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What if you always maxed out your 401(k)

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What if You Always Maxed Out Your 401(k)?How much have you saved in your 401(k)? If you had maxed out your 401(k) contribution every year since you started working, you would have a good size retirement portfolio by now. However, if you are like the average American worker, your retirement account balance is woefully inadequate. About half of all households age 55 and older have no retirement savings so it’s not useful to compare your own retirement savings to the average. Let’s look at the people who are really saving for retirement instead.

The median value of retirement accounts for families with savings are still low. Even if you have $150,000 saved for retirement, that will translate to very little retirement income. Using the 4% safe withdrawal rate, that $150,000 will generate only $6,000 per year or just $500 per month. The average retiree household would need a lot of help from Social Security, pension, or other sources to have a comfortable retirement.

median value of retirement accounts for families with savings

Luckily, I’m not average and our readers aren’t either. We have been maxing out our 401(k) for many years now and our retirement accounts is in a much better shape than the median value for our age group. My question is – what if you maxed out your 401(k) contribution every year? Let’s figure out how much retirement savings someone would have if they maxed out their 401(k) contribution as soon as they started working.

Maxed out 401(k) every year

Note: In our scenario, I have our worker contribute the max contribution divided by 12 on the first of every month. To make it simple, we’ll invest in VFINX, Vanguard S&P 500 index fund. I used VFINX’s price on 12/2/15 to figure out the 401(k) total (green line below.)

How much money would you have if you always maxed out your 401k

Here is how to read this graph. The horizontal axis is how many years you have been working. If you started working in 2005, then that’s 10 years you could have maxed out your 401k (from 2005 to 2015.) If you contributed the max every year, then you could have around $280,000 in your 401(k) account by now.

I’ve been working since mid 1996 so that’s 19.5 years. If I maxed out every year and invested in VFINX, then I should have around … $573,000 by now. I’m actually closer to 19 than 20. I have 528,795 in my 401(k). I didn’t max out my contribution when I started working so I was behind for a while. I have been contributing extra to my i401(k) these last 3 years so that helped me catch up a bit. Nothing beats investing while you’re young, though.

Where are you?

Here is the full table. It’s very easy to use. You just need to look at the first column and find the number of years you’ve worked. The Accumulated Value column will show how much your 401(k) would be worth if you’ve maxed out your contribution right from the beginning. The 3rd and 4th columns just show the corresponding year’s max contribution.

always max out your 401k

*I put this table on Google Spreadsheet. You can click on this link to see it. Unfortunately, the formula did not carry over from Excel. Let me know if you see any mistake.

It’s clear that by maxing out your 401(k), you will be much better off than the average household. If you started working in 1988 or 1989, you would be a 401(k) millionaire by now. I love my 401(k) and I can’t wait for it to hit 7 figures someday.

I didn’t even add any company matching to this. With company matching, your 401(k) balance should be quite a bit higher than my table here. Now that I mention company matching, I wonder why my total isn’t higher. I guess the first few years were really crucial and I didn’t max out those years. Also, I worked less than half a year in 1996 so I didn’t contribute much that first all important year. At that time, I didn’t know you could max out your 401(k) contribution even if you only worked less than half a year. If I could go back, I would definitely carve out $9,500 and contribute the max. If you’re young, you should try your best to max out your 401(k). It’s the optimal time to invest.

You can also see the magic of compounding on this table. If you contributed $7,313 in 1988, it would have turned into $99,457 today! ($1,162,299 – $1,062,842.) Wow, that’s a fantastic increase. Time is a huge factor when it comes to long term investment.

Max out your 401(k)

Of course, every 401(k) plan is different. Your retirement plan might not have very good investments or your fees might take a big bite out of your total return. If you don’t know how much fees you are paying then you should join Personal Capital and try their 401(k) fee analyzer tool. Generally, I think it’s worth maxing out your 401k contribution every year. You will pay less tax and you won’t leave any employer matching on the table. The contribution is auto deducted so you don’t even miss the money. The magic of compound interest will supercharge your 401(k) and help ensure a comfortable retirement.

How is your retirement account compared to this table? Are you ahead or behind?

If you need help keeping track of your finances, try using Personal Capital to manage your portfolio. They have great tools including the 401k fee Analyzer and one of the best retirement calculators on the internet.

track your net worth Personal Capital


This article was updated on December 3rd, 2015.

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{ 131 comments… add one }

  • The College Investor March 20, 2013, 12:33 am

    I’ve never maxed out my 401k, so I’m way behind. However, I’ve always fully taken advantage of my employers match and then contributed to my IRA.

    I think maxing out your contribution is great if you can afford it. However, in our case, we max my wife’s since her plan is much better than mine (with matching and investment choices). We only do mine to the company max, then invest elsewhere.

    • Dividend Growth Investor March 20, 2013, 6:46 am

      I am way behind on the 401 (K) front, as I only contribute enough to get the employer match. The rest is in taxable accounts, which gives me more control and is perfect for someone who wants to retire early. Dividend investing is very difficult in a 401 (K) plan..

      • retirebyforty March 20, 2013, 3:07 pm

        That works for you so it’s great. You’re right, most 401k doesn’t have good dividend funds/stocks.

      • Casey W December 4, 2015, 12:55 pm

        Maxing a 401k while you are working is still a fantastic way to retire early. You can easily rollover the 401k into an IRA when you retire and use rule 72(t) to withdrawal early without penalty. An IRA gives you all the control you could ever want to investing in dividend stocks. Focusing only on dividend stocks when you are in your young working years and ignoring tax advantaged accounts seems pretty irrational to me… Even if you are a super-star stock picker, the benefits of deferring taxes is hugely significant and leads to more wealth.

  • My Financial Independence Journey March 20, 2013, 2:40 am

    According to the chart I’m behind. But then again, I only invest enough in my 401k to get the match. However, if I add in all the money in my true retirement account (my taxable investments), I’m crushing the averages.

    • retirebyforty March 20, 2013, 3:01 pm

      That’s great! It’s good to have your money in several places.

  • Money Beagle March 20, 2013, 4:47 am

    I recently went four years without getting a raise, which definitely put me behind in my quest to slowly build up the contributions to the level where I’d be maxing out. I’d hoped to be there next year, but now it’ll probably be 1-2 years later considering the delay. I still consider myself lucky though all things equal. I have a good job, pays well, and work with a lot of great people, and there are other benefits I absolutely love.

    • retirebyforty March 20, 2013, 3:02 pm

      Sorry to hear that. I hope you’ll get a raise next year. Cost of living is getting higher. Good luck with maxing out in the next few years.

  • Glen @ Monster Piggy Bank March 20, 2013, 5:59 am

    I don’t add anything at all to our super fund (Australias version of the 401K) above what the government forces us to put in. My reasoning – There is a good chance that the money in that account will never be mine due to the amount of rule changes that happen ever year.
    I have already see the age for me to be able to access that money increase from 60 to 65. What happens when Australia does what Cypress is doing and taxes 10% of everyone’s money? I would rather invest my money than leave it to get eaten by inflation in a bank account or stolen by a greedy government.

    • retirebyforty March 20, 2013, 3:04 pm

      I’ll have to research your super fund more. Can you access that investment earlier and take some penalties like the 401k?

      • Glen @ Monster Piggy Bank March 20, 2013, 11:47 pm

        Nope, not unless I am terminally ill or need the money to continue living due to being unable to work. It is a massive scam that I want no part in.

  • Greg March 20, 2013, 6:03 am

    I am doing better than I thought for my amount of years in the workplace. But, I am considering pulling back so that I can invest in additional real estate. I, personally, have seen better returns in rentals than I have with my 401k, although, I’m sure part of that has to do with when I came into the workplace.

    • retirebyforty March 20, 2013, 3:05 pm

      I like rental real estates too. It’s good to have money in both stocks and real estate. Good luck with both!

  • Mid West March 20, 2013, 7:02 am

    Age: 29
    Combined 401k & IRA: $227,742.17

  • Leigh March 20, 2013, 7:20 am

    My plan is to max the 401(k) out so long as I’m working with a W-2 job. (And the 401(k) plan isn’t absolutely terrible.) I’ve finally got my balance above $50,000 now, so I think I’m doing pretty well at 24! I could probably honestly stop contributing to it after age 30 and still have a very healthy balance at FRA. I’m a little behind that chart since I only contributed enough to get the match in my first year working, but I’m still doing pretty well.

    One of my favourite things to do is to convince fresh college hires how awesome the 401(k) and Roth IRA is! Most of them are math-smart enough that it doesn’t take much convincing to at least get the full match 😀

    • retirebyforty March 20, 2013, 3:09 pm

      That’s great at 24! How long have you been working? 3 years or so? That’s right in line with my chart.

      • Leigh December 4, 2015, 7:06 am

        I started working in early 2010, but I didn’t max out my 401(k) that year. My balance is close to the 2011 start number now (~$110k) though I did remove my Roth 401(k) money to my Roth IRA when I changed jobs this year so that combined is probably (~$117k). My previous employer didn’t give much of a match, so that’s all me and the market. The stock market hasn’t been the greatest in 2014 and 2015 (I invest 50/50 in US/international), so my balances are a bit behind your chart. My employer allows us to do the “Mega Backdoor Roth IRA” though, so my Roth IRA balance is now around $65,000 at 27 🙂

        • retirebyforty December 4, 2015, 9:53 am

          Oh wow, mega backdoor Roth IRA. That’s great! Keep at it. I never had the opportunity to invest like that.

  • Srini March 20, 2013, 7:22 am

    Love your blog. Excellent post!

    Can you please tell if these studies considered the affect of 2008 crash in these numbers?

    • retirebyforty March 20, 2013, 3:09 pm

      Yes, they all take 2008 into consideration.

      • roberto anji September 21, 2013, 8:51 pm

        I think the reason the 2008 crash did not affect the numbers is because by 2012 all the losses had been erased by that time. If this analysis had used 2008 instead of 2013 as the last year of investment the total saved would be much less. At the end of 2008 VFINX would be 83 instead of 140 and using a rough approximation the total would be less by approximately that fraction, i.e. 727518 x (83/140) = $431314, so it matters which year you use as the last year of investment. That is why they say you need to start moving out of stocks and into bonds as you near retirement. It would be nice to see the same calculations where someone maxed out for 25 years but retired in 2008, 2009, 2010, 2011 and 2012 and compare these. Of course using sep 2013 (today’s month) the chart above will look even better.

        • retirebyforty September 22, 2013, 6:52 am

          You are 100% correct. I’ll write an update at some point.
          The key take away here is to keep investing and don’t panic and sell, right? In retirement, you need to cut spending during the bad years so your funds will have a chance to recover.

  • SavoirFaire March 20, 2013, 7:23 am

    Interesting. Regardless of how much I save I always feel I’m behind – just can’t get there fast enough. Based on these numbers I’m way ahead of the game. I’ve always pushed myself to save a lot for retirement on the advice of my father many years ago. The only downside this caused was when I wanted to buy a house I didn’t have enough for a 20% down because all my money was tied up in retirement funds. This forced me to take PMI and I utterly hate throwing money away like that for nothing.

    A tip I would give everyone too is that if you plan on maxing out your 401k savings is to take a percentage that maxes you out earlier in the year. This way if you max out around October, you’ll have more cash in hand for the Holidays because no more will be taken out for the rest of the year. Also in these unstable times, if you are let go, you’ve put more money away then you would have if you took the max/paychecks.

    • retirebyforty March 20, 2013, 3:11 pm

      Great tip about maxing out earlier. That’s what I did in 2012 before I quit my job. By maxing out earlier your money also has more time in the market. That’s the key to stock market investing. Sorry to hear about the PMI. Hope you can get rid of it soon.

      • SavoirFaire March 21, 2013, 8:59 am

        I got lucky with the PMI, only had it for 1yr. I did a refi that dropped my mortgage by 2% and the housing market was going up so fast that between what I put down and increase in my home value I had enough to get rid of PMI. I went from a 30yr to a 15yr and payed only $100 more a month. Just did another refi recently dropping it another 2% and it didn’t cost me a cent, some special government program. I’m pushing myself to accelerate my payments and rid myself of my one and only debt. The stock market has been so great lately that I’m taking a lot of profits and putting them into my mortgage. I certainly won’t RB40 (past that already) but I’m hoping to retire within the next 10yrs .

        • retirebyforty March 22, 2013, 3:19 pm

          That’s great to hear. I hated PMI and made it a goal to never pay that fee. Great refi!
          Good luck with your retirement plan.

    • M.L February 17, 2014, 2:54 pm

      One think to watch out for if you have an employer match, if you front load your 401K, you may not get all of your match.


      • retirebyforty February 17, 2014, 5:08 pm

        Wow, that’s interesting. I haven’t had that kind of plan.

      • Investment Hunting December 4, 2015, 9:15 am

        Great article link M.L. I often tell my coworkers that they are leaving money on the table by doing what you describe. Now I have a source to send them to.


    • Sachamama April 9, 2014, 5:15 pm

      The maxing out 401k early in the year scheme didn’t work out for me. And may not for many people. Reason being : my company matching occurs on a per paycheck basis. So if I don’t contribute for the last few months of the fiscal year, there is no company match ( = wasted money!)

  • Nick March 20, 2013, 8:09 am

    Wow that is crazy to see how much of a difference maxing your contribution makes!

    • retirebyforty March 20, 2013, 3:28 pm

      I should have added the fidelity line to my graph too. I’ll do that now.

  • Josh March 20, 2013, 8:32 am

    One thing I recently ran into with a change to working at a mega-corporation was the HCE rule. I would love to see an article on one of the financial blogs regarding HCE. I had certainly never heard of it before and finding information is tough.

    Basically, I am no longer allowed to provide the legal annual maximum and reduced to a smaller amount . Very frustrating when you run into a new rule that reduces your savings plan.

    – Josh

    • retirebyforty March 20, 2013, 3:34 pm

      I did a quick search and it sounds like that’s the company’s choice, correct? I need to research more. I guess bloggers don’t write about this because they are not affected. 🙂 My old company has many HCEs (as defined by the IRS) and I didn’t run into this problem.

      • Pat December 6, 2015, 5:21 pm

        I’d love to see an article about this too. I don’t know the formulas but it’s not the employer’s choice – it’s somehow tied to the % of low vs highly compensated employees who use the 401k. At my company a large % of employees are low paid horly workers and don’t invest, and as a result the HCEs (I believe cut-off is around 120 or 130k, but it’s IRS formula driven and differs by company I think) are capped at investing 6% of salary, plus a 3% match).

  • John S @ Frugal Rules March 20, 2013, 8:45 am

    Wow, crazy how much of an impact starting early and even when you start in the workforce can impact what you have in the future. It all comes down to time and doing what you should be at the outset. We did not start early enough and are doing all we can to throw as much as possible at retirement saving.

    • retirebyforty March 20, 2013, 3:36 pm

      That’s what I thought when I looked at the charts. People who started working in the 80s and saved a lot should be doing quite well now.

  • sin camisa March 20, 2013, 9:11 am

    The key word in the first paragraph is “average”. There are a handful of Americans with millions; and millions with only $25K or less in retirement savings. It would be nice to find out what the median is. Also, of course, this applies only to folks with Fidelity accounts. Most of my friend do not even have retirement accounts.

    • Steve March 20, 2013, 11:19 am

      The fact that it only applies to Fidelity accounts is key. That means that it certainly excludes those without any accounts at all. Also Fidelity does not even have a representative sample of all 401(k) holders. For instance, I’ve had Fidelity as my 401(k) provider when I worked at a major company; but at smaller companies I have tended to have other, higher fee providers that I assume offered to run the company’s 401(k) plan for “free” (meaning, by pushing the costs on to the employees).

      I also wonder what maxing out a 401(k) truly meant in the past. When I started working my employer only allowed a certain % max in addition to the dollar max. That seems less common today but I haven’t been able to figure out if it was an IRS rule in 1999 or just my employer’s choice.

      • Steve March 20, 2013, 11:32 am

        Apparently, the EGTRRA of 2001 changed the 415(c)(1)(B) defined contribution limit from 25% of eligible compensation to 100% of eligible compensation. So, there was a legal reason at the time for my employer to limit 401(k) contributions to a percentage.

      • retirebyforty March 20, 2013, 3:40 pm

        I think that’s just the employer’s choice. My old employer change the % match every year depending on how well they did. I suspect Fidelity accounts are in better shape than smaller companies’s plans. Employees in bigger companies probably have more stable lives and can save more in general.

    • retirebyforty March 20, 2013, 3:36 pm

      You are right, but it still illustrate my point about maxing out the 401k. 🙂

  • krantcents March 20, 2013, 10:12 am

    Thanks to some really good investing in rental property, I exceed your tables. When I started there were no 401K, IRA or Roth IRA. I started with a Fortune 100 company that had profit sharing etc.

    • retirebyforty March 20, 2013, 3:38 pm

      That’s great! I always thought people older than me had quite an advantage with the stock market. It hasn’t been doing as well since I started working in 96.

  • SavvyFinancialLatina March 20, 2013, 10:13 am

    I started work full time in June at age 22. I have accumulated $10K in 401K and $3K in ROTH IRA. Husband nothing right now 🙁 His work doesn’t offer a 401K.

    Although I want to max out my 401K, we want to gather enough cash to buy a house.

    Any raises I accumulate will go to my 401K over the years until I can max it out.

    • retirebyforty March 20, 2013, 3:38 pm

      Great job so far. Keep at it and you’ll get there. 🙂

  • Johnny Moneyseed March 20, 2013, 11:28 am

    We don’t have a 401k program at work. We do have a retirement plan, but there is no matching. I tend to just max out both my wife and my Roth IRAs every year and put the rest of our investments into taxable accounts.

  • Really interesting and clear graphics. Great post!

  • Mike March 21, 2013, 6:56 am

    I think it really does depend on the company you work for and if they offer anything decent. Some employers still offer decent plans, others do not. So doing the necessary research is essentially before trying to max out a retirement plan at the company that you work for.

  • Michael Jones March 21, 2013, 8:07 am

    Saving for retirement is so important and so many people either don’t do it or don’t care until the 11th hour. What exactly is it that is so important your forego your basic future needs? Hopefully tables and charts like this serve as a wake up call to people who still have some time. The last thing we need is an entire generation of people retiring who need more government assistance. Social security was never meant to be the bailout plan for a nation, it was only intended to be supplemental. That’s not even going into what I think is going to happen to SS in the coming years. Let’s look out for ourselves for awhile people, then we can be confident we’ll be OK.

  • JC @ Passive-Income-Pursuit March 21, 2013, 10:37 am

    Just counting my 401k and rollover from my previous job I’m behind by about $30k, but if you add in my Roth’s and brokerage I’m ahead by $87k so I think I’m doing fine. The only thing I really like about the 401k is that it’s a way to automatically save since that money never comes into your hands, but I personally am only investing enough to get the match now. Of course I’ve started focusing on FI/ER so I can’t have all of my savings tied up in the 401k and other retirement vehicles. The 70-75 year old bracket from the Fidelity study is encouraging because all you hear about is the retirement crisis. I think too many of the studies that look at that aren’t accounting for the fact that the baby boomers should receive their full social security payments and have at least some form of pension plan assuming they didn’t cash it out upon leaving the job or retirement. I’ve seen several that just look at 401k balances and of course the boomers will be behind on where they should be because they didn’t have the 401k option their full working career.

    • retirebyforty March 22, 2013, 3:21 pm

      I like auto deduction too. You never see the money so you don’t miss it at all. I think you have a point about the 70-75 bracket. The current retirees have social security and other resources. I’m pretty sure 99% of retirees will do just fine. They’ll just have to figure out how to live on less money. I’m pretty sure they won’t starve.

  • Integrator March 30, 2013, 5:40 am

    Like some of the early posters, I only contribute to my 401k to the extent of the match. The rest all goes into taxable accounts. Between taxable and tax deferred, I’m probably somewhere near the $700k mark. 401k is only $85k mark. I’m in my mid 30’s, but I started investing very early 🙂

    • retirebyforty March 31, 2013, 7:46 pm

      Great job! $700k is an enviable position for someone in their 30s.

  • CBSAustintexas May 18, 2013, 10:19 am

    I do 16% into my 401k for over a year now, my employer matches up to 5k a year but limits you to 2500 a half. I also have been able to do 10% employee stock purchase, where they escrow my funds for 6 months and I can take an immediate 15% discount and sell my stock to perk up that amount I escrowed. I also try to max the Roth IRA if possible. 98k at 33.

    Its tricky at first and took about a year to really be able to spend money when I turned on those savings vehicles……. and requires some debt freedom to get by with that much being put aside…..but once those 6 month ESP catch up and you will have no consumer debt but mortgage.

    I have good equity in 2 homes (700k) too and want to pay off the remaining 400k I owe between the 2 in the next 12 years. I see them as possible annuities that require maintenance but can give me 4-3k a month in rental income. Thats real market security/insurance and back up if I need it.

    16% for life and pay off my mortgages is all I worry about.

    I also do the 16% to just because I don’t want the government taking more of my money from me forever in taxes…..Its still in my pocket and allows me borrowing power against the bank of me should the need arise.

  • Strick June 13, 2013, 4:59 am

    Never had a 401k. Went for many years with employers offering no 401k, so all i could do was the ira (i never quite understood why having lousy job benefits should also prevent me from access to retirement savings accounts above the much smaller ira limit, why couldn’t I just put 15K into my ira?). So I ended up saving a lot in taxable accounts and paid off my mortgage.

    Now that I’m self-employed (which frankly I had the guts to do b/c of a paid off house) the limits have increased ridiculously (solo 401k+sep-iras) so i am effectively moving money saved in taxable into those now. It looks from the table that i would have more than maxed out a 401k since 2001 if that was an option so can’t really easily compare performance.

    • Casey W December 4, 2015, 1:26 pm

      I agree with you! Let’s up the IRA/Roth IRA limits to $18k! Or just make the contribution limit a combined limit of $23.5k for 401k+IRA (18+5.5=23.5). This way you could max an IRA at $23.5k or spread it out any way you see fit. Sometimes the government does not operate in a logic manner and imposes arbitrary limits on IRA contributions. A similar illogical government law is discriminating against married couples for tax purposes when you pass $230k or so in combined income… Don’t ask me how $200k+$200k = $230k…

  • steve October 5, 2013, 1:04 am

    I’m 38 with $60K in 401K and my wife has about $50K. From a previous job I have a guaranteed pension of $1,300 a month at 65. Realistically, how bad of shape am I in?

    • steve October 5, 2013, 1:06 am

      Also, I’m now putting in about $12K per year into 401K.

    • retirebyforty October 5, 2013, 9:04 am

      Do you have other savings? You are not doing too badly if you plan to retire at the usual age – 60 or so. It will be hard to retire early though. You need to ramp it up a lot if you want to retire at 50 or just figure out some ways to make money on the side.
      Good luck!

  • stoutboy March 4, 2014, 12:02 pm

    You use averages for your charts, but those figures are skewed by those with very high account balances. A better data point would be the median. That would give us a better yardstick.

  • Momofone September 25, 2014, 3:53 pm

    I just found this post today. I’m way behind on the curve (I’m 32). My husband doesn’t contribute at all, and my company doesn’t match or offer any sort of benefits. I have put away what I can, but my balance is less than $6,000. I do own my own house, but I am saddled with undergrad and grad school debt. What types of jobs offer retirement matching?

    • Casey W December 4, 2015, 1:20 pm

      A lot of medium to large companies offer 401k contribution matching. You can look on sites like Glassdoor.com, look up a company, and look under their benefits tab–people share what their company matches and other benefits they receive. https://www.glassdoor.com/Benefits/Johnson-and-Johnson-US-Benefits-EI_IE364.0,19_IL.20,22_IN1.htm

      If your company does not have good 401k investment options, you can always contribute to your own IRA/Roth IRA which will provide a LOT of flexibility–you can use low cost index funds from Vanguard or actively pick your own stocks! I am pretty much in love with my Roth IRA, but still contribute the max to my 401k while I have access to a good one. The best part is, you can contribute to BOTH! $18k for 401k, $5.5k for IRA/Roth IRA.

  • seetha November 27, 2014, 10:31 pm

    I am 44 and have 450K in 401k. Got laid off from work 2 weeks ago after working for 15 years. Always maxed out my 401k ever since I started working at 29. My husband is in workforce, making 6 figure salary. How much my 401k will be like in 15 years (when I am 59) if I don’t work any more? Am I any where close to be in decent shape?

    • retirebyforty November 29, 2014, 11:52 am

      I think you are doing pretty well. If you can avoid withdrawing from your 401k, you should in a pretty good shape in 15 years. I think you’d have at least double what you have now. Try to contribute more if you can.

  • Brandon December 4, 2015, 5:25 am

    In order to retire at 40 I’ve been putting the majority of my money in non-tax advantaged accounts and using that to buy real estate. The plan is to create enough “Passive” income so I can leave my day job around 40 and not need to dip into my savings for a few years/decades. I think the tax advantaged accounts are great, I try to put money in 401K, IRA and HSA to lower my tax liability, but at the end of the day i can’t access that money very easily or cheaply until 59.5. Luckily the area I live in now has a lot of properties that have high cash flow potential.

    • retirebyforty December 4, 2015, 9:48 am

      I think your way is probably better than the 401k honestly. It’s a lot more work upfront, but it will be very rewarding. Many investors retire with rental properties. Good luck!

    • Casey W December 4, 2015, 1:11 pm

      A lot of people here do not seem to know about or care about rule 72(t). You can access your tax-advantaged savings very easily if you are planning to retire early. The only caveat is you must take equal and periodic payments for the rest of your life, but if you are retiring that is exactly what you want. I can understand people like Retireby40 wanting to keep their money in their tax-advantaged accounts as long as possible, that is a valid strategy, but most people here seem to think it is impossible to take your money out before 59.5–when you can pretty easily turn your 401k/IRA into a cashflow machine.

      • retirebyforty December 4, 2015, 3:23 pm

        Actually, I’m coming around. Now, I think rule 72(t) is a great way to access your retirement fund. It’s a great way to avoid RMD if your retirement fund is large. I’ll look at it again when we both fully retire and have very little income. Maybe when we’re 50.

  • Justin December 4, 2015, 5:27 am

    That chart was scarily accurate for my situation. 10 years of working full time, maxing 401ks the whole time, and I ended up with about $265,000 in my 401k (versus $284,000 predicted by the chart). The difference is probably the first year out of college when I started work in May and wasn’t permitted to fund the 401k to the max due to plan rules.

    • retirebyforty December 4, 2015, 9:50 am

      Great job maxing your 401k right out of college! That’s really rare. I should have maxed out right from the start too. I’ll make sure our kid does that.

  • Sandy T December 4, 2015, 6:16 am

    In one of my senior classes in college the teacher told us that if we invested $1000 per year in our twenties and nothing else we would have a million dollars by the time we retired at the standard age. It was a lesson on compounding interest. (I have no idea if it’s true or where his data was from, but I took it with a grain of salt.) It hit hard. I was already 22 at the time, and had missed out on a lot of money in those years. That being said I have since invested well over $1000/per year and am doing better than the graph. I’ll stick with it until I can retire at 50…I’m not going to make 40! (I wish…I need to work on the side businesses). Thanks for the great post!

    • freebird December 4, 2015, 8:24 am

      Your teacher looks pretty close, although I think ‘interest’ wouldn’t have taken you there, you’d probably get better returns from an equity investment than a debt investment (think stock index funds). If the S&P500 grows by 12% annually including dividends reinvested, then Sum 1000*1.12^(45,44,43,…,36) to get 1.04M.

      The sad part is if $1000 per year in your 20s grows to this much by age 64, think about the damage that the typical $30,000 of student loan debt will do– those payments are a huge lost opportunity for your future self so that sheepskin is way more expensive than it looks!

      • retirebyforty December 4, 2015, 9:55 am

        You’re right about the student loan. It is such a huge factor when you look at it from the compounding point of view.

    • retirebyforty December 4, 2015, 9:52 am

      Great job! I think it’s pretty tough to beat the graph because most people don’t contribute the max right out of college. The employer contribution should help, though. Good luck on your journey. Retiring at 50 is still really great. You’ll be young enough to do pretty much everything.

  • Joe December 4, 2015, 8:19 am

    Age: 52 – Started maxing out about 7 years ago when my mortgage was paid off.
    TSP: 275K (last 10 years)
    Rollover IRA: 420K (prior employer401K)
    Roth IRA: 88K
    HSA: 38K

    Total: 821K

    • retirebyforty December 4, 2015, 9:54 am

      Great job with your retirement account. You’ll hit a million before you know it. I guess probably 3-4 years at the max. On a side note, I like the TSP. It’s very simple and the cost to invest is really low.

    • Casey W December 4, 2015, 1:06 pm

      You are looking mighty close to financial independence friend, congrats, if you are not there already! What does our lifestyle cost, and have you thought about just retiring now? A little expense cutting or active income and I am sure you could retire very soon.

      • Joe December 5, 2015, 12:49 pm

        Thanks Casey. I have 2 kids in college right now which is increasing our expenses. At age 56 I’ll be eligible for a small pension (about 1K a month after early retirement reduction). That’s my goal.

        • Mike H. December 7, 2015, 9:55 am

          Joe, all else being equal, I’d suggest you avoid the early retirement reductions, as they can be large. In a large risk pool, the actuarial equivalent can be something like 0.5% reduction per month prior to normal retirement age. If normal retirement age for your plan is age 60 (pretty standard age), you’re doing a lot of damage there. Especially if there’s a percentage-based cost-of-living-adjustment (COLA) in your plan Highly suggest you put it off, unless you’re taking another kind of hit by doing that.

          Also, though nobody likes to talk about this, if you expect your lifespan to be rather short, then taking the money makes sense. You look like you’re planning for the long term, however, so maximize that guaranteed income.

          • Joe December 10, 2015, 11:32 am

            Thanks Mike, I’ll be sure to run the numbers. I would be looking at a 30% reduction (5% a year for every year under 62).

  • nicoleandmaggie December 4, 2015, 9:13 am

    That is eerily close to my 403(b) account balance. Though really the process hasn’t been so simple– early on I only contributed the mandatory part of my income (12% including the match) and didn’t realize the 15K limit was separate. Later when I figured all of this out, I maxed out not just the required part but also the full 403(b) amount on top of that. So the not saving the max early is balanced out with saving more than the max later. (We also have IRA and 457 savings, so we’re not limited by the amount in the 403b.)

    • retirebyforty December 4, 2015, 9:56 am

      That’s great. I don’t think many people can get close to the graph. It’s nice that you’re catching up with extra contribution in later years.

  • Steve P December 4, 2015, 9:14 am

    Do you have that last spreadsheet (“where are you’) available on google docs or somewhere?

    • retirebyforty December 4, 2015, 9:57 am

      I just put it on Google docs. Check it out and let me know if there are any problems. Unfortunately, the formula did not carry over from Excel.

  • Stockbeard December 4, 2015, 10:51 am

    You’re wondering about company matching… but company matching doesn’t allow you to go beyond the yearly max, so it wouldn’t change the amount in your 401k. It however gives you additional money that you can save somewhere else.

    Am I wrong here?

    • retirebyforty December 4, 2015, 11:06 am

      When I had company matching, it just went straight into the 401k. I think that’s the same for most 401k plan.

    • nicoleandmaggie December 4, 2015, 12:29 pm

      The limit is 53K for employer + employee contributions. The 18K only applies to employee. This leads to interesting tax-avoidance vehicles for high earners like mega-backdoor-roths.

      • Mike December 4, 2015, 12:39 pm

        59k if over 50!. Back Door Roths are awesome. Turned 50 this year and hope to retire at 53. Pounding everything into the after-tax 401k(after reaching 24 k limit (18k + catch-up of 6k) on pre-tax. Tax free money to access in 50’s befor the 59.5 age for traditional IRA.

    • freebird December 4, 2015, 12:35 pm

      According to this–
      the 18K limit is for your own contribution, and there’s a separate 53K limit for the sum of your contribution plus your employer’s contribution.

  • Casey W December 4, 2015, 1:01 pm

    The thing that always gets me: you can never catch back up. Once you don’t max your 401k for a year, there is no going back. I am only about $5k behind for having access to a 401k for 2 years, but it still bothers me that I can never catch back up! haha

    The plan moving forward is to max it as long as I have access to it! You can’t control the future, but you can max your 401k contributions now. My entrepreneurial spirit may carry me to a place where I don’t have access to a 401k, so I will make the most of this tax-advantaged account while I can! 🙂

    • retirebyforty December 4, 2015, 3:25 pm

      Starting a business is a great way to catch up. You can open an i401k and contribute much more than the limit. Good luck with your business. The i401k is a great option for entrepreneurs.

      • Casey W December 4, 2015, 4:05 pm

        The options for profit sharing to bring the limit to around $50k is pretty fantastic if the business proves profitable.

    • Mike H. December 7, 2015, 10:37 am

      457 plans have some complicated rules around catchup contributions. If you have access to a 457, that’s one option for you.

  • Julie @ HappinessSavouredHot December 6, 2015, 4:52 pm

    A great way to put more money aside is to embark on a minimalist journey, which I did this year. Saved way more money than I thought possible, and put it both in retirement savings and extra mortgage payments. Being mortgage free (soon) will definitely make saving way easier!

    • retirebyforty December 7, 2015, 10:34 am

      That’s a great way to boost your saving. Good luck with your mortgage! It will feel great after that’s paid off.

  • Jason December 6, 2015, 7:10 pm

    This will be my first year of maxing it out…and not the last. I can also have access to a 457 so I have some more places to put my money. I have a lot of catching up to do.

    • retirebyforty December 7, 2015, 10:35 am

      Great job! Keep it up and good luck on your financial independence journey.

  • Financial Samurai December 7, 2015, 12:43 am

    One of my favorite topics I’ve written about many times! I’m still ahead, even though I left in 2012. The Solo 401K has helped.

    I view the 401k as just a nice bonus during old age!


    • retirebyforty December 7, 2015, 10:36 am

      Great job! I think you’re the only one so far who’s ahead of the table. You’re the expert on this subject.

  • gayle December 7, 2015, 5:49 am

    I just love your blog..I am getting better at saving, but not sure will be ready to retire at 65..I have $140,00 in 403B, also we have $250,000 in other stocks with good dividends. Also we have 3 rentals ..that dont make a ton, but I keep hoping with time and rental increase they will. I made $76,000 last year, what is my max for 403B? I just put mine up to 17%.

    • gayle December 7, 2015, 7:40 am

      forgot to say Im 54 !

    • retirebyforty December 7, 2015, 10:39 am

      Good luck with your rental. Just keep it up. I’m sure it will pay off in the long term. I think the 403B has the same max contribution as the 401k – $18,000 for 2015. If you’re over 50, you can contribute up to $6,000 extra. So that’s $24,000 max for you. That’s a lot of money…

  • Hannah December 7, 2015, 6:42 am

    I didn’t understand the 401k retirement vehicle at all when I first started working. I only contributed a few thousand my first two years. After that, I tried to get as close as possible to the max while still maxing my Roth and HSA.

    With those efforts (and a 5% employer match), I’m just about 25% under for someone who has invested for 5 years. Not too shabby.

    • retirebyforty December 7, 2015, 10:41 am

      Great job! The first few years are really crucial. Keep at it!

  • MP December 7, 2015, 9:31 am

    I just got in whole finance thing 5 months back was able to put 693 each pay period for me and my spouse, also investing in VTI, current portfolio in 20K in 5 months. It feels so great to have control of finances.

  • Mike H. December 7, 2015, 10:17 am

    I don’t max out my 401(k). Never have (I’m 29 and have been saving for 5 years). Don’t plan to for some time, unless my deferral percentage multiplied by my natural progression of salary raises catches up to the IRS limits [it’s getting closer – the new job offers a really awful match, so my contributions had to go up big time]. It’s tough to afford it (I’m making less than $100,000 and live in a big city), but even if I could I would choose not to.

    Why not? Because I don’t want all of my money in a tax-advantaged account, ESPECIALLY if I’m retiring early. All of my contributions are Roth, so I’m not saving on taxes from my salary. Like most people here, I’m also doing a lot of dividend growth investing, which is tough to do within a 401k structure – self-directed brokerages have all kinds of fees and restrictions. I want access to that money, to be able to move in and out of positions, etc.

    Finally, I have different goals for my retirement accounts than my other investments. I’ve calculated that between my contributions and my employer match, a 20% contribution to my 401(k) should be enough – on its own – to fund my age 65+ retirement. To me, that’s completely separate from my passive income investments, or my ever-growing inflation-protected safety net (I use Betterment for this). For money that could be needed prior to actual retirement, it would be dangerous to have it all in a retirement account.

    Personally, I don’t believe that people should over-save (I know, sacrilege around here!), but better safe than sorry. If you have no other financial strategies going on, then yes, max your 401k to the best of your ability.

  • Even Steven December 7, 2015, 12:10 pm

    2016 will be my first year of maxing out my 401 (k), I have made paying off debt and real estate investments a priority, but I love reading the future successes ahead, thanks Joe!

  • supernova72 December 7, 2015, 2:14 pm

    I like that table although it makes me feel like I’m a bit behind. I’m older than most on the this forum I’m pretty certain.
    My first full yr of 401K employment was 1985. I was making about $18K a yr so maxing out at ~$7K would have been quite a stretch (actually we can contribute 30% so it was not possible).

    I’ve been fortunate enough to max out the last several yrs however. Great analysis. My goal way back then (1985-1990 ish) was to get the company match at least. I did that 29 of the 31 yrs at my MegaCorp.

  • Jason December 7, 2015, 3:09 pm

    One thing I’ve always wondered: If someone wants to retire early, why put more than just the minimum necessary to get the employer match into the 401k? It’s locked in there until your 60, I think.

    Wouldn’t you want more of your money up-front to help you fund the early retirement instead?

    • retirebyforty December 7, 2015, 9:36 pm

      You can access the money in your 401k with various options – building a Roth IRA ladder and using rule 72(t) are the two easiest way to avoid the penalty.

    • Mike H. December 14, 2015, 9:53 am

      Jason, one additional reason. If you’re like me, you want to use your 401k to capture long-term market growth (i.e. your 401k is not your dividend growth portfolio or your day trading platform). A tax-advantaged account is awesome for this goal, as all of your earnings are tax-free, and if you use Roth then most or all of your withdrawals will eventually also be tax free.

      Give me 30+ years of tax-free market returns? Yes please. I’ll sock away 20% (17% Roth from me, 3% pre-tax employer match) for the rest of my career and cackle like a Disney villain every year I get capital gains without a capital gains tax.

  • James December 11, 2015, 9:11 am

    I guess I never really looked into this concept.

    Now am a bit depressed looking at your chart.

    I’ve been working since 1999 (16 years) and only have $300K socked away in 401K.
    I got rocked for about 10 years (i.e. the lost decade) due to the tech crash and 9/11.

    1) Your chart assumes that someone was able to realize the full 401k max straight away. In other words, for example, coming out of college at age 22, earning enough to accumulate the full 401k max.

    2) What is the compound annual average return in your model (or that you’ve realized since you started)?

    Thanks. Really enjoy your site.

    • retirebyforty December 11, 2015, 1:15 pm

      Keep at it! $300k is much better than most people. Yes, the chart assume max contribution right out of school. That’s a tall order for most people. A few people did it, though. I used historical return of VFINX. I think it annualized to 7-15% depending on the period.

  • Michael @ NTPNW December 11, 2015, 6:38 pm

    Wow after reading this I realized I have a long way to go to reach these numbers. Then again with my life style I may not need to. Hopefully putting savings into overdrive will let me amass enough to live comfortably. Time shall tell. Great article I enjoyed reading it.

  • bbob January 11, 2016, 7:46 am

    Great blog! I’ve maxed for 25 years and am close but a bit shy of the numbers in the table. One flaw in real life vs. table assumes you could apply the max 25 years ago but for the first 10 or so work years I hit the IRS lesser of the max amount or 20% of your income. For example, in 1992 I made a decent for that time $30k per year but could only max at $6k, not the $8,728 listed. Regardless, an aspirational article and I’m glad I maxed early as it hasn’t crossed my mind in years.

    • retirebyforty January 11, 2016, 6:49 pm

      I did not know about the 20% limit. I’m glad that’s gone. Great job with your 401k!

  • Jen January 19, 2016, 8:00 am

    Just stumbled across this article. I maxed out my 401k last year, first time in ten years of working, but I’m not entirely sure I know what it means. I contributed $18k but can I contribute more since fees are taken out? for example, can I contribute $18,300 if $300 is used for fees?

    • retirebyforty January 19, 2016, 10:46 am

      Great job with your 401k last year. You can only contribute $18,000. One way to contribute more is to go with Roth 401k. You still invest $18,000, but it’s after tax. So you are investing more and it will be tax free when you withdraw. Good luck in 2016!

  • Tom January 30, 2016, 11:34 pm

    I would love to see a graph like that for Australian Super. Currently you can contribute $30k per year pre tax ($35k per year if over 50). And if you really wanted to get things going, up to $180k of after tax money. So if you earn enough you could put in (after taxes) about $206k to $210k per year for 10, 20, 30, 40 years! Even just the pre-tax portion can add up too!

  • Steve O February 19, 2016, 6:58 pm

    I have about $150k in my 401k while my wife has about $125k. We max out both for $36k total. We are in our late 30s. So looks like we are fairly behind.

  • ASW March 1, 2016, 8:47 pm

    I modified your spreadsheet for maxed out IRA out of comparison. I’ve been maximizing since 2000, but have fallen short which I attribute to bad investment funds. I learned my lesson and fired my broker almost 2 years ago and been doing much better.

    One thing you left out of your spreadsheet is dividend reinvestments of VNIFX which would also significantly increase the returns. Overall, nice product you put together here.

    • retirebyforty March 2, 2016, 9:52 am

      I had the same problem when I started investing. The advisor was just looking to sell crappy funds. I’m pretty sure the dividend is already reinvested in Yahoo’s historical spreadsheet. Thanks

  • WishIHadSavedMoreEarlier April 5, 2016, 6:32 pm

    I am 51. My wife is 47. We have about $510K in retirement accounts with really minimal other savings. We have about $200K of equity in a $300K home, which we hope to have paid off in 10 years. We have about $50K in 529 accounts for our three kids, which is really not very much. At this point we are going to focus on retirement more than college, because they can get scholarships or borrow for college. I didn’t make much in the early years of my career and didn’t save much, and now it feels like, even with a combined income of about $160K+ that it is hard to make ends meet, so that we cannot max out our 401Ks or contribute much, if anything, to Roth IRAs. We don’t buy new or expensive vehicles or have expensive hobbies. Kids are expensive–sports clubs, braces, etc.–and I think family vacations are vitally important, so we try to do them once a year when we can. I think we can live pretty frugally once the kids are gone and we retire, although we think we’d still like to travel some. I love your site and wish I had had your mindset from a young age. I did talk to some friends the other day and they were saying how their financial guy said if all goes well they will have about $12 million set aside for retirement. I just about fell off my chair. I think we could retire relatively comfortably with between $1.3-$1.5 million (counting on some social security), but of course I don’t know if I will live 10 years past retirement or 30 years. That is what makes this all so hard. I don’t feel any responsibility to give my kids a large inheritance–but I also don’t want to become a burden to them. I’m interested in your thoughts since I feel like you always have good insights in to people’s retirement ‘snapshots’. Thank you.

    • retirebyforty April 6, 2016, 10:15 am

      Have you tried tracking all your income and expenses? It could help you figure out where all your money is going. Your income is great at $160k and you should be able to save more. You have just 10-15 years left to beef up your retirement saving. I guess 3 kids can be very expensive. Maybe encourage them to work a little to help pay for their extracurricular activities?
      I agree about kid education. At this point, you should concentrate on retirement saving. They can get student loan to help fund a degree.
      I would try to save more and keep investing. Good luck!

  • John April 7, 2016, 7:42 pm

    I’m 51 and only have 10000 in my 401k. Is it still a good idea to max it out? I’m planning on retiring at 62. So that gives me a good 10 years. I can afford the 18000 + the extra 6000 since I’m over 50.

    • retirebyforty April 8, 2016, 7:39 am

      It’s probably a good idea to max out your 401k. It sounds like you are in a high tax bracket. Saving money in your 401k is a great way to defer tax.

  • Elenore June 19, 2016, 5:33 pm

    I am 65 and wil retire next year at 66. I have been saving in deferred comp for years now have amassed 550,000 I will retire next year. I do no have any immediate savings other than an emergency fund of 10,000. Should I divert my last year of deferred contributions to savings account in order to have some money in the bank before I start collecting my pension ,social security and deferred comp money in retirement.

    • retirebyforty June 20, 2016, 10:26 am

      You should check with your company’s retirement plan and see if they have an advisor who can help you decide. I imagine your employer uses Fidelity or another big company. They usually can help you figure these things out.
      If I were you, I would keep adding to the tax advantaged account for now. This year you are paying tax and deferred comp will lower your tax. Once you retire, you won’t have much income and you will pay much less tax on the withdrawal. Having some cash in the bank is a good idea. I would aim for 6 months of cash. You have pension and social security so I think you will have a smooth transition. Good luck!

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