In 4 years? Definitely gone up a lot but let's not go crazy here. Got a gallon of milk yesterday for $3 and 12 eggs for $1.50.

And you need to hit a retirement calculator before you say $1 million is $40k/year. The money will grow, of course.

Funny you only picked the cheapest milk and eggs. I know it has doubled for me because I rarely spent more than $100 each week at Costco before pandemic. Now I rarely spend less than $200 with the same type of stuff. For example, a pack of 40 bottles of water was $3 pre-pandemic and is now $7.39.

Why are you buying 40 bottles of water a month?

Because we have a family of four and don't drink tap water.

That's stupid.

Ok if an idiot has to say so.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Because everything is so much more expensive now. For example, food price has doubled since the pandemic. Your one million dollar at retirement translates only to $40k per year, which isn't much as you can imagine.

Doubled? In 4 years? Definitely gone up a lot but let's not go crazy here. Got a gallon of milk yesterday for $3 and 12 eggs for $1.50.

And you need to hit a retirement calculator before you say $1 million is $40k/year. The money will grow, of course.

Funny you only picked the cheapest milk and eggs. I know it has doubled for me because I rarely spent more than $100 each week at Costco before pandemic. Now I rarely spend less than $200 with the same type of stuff. For example, a pack of 40 bottles of water was $3 pre-pandemic and is now $7.39.

Why are you buying 40 bottles of water a month?

Because we have a family of four and don't drink tap water.

Your family generates an incredible amount of waste. It’s pretty despicable

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Because everything is so much more expensive now. For example, food price has doubled since the pandemic. Your one million dollar at retirement translates only to $40k per year, which isn't much as you can imagine.

Doubled? In 4 years? Definitely gone up a lot but let's not go crazy here. Got a gallon of milk yesterday for $3 and 12 eggs for $1.50.

And you need to hit a retirement calculator before you say $1 million is $40k/year. The money will grow, of course.

Funny you only picked the cheapest milk and eggs. I know it has doubled for me because I rarely spent more than $100 each week at Costco before pandemic. Now I rarely spend less than $200 with the same type of stuff. For example, a pack of 40 bottles of water was $3 pre-pandemic and is now $7.39.

Why are you buying 40 bottles of water a month?

Because we have a family of four and don't drink tap water.

Reconsider, drinking micro plastics from bottled water is absolutely stupid.

Get a water filtration system in your house for reverse osmosis for drinking water and you’ll save a ton of money.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Because everything is so much more expensive now. For example, food price has doubled since the pandemic. Your one million dollar at retirement translates only to $40k per year, which isn't much as you can imagine.

Doubled? In 4 years? Definitely gone up a lot but let's not go crazy here. Got a gallon of milk yesterday for $3 and 12 eggs for $1.50.

And you need to hit a retirement calculator before you say $1 million is $40k/year. The money will grow, of course.

No, this is accurate. The rule is that you can withdraw 4% of principle. So that is 40K the first year. True hopefully a little more each year after, but not a lot. The best estimate on 1M is 40K per year for the first ten years of retirement.

You’d be crazy to use 4% rule if you don’t have pension. 3% max or lower.

Wait do you all think you are gonna live past 95?

Also I assume social security will not be as generous when I retire (probably around 20 years from now?), but it won't be zero.

You save because you can't tell the future. What an idiotic statement

+1 my grandmother is currently 96. My great grandparents all lived past 90. My mother has a disease that has rendered her in immobile and she’s only 70. People save for these possibilities.

[Anonymous]

Anonymous wrote:It seems a one million dollar 401k was everyone’s goal.

But now with greater contribution limits and a bull market more people are hitting two million. And a rare lucky few even 5 million in their 401ks if they did the max and all growth stocks and older.

How did one million for a retirement goal in the 401k so quickly become a small amount?

To specifically answer your question:

- When fewer and fewer people have pensions, they need bigger defined contribution plan balances.
- Changes in tax laws (specifically, mega backdoor Roths) have allowed participants to contribute much more to retirement plans, leading to higher balances.
- High-income people want more to retire on. We make ~$500k in HHI (without pensions), and a $1m retirement plan balance would require a dramatic change in lifestyle.