Only 100k in 401k at 50

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I don't have data to back up my claim but if I had to guess I'll say the median 401k balance for a 50 years is around $100k and the average probably around $500k. There is big income disparity between college and non cell grads.

Fidelity found that participants between 50 and 54 had account balances of $199,900 on average, while participants between 55 and 59 had $244,900. This account data is based on 26,700 plans and 24.5 million plan participants as of December 31, 2024.
https://www.investopedia.com/average-401k-balance-50-year-old-8773972#:~:text=Fidelity%20found%20that%20participants%20between,4

Also 401ks underperform the S&P by 25-50%.

OP, please don't be scared by what this poster is trying to imply about 401(k) with this underperformance comment.

Yes, on average 401(k)s do underperform the S&P 500, but that's not alarming. Some is due to asset allocation. If you want to hold a portion in bonds, you can expect lower returns but also generally with the trade off of lower volatility. Some is due to trading behavior vs. buy and hold (indexers who don't mess with their portfolio generally do better over time than even the index itself).

Some is due to being invested in active funds with high fees. Performance of low-fee index funds will compare well to the S&P 500 regardless of whether you hold them inside or outside of your 401(k).

Finally, many here equate 401(k)s with target date funds that are often the employer's default or else blindly chosen by many investors. These often haven't performed as well as S&P 500 in recent years due to often holding a substantial portion of international (as well as more active management with higher fees and a growing bond allocation over time). While true about many target date funds, that's NOT an argument against 401(k)'s, it's an argument for paying attention to your investment choices, associated fees, and choosing an asset allocation you're comfortable with whether that's a target date fund or not.

If you are scared, I'd suggest listening to the Money Guy Show on YouTube vs. as a podcast at first because they show charts on their net worth by age and similar episodes. They often show the power of the first $100k saved and demonstrate how much future contributions can turn into at different ages.

But why would anyone under 60 hold much if any in Bonds? A 50yo has 15 years before accessing any of it, and most likely 30+ more years to live. You want it mostly if not 100% in Stock funds. You can weather a down turn, the end result is you also get the 30-40% yearly returns of the past decades (parts of it at least)

Allocation is personal preference. Plus, as you get older you likely tend to have more fixed income assets and they don’t have to be bonds.

When we retire we’ll increase our fixed income assets and still be invested in market, likely with three fund portfolio.

Not sure where your digging that 30-40% yearly returns number from.

[Anonymous]

A large part of 401K underperformance which is shocking as up to recently the default was the in cash or money market safe option. The company did not want to do the investing for you. Many people often opened a 401k and did not move the funds so say in cash for many years.

Now companies can default to a target date. My own daughter started work in 2022 and did not pick any choice for her 401K under new rules she got put into Target Date 2065. When she finally realized this in Summer 2024 she was mad she missed the rally in stocks, but turns out her 401K was up a lot. If it was the past it would have been in the money market or something. She reallocated.

But before companies could invest in stocks with default option was a big problem. People would leave it.


Also Target dates and an aging population means a ton of 55-70 year olds still in workforce. Those Target dates have a lot of bonds and international stocks.

Also different target dates have different stock tollerances. The Fidelity 2025 has more US stock than the Vanguard 2025

And age matters. I was at a start up prior to this and a lot of Target date people. We were a very young company. It was all Vanguard 2060-2070 funds. Lets day that was a old Fed place the funds would be Vanguard 2020-2045 funds. Big difference last five years in missing out on Stock Market gains.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I don't have data to back up my claim but if I had to guess I'll say the median 401k balance for a 50 years is around $100k and the average probably around $500k. There is big income disparity between college and non cell grads.

Fidelity found that participants between 50 and 54 had account balances of $199,900 on average, while participants between 55 and 59 had $244,900. This account data is based on 26,700 plans and 24.5 million plan participants as of December 31, 2024.
https://www.investopedia.com/average-401k-balance-50-year-old-8773972#:~:text=Fidelity%20found%20that%20participants%20between,4

Also 401ks underperform the S&P by 25-50%.

OP, please don't be scared by what this poster is trying to imply about 401(k) with this underperformance comment.

Yes, on average 401(k)s do underperform the S&P 500, but that's not alarming. Some is due to asset allocation. If you want to hold a portion in bonds, you can expect lower returns but also generally with the trade off of lower volatility. Some is due to trading behavior vs. buy and hold (indexers who don't mess with their portfolio generally do better over time than even the index itself).

Some is due to being invested in active funds with high fees. Performance of low-fee index funds will compare well to the S&P 500 regardless of whether you hold them inside or outside of your 401(k).

Finally, many here equate 401(k)s with target date funds that are often the employer's default or else blindly chosen by many investors. These often haven't performed as well as S&P 500 in recent years due to often holding a substantial portion of international (as well as more active management with higher fees and a growing bond allocation over time). While true about many target date funds, that's NOT an argument against 401(k)'s, it's an argument for paying attention to your investment choices, associated fees, and choosing an asset allocation you're comfortable with whether that's a target date fund or not.

If you are scared, I'd suggest listening to the Money Guy Show on YouTube vs. as a podcast at first because they show charts on their net worth by age and similar episodes. They often show the power of the first $100k saved and demonstrate how much future contributions can turn into at different ages.

But why would anyone under 60 hold much if any in Bonds? A 50yo has 15 years before accessing any of it, and most likely 30+ more years to live. You want it mostly if not 100% in Stock funds. You can weather a down turn, the end result is you also get the 30-40% yearly returns of the past decades (parts of it at least)

I made no comments as to how much anyone should hold in bonds at any age. My points are that 401(k) underperformance metrics are likely comparing to a different asset mix than S&P 500, and that everyone should know what they are invested in and according to their personal circumstances and risk tolerance.

*know what they are invested in and invest according to their personal circumstances and risk tolerance

I agree. Just pointing out that most 50 yo should NOT have much if any in Bonds. People not understanding that is a bit shocking given how easily you can figure this out with the internet. But I guess it also explains why people use the "target funds" for 529 and miss out on the growth they need.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Op, you are doing great! Starting plowing money into your retirement accounts. The first $100k is really hard, but you did it! Things will accelerate now. Start plowing money into your retirement accounts up to the max. If you have any room in the budget consider putting $400 a month into a 529 for the oldest kid. Aim to cover one third of state college costs from savings. Anything extra will get rolled over to the next kid if they are also college bound.

I disagree. It would be great to help your kids financially if you can, but it doesn't seem to be in the cards for you. Focus on your retirement vs. school savings.

Focus on retirement. The kids can

Start at CC and then transfer to a state U to finish.

Complete their AA in HS with dual entry and only need 2 years at state U to get their degree (maybe 2.5 depending upon the degree requirements).

Go to 4 year State U or Private that offers great merit (typically 1-2 tiers below when your reach level is) and only pay $20-25K/year (or less) for college. The kid can earn $10K of it, $5K in fed loans and then the OP only needs to help with $5-10K each year, if they don't get financial aid.

All 3 options will be affordable to the OP. College does not have to cost $90K/year. Much better to do it affordably and not take on too much debt (IMO the $27K max fed student loans is acceptable debt if needed, and a smart person can pay those back in 4-5 years typically).

[Anonymous]

Anonymous wrote:A large part of 401K underperformance which is shocking as up to recently the default was the in cash or money market safe option. The company did not want to do the investing for you. Many people often opened a 401k and did not move the funds so say in cash for many years.

Now companies can default to a target date. My own daughter started work in 2022 and did not pick any choice for her 401K under new rules she got put into Target Date 2065. When she finally realized this in Summer 2024 she was mad she missed the rally in stocks, but turns out her 401K was up a lot. If it was the past it would have been in the money market or something. She reallocated.

But before companies could invest in stocks with default option was a big problem. People would leave it.


Also Target dates and an aging population means a ton of 55-70 year olds still in workforce. Those Target dates have a lot of bonds and international stocks.

Also different target dates have different stock tollerances. The Fidelity 2025 has more US stock than the Vanguard 2025

And age matters. I was at a start up prior to this and a lot of Target date people. We were a very young company. It was all Vanguard 2060-2070 funds. Lets day that was a old Fed place the funds would be Vanguard 2020-2045 funds. Big difference last five years in missing out on Stock Market gains.

hence why we desperately need more basic financial education in this country!!
First, everyone should contribute to a 401K (if they have one) at least up to the company match. Otherwise you are leaving $$ on the table. I've seen people do this at tech companies (ie places where the workforce is educated and one would assume would understand this and they make enough to be able to contribute typically). At our company, over 20% were not contributing, so we made the switch to "employees must opt out" and the automatic was the % to get the full company match. That was a fun January for HR/Payroll when the Jan 15 paychecks were deposited.
And IMO, the default should at least be a "target fund". Those are not perfect, but it's much better than MM fund at age 25.

But in reality, this just shows that most Americans don't work hard to help themselves with this. 10+ years with your 401K in MM when you are in your 20s/30s?!?! Well don't complain when you don't have enough to retire.

[Anonymous]

OP here. Thank you so much for all the comments. I'll go through each comments and respond to you guys really appreciate it.

[Anonymous]

One reason OP or any investor may be want to have some bonds is if they will be freaked out by big swings in the stock market, which could lead to emotional market timing which tends to lower returns. OP, go to the Bogleheads wiki and look up need, willingness, and ability to take risk. Whether you get advice from here, or there, or an advisor, please only invest in what you understand and know why you've chosen it.

[Anonymous]

You are not screwed. It can grow quickly. Max out your 401K from the start so that you are accustomed to the paycheck that you see and have to work with every two weeks. Make sure you are not only maxing out, but maxing out the catchup amount--so $31k total in 2025, I think. Does your new employer offer any sort of match?

[Anonymous]

Do any of the people freaking out about elder care costs have long term care insurance? Because my DM has it and pays $6,000 a year so that she’ll have $250 a day in care for 5 years straight when she needs to use it. These nightmare elder care cost scenarios would be solved with this type of insurance right?

[Anonymous]

Put your money in like some of the higher risk market funds. Seriously, what about 100% US stocks. Or even a 2x monthly or quarterly rebalancing fund like RMQHX. I’m sure people will yell at me for not diversifying into bonds or whatever, but if you’re not happy with 150K you can take higher risk attempts to catch up.

[Anonymous]

I think you're better off than the average American. But you should try to maximize your retirement savings as much as you can from here on out.

Congrats on the new job!

[Anonymous]

Anonymous wrote:Do any of the people freaking out about elder care costs have long term care insurance? Because my DM has it and pays $6,000 a year so that she’ll have $250 a day in care for 5 years straight when she needs to use it. These nightmare elder care cost scenarios would be solved with this type of insurance right?

LTC insurance will help. However, most do not kick in until 60/90 day mark. So a hospital stay and 30-40 days in Nursing care/assisted living to get back to normal and then transferring to IL would be paid for ALL by you. Also, most have a 2-3 year max payout. I had a relative in memory care for 7 years, and they'd still be there except the Flu got them. Prior to that they were still relatively healthy.
And another who is 90 and been in nursing care for 3+ years. That's 10-15 K/month.
But even the good plans only pay out $250-300/day--that's $7K/month.
So yes it helps, but if you end up in advanced care for more than 2-3 years, you will be paying $120-150K+/year plus any extras needed (extra aide/etc).

[Anonymous]

Anonymous wrote:One reason OP or any investor may be want to have some bonds is if they will be freaked out by big swings in the stock market, which could lead to emotional market timing which tends to lower returns. OP, go to the Bogleheads wiki and look up need, willingness, and ability to take risk. Whether you get advice from here, or there, or an advisor, please only invest in what you understand and know why you've chosen it.

As I’ve gotten older I’ve moved to dividend ETFs, instead of bonds. I allocated enough to cover my living expenses for retirement.

$2.5mm in SCHD and VYM, plus social security, will be able to fund my life in retirement. The other portion of the portfolio is 100% in a Total Stock Market mutual fund.

Still have more growth potential than bonds but it allows me to sleep at night knowing the dividends are coming in.

[Anonymous]

Anonymous wrote:

Anonymous wrote:A large part of 401K underperformance which is shocking as up to recently the default was the in cash or money market safe option. The company did not want to do the investing for you. Many people often opened a 401k and did not move the funds so say in cash for many years.

Now companies can default to a target date. My own daughter started work in 2022 and did not pick any choice for her 401K under new rules she got put into Target Date 2065. When she finally realized this in Summer 2024 she was mad she missed the rally in stocks, but turns out her 401K was up a lot. If it was the past it would have been in the money market or something. She reallocated.

But before companies could invest in stocks with default option was a big problem. People would leave it.


Also Target dates and an aging population means a ton of 55-70 year olds still in workforce. Those Target dates have a lot of bonds and international stocks.

Also different target dates have different stock tollerances. The Fidelity 2025 has more US stock than the Vanguard 2025

And age matters. I was at a start up prior to this and a lot of Target date people. We were a very young company. It was all Vanguard 2060-2070 funds. Lets day that was a old Fed place the funds would be Vanguard 2020-2045 funds. Big difference last five years in missing out on Stock Market gains.

hence why we desperately need more basic financial education in this country!!
First, everyone should contribute to a 401K (if they have one) at least up to the company match. Otherwise you are leaving $$ on the table. I've seen people do this at tech companies (ie places where the workforce is educated and one would assume would understand this and they make enough to be able to contribute typically). At our company, over 20% were not contributing, so we made the switch to "employees must opt out" and the automatic was the % to get the full company match. That was a fun January for HR/Payroll when the Jan 15 paychecks were deposited.
And IMO, the default should at least be a "target fund". Those are not perfect, but it's much better than MM fund at age 25.

But in reality, this just shows that most Americans don't work hard to help themselves with this. 10+ years with your 401K in MM when you are in your 20s/30s?!?! Well don't complain when you don't have enough to retire.

401(k)s are not the panacea you make them out to be. Only 25% of companies with under 50 employees offers a 401k. 58% of companies with 100 employees offer 401k. That is 52% of US workers force. Till about 5 years ago 68% of large businesses did not offer 401k.

Many of the plans require vesting to receive employer match. Which is absolutely ridiculous. If you leave your first job for a higher salary you lose your employer contributions. Do this twice and you could lose 10 years of matching funds. This is a retirement instrument not a loyalty test.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:A large part of 401K underperformance which is shocking as up to recently the default was the in cash or money market safe option. The company did not want to do the investing for you. Many people often opened a 401k and did not move the funds so say in cash for many years.

Now companies can default to a target date. My own daughter started work in 2022 and did not pick any choice for her 401K under new rules she got put into Target Date 2065. When she finally realized this in Summer 2024 she was mad she missed the rally in stocks, but turns out her 401K was up a lot. If it was the past it would have been in the money market or something. She reallocated.

But before companies could invest in stocks with default option was a big problem. People would leave it.


Also Target dates and an aging population means a ton of 55-70 year olds still in workforce. Those Target dates have a lot of bonds and international stocks.

Also different target dates have different stock tollerances. The Fidelity 2025 has more US stock than the Vanguard 2025

And age matters. I was at a start up prior to this and a lot of Target date people. We were a very young company. It was all Vanguard 2060-2070 funds. Lets day that was a old Fed place the funds would be Vanguard 2020-2045 funds. Big difference last five years in missing out on Stock Market gains.

hence why we desperately need more basic financial education in this country!!
First, everyone should contribute to a 401K (if they have one) at least up to the company match. Otherwise you are leaving $$ on the table. I've seen people do this at tech companies (ie places where the workforce is educated and one would assume would understand this and they make enough to be able to contribute typically). At our company, over 20% were not contributing, so we made the switch to "employees must opt out" and the automatic was the % to get the full company match. That was a fun January for HR/Payroll when the Jan 15 paychecks were deposited.
And IMO, the default should at least be a "target fund". Those are not perfect, but it's much better than MM fund at age 25.

But in reality, this just shows that most Americans don't work hard to help themselves with this. 10+ years with your 401K in MM when you are in your 20s/30s?!?! Well don't complain when you don't have enough to retire.

401(k)s are not the panacea you make them out to be. Only 25% of companies with under 50 employees offers a 401k. 58% of companies with 100 employees offer 401k. That is 52% of US workers force. Till about 5 years ago 68% of large businesses did not offer 401k.

Many of the plans require vesting to receive employer match. Which is absolutely ridiculous. If you leave your first job for a higher salary you lose your employer contributions. Do this twice and you could lose 10 years of matching funds. This is a retirement instrument not a loyalty test.

The other issue is matching and how much you make. Fannie Mae is very generous with 401k with a 8 percent match and immediate vesting. They also match on bonus. I was working with lots of people making 300K and if they just did 8 percent for match they were putting in 48K a year. You also can join first day at work.

Most people make way less and get way less a match. And some have vesting periods to get match and others waiting periods to join. And some have none.