Only 100k in 401k at 50

[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?

Well first, the LTC company has to still be fiscally viable when you need them. Many are having issues, as people live longer with more health issues.

In the above example, let's say you purchased it at age 50, and live until 85, with the last 7 years requiring "advanced care". You paid in $210K, but they paid out $465K for those 5 years. Basically for anyone hitting the 2.5year+ mark, the company is loosing money. And you are not even accounting for the costs associated with running the insurance company, that's just the intake from you versus payout to you.

Now $250/day is only $7550/month, but skilled nursing in my parent's place (not DCUM, but not a "cheap area either" is $412/day or $12360/month. So you have to pay the difference along with any medical care/doctor visits/hospital stays/etc. So you are paying another ~$5K/month or $60K/year.

[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.

Full vesting happens in 4-5 years max. Most plans start vesting monthly and it takes up to 48 months to be fully vested. So if you leave in month 14, you'd get 29.16% of your vested balance. Never heard of it taking longer. So yes, that is part of your decision to decide whether to leave or stay at a company. Just like sometimes you have to stay for another 3-4 months to get your last year's bonus.

[Anonymous]

Can you find an old rich geezer who is about to kick the bucket and won’t demand a prenup?

[Anonymous]

Anonymous wrote:

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.

Nothing is perfect. Also, that is part of your full employment package. Some people choose a different job based on the overall package, and retirement is a part of that.

And yes, obviously someone making $300K is able to get more match and put in more. I wouldn't expect a person making $48K to be putting away more than 15-20% of their income to retirement savings (most likely a lot less). But if you are only making $48K, it still makes sense to save whatever you can.
And if you want to make more, then you have to find a way to "better yourself and make yourself qualified for higher paying jobs", most of those jobs are people with a college degree and more importantly people who have worked to move up in their career, it doesn't just magically happen

[Anonymous]

You are doing great OP. Go to bogleheads forum to learn what to invest your money in. Here is what I would do:

-Keep investing as much as you can in your 401K. This money grown tax free.
-Keep putting money in a Roth IRA if you can.
-Make sure you have an emergency fund. Try to save 6 months of expenses (not salary). Keep in in a High Yield Savings Account (HYSA). This will get you through most emergencies.
-With any raise or windfall add more (keep half of any raise for something fun and save half)
-Set aside $100 paycheck for something fun (a family trip, etc) now that you earn good money.
-Don't overspend on cars. Basic is best for everything.
-Don't spoil the kids out of guilt. Encourage the kids to babysit and dog-walk etc for pocket money.
-Try to work to at least 67 (full retirement age for social security for your age) or 70 (max benefits for social security)

If you do these things you will have a comfortable retirement and future! You will be setting a wonderful example for your kids too!

[Anonymous]

Anonymous wrote:You are doing great OP. Go to bogleheads forum to learn what to invest your money in. Here is what I would do:

-Keep investing as much as you can in your 401K. This money grown tax free.
-Keep putting money in a Roth IRA if you can.
-Make sure you have an emergency fund. Try to save 6 months of expenses (not salary). Keep in in a High Yield Savings Account (HYSA). This will get you through most emergencies.
-With any raise or windfall add more (keep half of any raise for something fun and save half)
-Set aside $100 paycheck for something fun (a family trip, etc) now that you earn good money.
-Don't overspend on cars. Basic is best for everything.
-Don't spoil the kids out of guilt. Encourage the kids to babysit and dog-walk etc for pocket money.
-Try to work to at least 67 (full retirement age for social security for your age) or 70 (max benefits for social security)

If you do these things you will have a comfortable retirement and future! You will be setting a wonderful example for your kids too!

Clearly OP is not doing great. You lost me there.

[Anonymous]

Anonymous wrote:Your best earning years are to come so just keep saving as much as possible. Your kids might need to start off in CC or live at home to go to an in-state school. Prioritize your savings over their college savings.

Think this is so silly. Why do super smart kids start out at CC if a parents make good money? They get punished for the parents late start. For the kids it’s better not to ever make more than 150k or no financial aid.

[Anonymous]

Anonymous wrote:

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?

Well first, the LTC company has to still be fiscally viable when you need them. Many are having issues, as people live longer with more health issues.

In the above example, let's say you purchased it at age 50, and live until 85, with the last 7 years requiring "advanced care". You paid in $210K, but they paid out $465K for those 5 years. Basically for anyone hitting the 2.5year+ mark, the company is loosing money. And you are not even accounting for the costs associated with running the insurance company, that's just the intake from you versus payout to you.

Now $250/day is only $7550/month, but skilled nursing in my parent's place (not DCUM, but not a "cheap area either" is $412/day or $12360/month. So you have to pay the difference along with any medical care/doctor visits/hospital stays/etc. So you are paying another ~$5K/month or $60K/year.

Some of that $60K can be paid out of current Social Security income. Most people in LTC don't spend on much other than the LTC and healthcare.

[Anonymous]

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.

I just looked it up and that was a good guess. From federal reserve survey of consumer finances it’s 115k/313k for the 45-54 age range.

From Fidelity, The average 401(k) balance for individuals in their 50s is around $592,285, with a median balance of $252,850. Some data sources show a range between $199,900 and $592,285 for those in their 50s. Fidelity found that 50-54 year olds had average balances of $199,900, while 55-59 year olds had $244,900.

That’s for people with 401k, which is roughly half the US.

[Anonymous]

Could you get a second job and invest all of it for several years to build up your savings now while you are still young and capable?

[Anonymous]

You have gotten some good advice here. Focus on maxing out 401K and Roth and building an emergency fund. Your kid should focus on college scholarships - she should study hard for the SATs and get good grades. Since you likely are not able to invest enough to make a meaningful dent in the cost of college, I would focus on making your kid a good candidate for scholarships (put money aside for SAT prep, college counselor, extracurriculars). A couple thousand a year for that will go a long way.

[Anonymous]

I had 1M in 401k at 50. Just got through paying cash for two Ivy League schools. Finished my mortgage at about the same time. 401k is now at 6M at 65. Once free of college expenses and the mortgage, I threw a lot at retirement. You can do it.

[Anonymous]

Your kid might actually get a lot of financial aid for college. Let her know in high school that you will have to consider the financial aid packages but that she should apply and she what happens.

Just FYI the most elite schools - like Harvard- tend to give the best aid because they are so rich. Don't assume that the highest ranked schools are most expensive. They are not.

[Anonymous]

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%.

That’s people who invest at fidelity. Not very helpful information.

[Anonymous]

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%.

That is all so shocking!!! Why wouldn't people put their 401K into a SP500 type fund?!?! You have decades to go, let it grow!

Also, we need so much more financial education in this country. My 25yo already has $50K in a ROTH IRA (been investing in that since they had income and into a SP500 fund) and another $50K+ in their 401K. Now yes, they don't have student loans, but they are smart enough to know "time is your friend" and take advantage of not having $700-1000/month loan payment and just invest as much as you can. They live decently, but not extravagantly and focus on saving and getting the company match

I found this all entirely confusing and after educating myself this past year, finally looked at my workplace 401k. It was in a target date fund. I moved it to an S&P fund. I'm so psyched that I understand this now!