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

Forum Index » Money and Finances

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

Subject:

Emoticons





More smilies

Text Color: Font: Close Marks

[quote=Anonymous][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]

But, you are right that it is very possible to beat the S&P 500 and aggressively grow your portfolio through active management. The moment Trump announced the restrictions on European travel at the start of COVID-19, I immediately rebalanced 100% of our family’s 401k portfolios into a stable-value fund. A stock market crash was imminent! It’s not uncommon for a major crash to see the DJIA lose about 1/4 to 1/3rd it’s value. When the DJIA dropped below 20,000 I rebalanced [b]everything[/b] back to a large-cap growth index fund and left it there until the DJIA regained its previous peak value. After this, I rebalanced again and put my portfolio back to its original allocations. Currently we have double the amount in our 401k portfolios as compared to January 2020, not including subsequent contributions and even considering the decline since November 2021.

This is NOT what all the financial advisors recommend and it is not for the faint of heart. [/quote]

Options

	Disable HTML in this message
	Disable BB Code in this message
	Disable smilies in this message

Review message

Search Recent Topics Hottest Topics