Reply to Super-savers in 401(k) - what are your retirement plans?

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]How can you be a super saver in a 401k? You can only put in $19,500. That makes for a nice retirement, but it's not 5m in the bank. [/quote]

its amazing how many people on this board don't understand retirement plans and how they work.  Combined contribution (employee + employer) maximums for 2022 are $61,000 (under 50) or $67,500 (over 50).  Those limits easily allow for 5M in the bank.  Take into account that some of that can be Roth / post tax, and it realizes you even more in retirement.[/quote]

I agree. And you're one of them! Let's just run the numbers shall we?!?!

Let's say that OP is 47 years old and has been investing the absolute maximum employee contribution into a 401k for 25 years AND has been receiving the absolute maximum employer contribution for 25 years AND has been maxing out IRA contributions for 25 years. [b]This is EXTREMLY difficult to do[/b], BTW, since most employers come nowhere close to contributing the maximum amount. Let’s not also forget that 25 years ago the max employee, employer, and IRA contributions were $9,500.00, $20,500.00, and $2,000.00, respectively.

Let’s also assume that OP has been earning a [i]very respectable 8% YoY return[/i] on all contributions over 25 years. The retirement savings contributions break down as follows:

A = Contribution Year
B = Max 401k Employee Contribution in Year A
C = Max 401k Employer Contribution in Year A
D = Max IRA Contribution in Year A
E = B + C + D in 2022 dollars after YoY compunding since Year A

A | B | C | D | E
1997 | $9,500.00 |$20,500.00 | $2,000.00 | $219,151.21
1998 | $10,000.00 | $20,000.00 | $2,000.00 | $202,917.78
1999 | $10,000.00 | $20,000.00 | $2,000.00 | $187,886.84
2000 | $10,500.00 | $19,500.00 | $2,000.00 | $173,969.29
2001 | $10,500.00 | $24,500.00 | $2,000.00 | $186,251.85
2002 | $11,000.00 | $29,000.00 | $3,000.00 | $200,421.16
2003 | $12,000.00 | $28,000.00 | $3,000.00 | $185,575.15
2004 | $13,000.00 | $28,000.00 | $3,000.00 | $175,824.86
2005 | $14,000.00 | $28,000.00 | $4,000.00 | $170,200.83
2006 | $15,000.00 | $29,000.00 | $4,000.00 | $164,445.25
2007 | $15,500.00 | $29,500.00 | $4,000.00 | $155,436.29
2008 | $15,500.00 | $30,500.00 | $5,000.00 | $149,796.87
2009 | $16,500.00 | $32,500.00 | $5,000.00 | $146,859.68
2010 | $16,500.00 | $32,500.00 | $5,000.00 | $135,981.19
2011 | $16,500.00 | $32,500.00 | $5,000.00 | $125,908.51
2012 | $17,000.00 | $33,000.00 | $5,000.00 | $118,740.87
2013 | $17,500.00 | $33,500.00 | $5,500.00 | $112,943.76
2014 | $17,500.00 | $34,500.00 | $5,500.00 | $106,428.49
2015 | $18,000.00 | $35,000.00 | $5,500.00 | $100,258.72
2016 | $18,000.00 | $35,000.00 | $5,500.00 | $92,832.15
2017 | $18,000.00 | $36,000.00 | $5,500.00 | $87,425.02
2018 | $18,500.00 | $36,500.00 | $5,500.00 | $82,309.58
2019 | $19,000.00 | $37,000.00 | $6,000.00 | $78,102.14
2020 | $19,500.00 | $37,500.00 | $6,000.00 | $73,483.20
2021 | $19,500.00 | $38,500.00 | $6,000.00 | $69,120.00
2022 | $20,500.00 | $40,500.00 | $6,000.00 | $67,000.00
[b]TOTAL = $3,569,270.68[/b]

Even with 25 years of maximum savings and very optimistic returns, a single person cannot have anything close to $5M! If OP is only 42, then the first five rows are all zero, which [b]cuts out nearly $1M from what they could have down to more like $$2.6M.[/b]

In the more likely scenario that your employer is matching up to 50% of ALL your contributions vs. the federal maximum, the total for a 47 year old becomes only $1.9M. Even doubled for two spouses maxing out for 25 years at this rate isn't even $4M!!!

So, OP, don't believe the so-called outliers on DCUM. [b]You should know that they are outright liars.[/b] The math is irrefutable. You're doing great. Stay the course.[/quote]

One thing your analysis doesn't take into account is the ability some have to do post-tax savings into their 401k.  My portion is something like 20% to 25%.  Would have to look up to find the exact percentage.

I am strictly buy and hold but someone with good intuitions and conviction to act could have actually done quite well.  For example in July 2007, I thought an implosion in the financial sector was coming and mused it was a good time to go all in on governments. (October 2007would have been the ideal time.)  In March 2009, my view was we were past the crisis and if I had made that move in 2007, March 2009 would have been a great time to go back all in on equities.[/quote]

No, you are mistaken. It is true that an employee can contribute beyond the stated employee maximums with after-tax dollars (even with pre-tax dollars into a non-qualified plan, usually with early withdrawal requirements), but these contributions are essentially taken away from the available employer contribution limits such that the [b]total[/b] still cannot exceed the limits stated in the tables above. Beyond this, you’re looking at an HSA for retirement, maybe a 529 if you want to take a hit on using it for non-education purposes, or just a taxable brokerage account. [/quote]

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