Reply to Only 100k in 401k at 50

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]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. [/quote]

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%.[/quote]

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.[/quote]

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)
[/quote]

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.[/quote]

*know what they are invested in and [i]invest[/i] according to their personal circumstances and risk tolerance [/quote]

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.

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