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][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]

Looks like you forgot rate of return and discount factor to calculate the value of this annuity. If they were making at least 3% annually on their contributions, they would be exactly at $5mm[/quote]

DP. This PP said: [b]Let’s also assume that OP has been earning a very respectable 8% YoY return on all contributions over 25 years.[/b]
[/quote]

It looks like in Column E the total stopped growing and began decreasing in 2003.[/quote]

Yea, his calculations are all messed up. No way the column E would be decreasing: S&P was returning 8% average [/quote]

I think Column E represents what each line would have increased by the end of 2022 with a 8% YoY return. This is why the last line (2022) is only the total amount, since it wouldn't have had time to increase. Add Column E and then get the total, is how I'm assuming it was computed.[/quote]

Yes. This is correct. Column E is the 2022 value of the contribution that was made in the year specified in column A. This is why the rows at the top tend to be larger than those at the bottom; they have had many more years to compound interest. In 2022, if you contribute $67K…it’s worth $67K. The $32K max that you might have contributed in 1997, though, has grown to $219K. Not too shabby. Start investing early![/quote]

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