A safe withdrawal rate of one million dollars would generate an annual income of $45,000.
The median family income in the United States is about $75,500. Do a quick search for the citation. So, a million will provide an income of more than half the median.
If you're not contributing to your 401(k) you're giving up free money. Everyone reading this should take full advantage of their employer's match and maximize their contribution if they're serious about retirement.
The problem is that wealth is not being created. We've just increased the rate that it goes from the poor to the rich with a few middle class moving up and the rest moving down in income. All those high taxes on million dollar incomes would have gone back into the economy. Instead, they just earn millionaire's interest or are reinvested in stock to make the value go higher. It doesn't help that the economic success is at the cost of astronomical increases in federal spending. I can go on a spending spree on my credit card and feel successful for a while. It's great for today, but it will eventually have to be paid.
Yeah... That's not a Trump problem. The government has been badly mismanaging social security for years, and it will probably bankrupt the country if it isn't cut.
Don't rely on social security for your retirement.
It’ll be just like a lot of our parents and grandparents. Plenty will retire wealthy, plenty will retire okay, and plenty will retire poor.
Even in America’s “golden age”, most people didn’t have pensions or big retirements. Retirement was affordable because it didn’t involve fancy vacations or eating out often. For my grandparents retirement was living in the same small house they bought at 24 and taking care of the yard. That was very common.
It’s really not that much, figure most people will rely on their 401k as their primary income source in retirement, and they un-invest at 3% a year that works out to 30k of taxable income subsidized by social security.
Not a bad thing, just a nonsense stat given to make people believe everyone is dandy. This stat is going to happen naturally because inflation and population growth. It doesn't mean that things are good.
If you are becoming a millionaire through savings programs, you have been saving long before Trump ever took office. It's like taking credit for the fruit of a tree planted by someone else 20 years ago because you happen to now water it.
He also doesn’t realize that he inherited Obamas economy and now its being propped up by Fed injections and low rates which will fuck us in the next recession all because Trump wants to keep posting “all time highs” even though anyone with financial knowledge knows thats meaningless.
I'm getting a late start, but my goal is to have a combined $1+ million net worth by my early 50s. I'm also going into the military as an officer and plan to do the 20 years so that on top of the pension should make a fairly comfortable retirement. I just wish I started this at 23 rather than 33.
Yes. Same with all headlines like record number of bankruptcies, record consumer debt, record number of people living in poverty, record GDP, record stock market, record median home prices, record number of suicides, etc.
In a system with a growing population and growing economy it should be a constant stream of récords, other factors being equal.
Things can change. There are plenty of examples in history where economic fortunes of entire societies have changed dramatically due to a wide variety of circumstances. My point is that the market fluctuates, and there's little reason to believe that it can't tank for a long prolonged time, taking out the fortunes of lots of people. It's happened before, and there's no reason to believe it won't happen again.
Exactly. I'm young, so I guess it's easier for me to say, but I'm not concerned about a recession messing with my 401k or investments. Don't obsess over the number, don't do anything drastic to try and avoid the short-term losses, and if you can, buy more when it's down.
You need 25X your yearly spending invested. That gives you a 94% chance of having more than $0 at the end of 30 years. That's with zero flexibility in how much you live on or draw down. Change that to 31X and you are likely to never run out of money.
You're still going to need more than that for Thailand. I know quite a few expats that bought into the whole "semi-retiring" in Thailand, only to realize the country is no longer as cheap as it used to be.
It makes sense given that with inflation you'd expect that most of the time there would be more millionaires than at any other point in history.
A million isn't even *that* impressive anymore if you're getting close to retirement age. I'm 33, by the time I retire I'll be at about 1.77 million, and the calculator thinks I should be at 2.7 million.
It depends on what you consider to be comfortable. If you can earn ~ 4% interest and withdraw 4% a year could live off 1 million and never drain it at 40k a year.
If 120/year is what you see as comfortable, then you probably want about 3 million.
lol yeah, to maintain my current lifestyle I would need the $120k. Funny that I used to be just fine on a fraction of that when i was younger. I could probably get away with a lot less if i didn't have a mortgage or didn't pay rent.
You save the same as me then - which means you probably make about the same as me - you'll be looking at around 4k in todays dollars in social security per month as well.
All the number's I'm running have me making more a month now in retirement - not counting for inflation.
1.7 will be plenty for retirement in 2055 if you aren't a shithead with spending - the fact that you're saving for retirement at 33 means you probably are doing other stuff right, and will have more than the 401k account in assets at that time.
For example we built our retirement home this year so by 60 we'll have a nice home on a half acre in town paid off as an additional nest egg. We are 32/33.
> you'll be looking at around 4k in todays dollars in social security per month
That seems high. The max social security payout for someone who retires today at full retirement age (ie, 66ish, not waiting until 70) is about $3k, and most people receive distinctly less. And I think it's very likely that over time that number (adjusted for inflation) will go down rather than up.
It's fine in 2020 (but hardly rich). But you're ignoring inflation risk. Even with just 2% inflation between now & 2055 (will likely average at LEAST that much) the real value is cut in half after inflation. $36k/yr in 2020 dollars isn't starving, but after old age medical costs (Medicare doesn't cover everything) you wouldn't be living the high life either.
If inflation averages 4%, then it would be equivilent to $18k/yr in 2020 dollars.
Likely inflation will average somewhere in-between, but I'd rather err on the side of having more money in retirement than risk being broke.
Likely inflation somewhere in the middle.
Plus - the 4% rule has been proven not to be foolproof depending upon when during the economic cycle you happen to retire.
Well I can increase my contribution every year up to a few more percent, my pay is likely to go up, and I got a late start because of grad school and postdoc. Hopefully between those things I'll be in an okay position.
You take the employer match in your 401k first ALWAYS because it's free money.
Then you max the Roth to hedge against tax rate increase in the future and because the money is more accessible before retirement(contributions can be withdrawn at any time without penalty).
Then you can return to contributing to your 401k.
It's just a general rule.
You of course first want to get any sort of money from your employer that you can get. The main advantage of a personal IRA over a 401k is that you can self-direct it, and it's more flexible.
A nice Vanguard ETF will likely have lower fees than a 401k account, and it's easier to tap a Roth if you need it for various expenses. (Ex: I'm planning to use my Roth to pay for my kids' college. It's growing tax free, and you are allowed to withdraw from a Roth for your kid's college, and then I'll get a tax break on it via a short-term 529 account.)
If you only have access to a traditional 401k, early in your career putting in post-tax money which won't be taxed later is an advantage since your in a lower bracket. It's good to have a mix in retirement to stay in a lower bracket.
But the difference between Roth & Roth 401k isn't as huge.
You don't know how investing works do you?
Edit: I cannot read. This dude is absolutely correct. I thought the original guy was saying he had 1.77 million to retire off today. He understands investing and I don't understand reading.
Glad you're not consulting me. 1.77 million is an absolutely reasonable amount if invested. Even if someone thinks the 4% rule Trinity study is too liberal of a withdrawal rate for retirement. 3% of 1.77 million annually is plenty for an individual to live off of. If you're money is invested properly it isn't like you just sit victim to inflation.
Edit: please note my 3% figure is adjusted to the actual value of that money in today dollars. Inflation does not change that since your portfolio is growing
3% of 1.77m is plenty NOW in 2020 dollars. He doesn't have 1.77 now. He will have approx 1.77m in 35 years. In 35 years that 1.77m would be worth considerably less than $1m is today. Hardly starving, but not where I'm aiming to be in retirement.
And I'm not a financial advisor. Those guys are salesmen who know the finance lingo - a large % of them are really talking out of their ass.
I don't think it's that surprising.
You can only contribute $19,500 to an 401k this year and only $6,000 to an IRA (and those are also subject to income caps). And those maximums are just for this year. Prior years have had lower maximums.
It probably takes a lifetime to build up $1M at those contributions and that's only the people who can afford to contribute that much in the first place.
The record number was probably more due to the fact that stocks have been on a pretty good run for the past year.
I'm getting close to $1M in 401K and IRA, and I wasn't any where near maxing out for the first 20 years. I've been gradually increasing, but have always done a minimum of 10% of salary.
" The record number was probably more due to the fact that stocks have been on a pretty good run for the past year. "
More than just the last year. Since about 2011 the stock market has gained considerably.
I’m not that old and have half that amount in my 401k. It helps that I agressively increased my contributions starting in 2009.
> The record number was probably more due to the fact that stocks have been on a pretty good run for the past year.
They've been on an unprecedented run since 2008.
And let's not forget that 401(k)s weren't really all that popular until about 35 years ago. I would venture to guess that most of those million dollar accounts we're started between 1985 and 1990 (to get all of the stock market booms).
I've been employed for 20 years and contributing to my 401(k) since the beginning. And I'm only about a quarter of the way to a million (stupid '00s....). I have no doubt I'll hit a million by the time I retire in 25+ years though.
....Assuming the economy doesn't get torched between now and then.....
The goal is to use compound interest, since the point of a 401k is to put money in and not touch it until you retire.
Let's say by 30 you put in 20k. By age 65 with 12% annual returns you will have just over a million. So in almost one year, if you start early enough, by putting in the maximum for that year you can get there. The longer you wait, the more you need to contribute.
Also, although 12% is the average for the past several decades, do your actual planning to be more conservative (like 8%).
Yes, the market is volatile and will swing up and down. If left in one place however, it historically goes up.
This is also why most 401k plans through places like Fidelity have a "target date". The further you are from the target date, the more risky the distribution (typically 80% or more stocks, 20% or less bonds), but as the target date gets closer they get more conservative to reduce volatility (more bonds than stocks).
Iirc inflation last year inflation was roughly 1.7, 1.8% with some months above and others below.
There were several accounts with savings rates at 2% or higher, though I think most of them have dropped to 1.7% now
But ya, dumb to keep anything more than your emergency fund in cash liquid
$1MM in retirement accounts allows for $40/yr in retirement income. Add in social security and you're pretty good all things considers. A million dollars isn't enough if you want an upper middle or upper class lifetime in retirement, but you can definitely retire.
Not to toot my own horn but to totally toot my own horn, I'll be there someday. If my calculations are right, even if I stopped contributing and interest is 7%, I'll hit 1mil in 28 years. If I keep maxing out, it'll be half that.
Start early, kids. Compound interest is REALLY important in your 20's. 1 missed year in your early-mid 20's can be $70k-$150k/year in missed gains 25-30 years down the road. Even just putting 5% of your check to 401k as a recent college grad will be a redwood tree of a fund.
> Start early, kids. Compound interest is REALLY important in your 20's. 1 missed year in your early-mid 20's can be $70k-$150k/year in missed gains 25-30 years down the road.
This is SOOOO important, and I wish more people took this into consideration. When people put numbers into the situation it makes sense, but so often I see people talking to younger people trying to explain this concept, but failing to do so
Just did another calculation: Let's say you start with 15k, multiply that by 1.07 25 times, and you get 81k. You start at 26 instead of 25, and you just missed on 81k with a 7% average yearly return. Turn it to 8%, and it's 102k.
All you college grads, seriously, invest in a 401k ASAP.
This is what I think a lot of people don't get.
I missed 5 years because recession. I'm 7 years behind my goal at this time and will fall further behind as time goes on because of that compounding power.
Its so unbelievably frustrating, especially seeing people doing it on purpose. Don't do it! Put in as much as you can even if you can't do the 15%. You won't miss that 1%, and if you think you can't afford it you surely can't afford to not.
I'll never understand this stuff. Who would ever have a 100k student loan at 9% interest? That's so ridiculous, that's twice the national average for interest and almost three times the average loan amount.
Poor people, trying to pull themselves out of poverty through education. Even state school will cost you 20k/yr. Private loans at 9% is not uncommon. That’s what mine were. The average overall debt is less because a lot of privileged people go to college and leave with little debt because their parents pay for most of it.
If you have a set payment with an IBR, are using pretax income for your 401k while not throwing that percentage into your loan in the first place, it surely does.
It's a good idea to not put all your eggs in one basket. Budget paying off loans, retirement and a personal savings is the best route seeing it protects you on all sides.
I'm okay regardless. I'm blessed to be in a situation where I max out my 401k/Roth IRA and put extra money in my eTrade account to invest in individual stocks, and a little bit of money doing some yolo r/wsb options.
For some people I realize this just isn't possible, but some of the best saving advice I ever got was: "Pay yourself first". What this means is have a savings account (preferably one with a different bank than your checking account is with to make it less enticing to accidentally spend) that you put some money into out of every check. But put that money there as soon as you get the check instead of trying to save whatever you didn't spend during a pay cycle.
It's true. The vast majority of Americans can't afford a $500 sudden expense, and that really sucks. It's not like people can just cut expenses or increase their income by thousands of dollars at a whim.
Yup, when my company first instated the 401k when I was 24, we had Fidelity's rep come to the office and got on every young person to AT LEAST do the company match, and if we could, to put 10-15% of our checks to 401k. He was 38 and said he maxed out since he started working at 23. He was like, "do the math. You can guess how much is in my own account." Total baller move because he had a spreadsheet on the screen that showed how a per-year calcuations on how much you can have at 30/35/40/etc, and it really hit home for us.
max contribution. I don't recall there being a company match back then. My dad did not believe in 401k (i believe when companies were allowed to run/control them, some stole them maybe?) and was PISSED.