Anonymous
Post 03/22/2017 10:14     Subject: Tell me how much you have saved in your 401K at age 40.
Anonymous wrote:I don't understand how these high Numbers are possible for people under 35-40 in only a 401k, the max per year isn't enough to get over $1mm even if you were maxing out every year.... what am I missing?!


I am a PP, who is now 43 and our combined 401Ks are about $1.5 M. We hit $1M when I was 40. We've always both maxed out since finishing grad schools. I had a 5% match, and then my agency recently started an 8% match (but we've been temporarily suspending any contributions due to last year of nanny and PT preschool tuition). Also, since I work for the federal govt, the TSP has some of the lowest management fees.

DH's job gives 11% without any contributions and requires a 5% contribution of salary of all employees. I believe it's a 403b or something like that account. He works for a not-for-profit company. So, before this current year, DH and I would max, and he'd be contributing 16% extra (through his company and the mandatory 5% taken out), and I would max with a 5% match. His salary isn't as great as other professionals in this area, but on the back end the retirement plan is what keeps people at his company. Also the market has been over valued for a while. Finally, since we don't plan to retire for 20 plus years, I've diversified heavily in stocks and less in government bonds (in contrast to some co-workers who plan to retire sooner so have re-allocated their portfolios).
Anonymous
Post 03/22/2017 09:49     Subject: Tell me how much you have saved in your 401K at age 40.
We are 36/39. DH has ~ 600k in his 401k. I SAH.

Excluding our house (not sure what that is worth), our net worth is a little over 3 million.
Anonymous
Post 03/22/2017 09:40     Subject: Tell me how much you have saved in your 401K at age 40.
Anonymous wrote:I don't understand how these high Numbers are possible for people under 35-40 in only a 401k, the max per year isn't enough to get over $1mm even if you were maxing out every year.... what am I missing?!


some companies do profit sharing. that's probably where the big #s are coming from (plus employee matches but that's not uncommon).
Anonymous
Post 03/21/2017 21:15     Subject: Tell me how much you have saved in your 401K at age 40.
37 Nothing in retirement. But have some other assets and will have mortgage on 1.2 mill house paid off in 2 years.
Anonymous
Post 03/21/2017 12:22     Subject: Re:Tell me how much you have saved in your 401K at age 40.
Anonymous wrote:
Anonymous wrote:
Right but the PP didn't say he or she was not maxing out in order to invest in something else. They are simply spending the money and that's why they aren't maxing out.


No, PP has specifically talked about taxation ("Every penny you don't contribute to max out is being taxed") rather than saving vs. spending.


Here are the options:

1. Invest 18k pretax
2. Spend the 18k post tax on "living expenses"
Anonymous
Post 03/21/2017 12:19     Subject: Re:Tell me how much you have saved in your 401K at age 40.
Anonymous wrote:
Right but the PP didn't say he or she was not maxing out in order to invest in something else. They are simply spending the money and that's why they aren't maxing out.


No, PP has specifically talked about taxation ("Every penny you don't contribute to max out is being taxed") rather than saving vs. spending.
Anonymous
Post 03/21/2017 12:11     Subject: Re:Tell me how much you have saved in your 401K at age 40.
Anonymous wrote:
Anonymous wrote:
You should still max out for the tax benefit. It's some of the only tax free money you can earn. Every penny you don't contribute to max out is being taxed.


It is not tax-free, it is tax-deferred. So the issue is your present tax bracket vs. future at the time of withdrawal.
Whether that benefits you depends on a combination of three factors:
1. Present tax law. vs. future tax law at the time of withdrawal
2. Your present state jurisdiction vs future tax bracket at the time of withdrawal
3. Your present income vs. future income at the time of withdrawal

How those factors play out in concert somewhat depends on you (factors 2 and 3), but the key factor 1 is mostly out of your control.
For many people, the income in retirement may exceed that early in life (esp. considering the child deductions and exemptions)>
Then the Factor 3 would work against pre-tax savings.
The factor 2 may work both ways. If I earn in MA or CA (high state tax bracket) but intend to retire in FL - yes, for pre-tax savings
If I earn in WA (no state tax) but intend to retire in CA (say for family reasons), the other way around.
Most importantly, I would project that (with the current US budget situation) the taxes in 10 - 20 years are bound to go up rather than down.
Then you are better paying now and having funds after-tax.

The black swan is the security of 401(K) balances as such in the current and projected budget situation - learn what happened in Argentina.
You think that can't in USA. Well, with our politics now increasingly resembling South America, I am not so sure.
That in principle applies to both pre- and after-tax, although more likely to pre-tax as those are easier to confiscate
quasi-legally through changes in tax law.

The combination of all these factors are hard to handicap 30 years into the future.
So I am splitting 401(K) about 50/50 between pre- and after-tax, but putting into real estate more than both.
The history (of South America, but not only) shows that throwing someone out of a home/homes is MUCH harder politically and practically
than taking money in some account (sure, the first happened too but usually only for few extremely wealthy "latifundistas".
That historical memory is, btw, why immigrants to USA (esp. Asians and South Americans) are so focused on RE rather than financial instruments.


Right but the PP didn't say he or she was not maxing out in order to invest in something else. They are simply spending the money and that's why they aren't maxing out.
Anonymous
Post 03/21/2017 11:58     Subject: Re:Tell me how much you have saved in your 401K at age 40.
Anonymous wrote:
You should still max out for the tax benefit. It's some of the only tax free money you can earn. Every penny you don't contribute to max out is being taxed.


It is not tax-free, it is tax-deferred. So the issue is your present tax bracket vs. future at the time of withdrawal.
Whether that benefits you depends on a combination of three factors:
1. Present tax law. vs. future tax law at the time of withdrawal
2. Your present state jurisdiction vs future tax bracket at the time of withdrawal
3. Your present income vs. future income at the time of withdrawal

How those factors play out in concert somewhat depends on you (factors 2 and 3), but the key factor 1 is mostly out of your control.
For many people, the income in retirement may exceed that early in life (esp. considering the child deductions and exemptions)>
Then the Factor 3 would work against pre-tax savings.
The factor 2 may work both ways. If I earn in MA or CA (high state tax bracket) but intend to retire in FL - yes, for pre-tax savings
If I earn in WA (no state tax) but intend to retire in CA (say for family reasons), the other way around.
Most importantly, I would project that (with the current US budget situation) the taxes in 10 - 20 years are bound to go up rather than down.
Then you are better paying now and having funds after-tax.

The black swan is the security of 401(K) balances as such in the current and projected budget situation - learn what happened in Argentina.
You think that can't in USA. Well, with our politics now increasingly resembling South America, I am not so sure.
That in principle applies to both pre- and after-tax, although more likely to pre-tax as those are easier to confiscate
quasi-legally through changes in tax law.

The combination of all these factors are hard to handicap 30 years into the future.
So I am splitting 401(K) about 50/50 between pre- and after-tax, but putting into real estate more than both.
The history (of South America, but not only) shows that throwing someone out of a home/homes is MUCH harder politically and practically
than taking money in some account (sure, the first happened too but usually only for few extremely wealthy "latifundistas".
That historical memory is, btw, why immigrants to USA (esp. Asians and South Americans) are so focused on RE rather than financial instruments.
Anonymous
Post 03/21/2017 11:37     Subject: Re:Tell me how much you have saved in your 401K at age 40.
Anonymous wrote:

I don't understand why equity would be more important than cash. You can't eat equity.


Simply because many regular working people with 200 - 300 K HHI have 0.5 - 1 M or more in equity.
Hardly anyone in that category has similar amounts of cash.
And a good half or more of retirees eat equity by moving to FL, AZ, NV etc.
Anonymous
Post 03/21/2017 10:23     Subject: Re:Tell me how much you have saved in your 401K at age 40.
Anonymous wrote:Very important missing piece (may be more than 401 K) is home equity.
People mention some 30 or 100 K in cash, isn't equity more important.
We are 46 and 41 y. old. The 401 K is fairly modest (just over 500 K between two), but equity is close to 800 K (between two homes).
We started in USA as immigrants with nothing at about 30.


I don't understand why equity would be more important than cash. You can't eat equity.
Anonymous
Post 03/21/2017 10:13     Subject: Tell me how much you have saved in your 401K at age 40.
Anonymous wrote:I don't understand how these high Numbers are possible for people under 35-40 in only a 401k, the max per year isn't enough to get over $1mm even if you were maxing out every year.... what am I missing?!

I question the 26 and 30 yo PPs simply because even with max plus profit sharing or solo/partnership I don't see how they could get that much given the last 10-12 year market performance. Probably FOS/trolls. Speaking for myself, my company has no match so I kick in 18k myself. My company has a profit sharing plan that kicks in another $30-35k so I end up contributing about $50k a year. If someone that young (no catch up contributions) is solo/business owner or has a generous employer and maxes out at 54k a year he/she could get to $1mm pretty quickly in a bull market. I'm not buying 26 years old though. Starting at 18 and a zero balance that would take 54k/yr and a 23% rate of return to hit $1mm by 26. I don't even think Warren could pull that off.
Anonymous
Post 03/21/2017 08:18     Subject: Tell me how much you have saved in your 401K at age 40.
Have worked hard for 20 years and never had a job that offered 401k. I tried to save in Roth, but the crises came and didn't have any extra money. Hoping to catch up from 40-65.
Anonymous
Post 03/21/2017 08:17     Subject: Re:Tell me how much you have saved in your 401K at age 40.
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:42 yo - my individual retirement accounts (Rollover IRA, Roth IRA, SEP IRA) total: $266,790.32
40 yo spouse (401k, Roth IRA, and Rollover IRA): $117,926.60
We save about 12% of our pre-tax income for retirement each year, and my wife has a pension plan that is pretty secure and has a solid payout at retirement age.
1 12yo son - 2 semesters (1 yr of tuition and fees at 4-year university) of Virginia Pre-paid 529 and $10,514.74 in regular Virginia 529
Savings in cash/cash equivalent: $89,412.25

New financial planner said we're "good, but not wow." We have an aggressive and achievable plan for college savings to purchase 2 semesters/year for next 3 years (currently $15,650/year) + $8,000/year in regular 529 (to max our Virginia tax deduction). This feels fine. Not sweating it.


What's you HHI?


~$300k. I am an independent consultant and my income varies $180k-$210k. 2016 HHI was $312k


I'd absolutely increase the 12 percent. You should be maxing it out at 312k. No excuse.


Probably. That income level is only the last 3 years, though - spent early 30s with both of us in grad school then worked our way up and started seeing a major ROI on those education investments relatively recently. We also have $250k in home equity and little consumer debt. We have simple tastes and will happily live on a lot less and downsize in retirement. There are other things to worry about/enjoy than building a monstrous nest egg that could be useless if we drop off a cliff and shed our mortal coils pre-retirement. Also don't believe in the save-till-you-drop approach then total retirement - I work with lots of people in their 60s and even 70s still doing independent consulting - voluntarily, for mental challenge and periodic income - in my area of consulting.


You should still max out for the tax benefit. It's some of the only tax free money you can earn. Every penny you don't contribute to max out is being taxed.
Anonymous
Post 03/21/2017 08:12     Subject: Re:Tell me how much you have saved in your 401K at age 40.
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:42 yo - my individual retirement accounts (Rollover IRA, Roth IRA, SEP IRA) total: $266,790.32
40 yo spouse (401k, Roth IRA, and Rollover IRA): $117,926.60
We save about 12% of our pre-tax income for retirement each year, and my wife has a pension plan that is pretty secure and has a solid payout at retirement age.
1 12yo son - 2 semesters (1 yr of tuition and fees at 4-year university) of Virginia Pre-paid 529 and $10,514.74 in regular Virginia 529
Savings in cash/cash equivalent: $89,412.25

New financial planner said we're "good, but not wow." We have an aggressive and achievable plan for college savings to purchase 2 semesters/year for next 3 years (currently $15,650/year) + $8,000/year in regular 529 (to max our Virginia tax deduction). This feels fine. Not sweating it.


What's you HHI?


~$300k. I am an independent consultant and my income varies $180k-$210k. 2016 HHI was $312k


I'd absolutely increase the 12 percent. You should be maxing it out at 312k. No excuse.


Probably. That income level is only the last 3 years, though - spent early 30s with both of us in grad school then worked our way up and started seeing a major ROI on those education investments relatively recently. We also have $250k in home equity and little consumer debt. We have simple tastes and will happily live on a lot less and downsize in retirement. There are other things to worry about/enjoy than building a monstrous nest egg that could be useless if we drop off a cliff and shed our mortal coils pre-retirement. Also don't believe in the save-till-you-drop approach then total retirement - I work with lots of people in their 60s and even 70s still doing independent consulting - voluntarily, for mental challenge and periodic income - in my area of consulting.
Anonymous
Post 03/20/2017 23:22     Subject: Tell me how much you have saved in your 401K at age 40.
I don't understand how these high Numbers are possible for people under 35-40 in only a 401k, the max per year isn't enough to get over $1mm even if you were maxing out every year.... what am I missing?!