What if You Always Maxed Out Your 401k?

What if You Always Maxed Out Your 401(k)?

What’s the surest way to become a millionaire? I can tell you right now – max out your 401k contribution every year. It will take a while, but I guarantee you will get there. This is the easiest way to build wealth. The problem is you have to start investing young and most of us didn’t know that when we were 22. We all spent too much money and didn’t invest enough in our 20s. Even I didn’t want to contribute to my 401k when I started working in 1996. To that young guy, retirement was 40+ years away. Why should I put so much money aside? I wanted to go out, have fun, replace my junky old car, and buy nice clothes. Fortunately, my dad convinced me to start contributing to my 401k and saved me from a huge mistake. The compounding effect of investing early is absolutely amazing. It’s too bad so many young people don’t understand this concept and put off investing until later.

Woefully inadequate retirement savings

Putting off retirement savings is a big mistake. If you don’t start saving right away, it can be very difficult to put money away. Can you believe that half of all US households have no retirement savings at all? It’s true. Even households that saved for retirement haven’t saved enough. According to the latest (2019) Survey of Consumer Finance, the median value of retirement accounts for families near retirement age is $134,000. That’s only the people with retirement accounts. People with no retirement accounts have much less savings.

Anyway, even $134,000 won’t be enough to support a frugal retirement. If you keep track of your annual expenses, you’d know. For us, $134,000 would cover about 3 years of modest living. That’s not long enough. Many people spend 30+ years in retirement. What will they do once their savings are gone? They will have to depend on other sources of income such as Social Security Benefits and part-time work. Unfortunately, this usually means drastically downgrading their lifestyle.

median retirement accounts

Luckily, I’m not average and you aren’t either. If you’re reading this, you’re way ahead of the average household.

I have been maxing out my 401k for many years now and my retirement savings are in great shape. Let me show you how wealthy you’d be if you maxed out your 401k contribution every year since you started working. Hold on tight because you will be amazed by the power of compounding*.

*Compounding is just another word for compound interest.

Maxed out 401k every year

The graph below shows how much your 401k would be worth if you maxed out your contribution every year.

Note: In our scenario, I have our worker contribute the max contribution divided by 12 every month. To make it simple, we’ll invest in VFINX, the Vanguard S&P 500 index fund. (This doesn’t include any employer contributions. You should be ahead of this chart if your employer helped out.)

Here is how to read this graph.

  • The horizontal axis is how many years you have been working.
  • The green line is how much your 401k would be worth if you maxed out every year.
  • The blue line is how much you contributed.

For example: If you started working in January 2012, then that’s 10 years you could have invested in your tax-advantaged account. If you contributed the max every year, then you should have about $400,000 in your 401k account by now. 2021 was a terrible year for many people, but the stock market had another amazing run. If you invested for many years, all your investment got a huge boost. That’s compounding in action.

My 401k

I’ve been working since mid-1996 so let’s round down to 25 years. If I maxed out every year and invested in VFINX, then I should have about … $1,453,000 in my 401k at the end of 2021. Unfortunately, my account doesn’t have that much. I made some mistakes when I was young, like most people. I didn’t max out my 401k contribution when I first started working. It took me a few years to increase my contribution to the maximum allowed. Also, I chased performance in my early 20s. That meant my investments underperformed in those crucial early years.

retirement
Sorry, this is an old chart from 2021. I couldn’t log on to Vanguard from Thailand.

At the end of 2021, I had about $1,020,000 in my 401k. That’s closer to 18 years of work instead of 25. Those early mistakes got amplified as the years go by. If I could go back, I’d tell my younger self to focus on maxing out the 401k and put everything in a good index fund. My dad told me to invest in my 401k, but he didn’t know about index funds. I had to learn the hard way from my mistakes. I’m still thankful that he convinced me to invest in my 401k. You can read more about my mistakes below.

How is your 401k doing?

The full table is below. 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 shows how much your 401k would be worth if you’ve maxed out your contribution right from the beginning. The 4th column shows the max contributions for the corresponding years.

You can see the magic of compounding on this table. If you contributed $7,313 in 1988, it would turn into $201,273 today! That’s an incredible 2,751% gain AND it will keep increasing every year. Time is your best ally when it comes to investing.

It is clear that maxing out your 401k will make you wealthy by the time you retire. If you did and started working before 2000, you would be a millionaire now. I love my 401k and I can’t wait for it to hit 7 figures someday. Unfortunately, most workers aren’t contributing enough and that’s why the median value of retirement accounts is so low.

*Woohoo! My 401k finally crested over a million dollars. I’m officially a 401k millionaire! Although, stocks have gone down lately. My 401k accounts are worth less than a million again…

Lessons learned

  1. Don’t delay maxing out your contributions. It took me a few years before I maxed out my 401k contributions. Those early years are crucial and you need to max out ASAP. The longer you wait, the more you’ll lose out with compounding.
  2. Don’t chase performance. I didn’t know how to invest when I was younger and I just picked the funds with the best performance from the previous year. This is called chasing performance. This is a bad idea and it will underperform in the long run. Funds that did very well the previous year usually underperform the next. It is better to invest in a low fee index fund like VFINX and just keep adding more every month.
  3. Don’t pause investing. I stopped investing for a while after the Dot Com bubble busted. This worked out okay in the short term because the market kept going down. However, it was the wrong move in the long term. If I kept investing, my retirement fund would be worth much more today. You need to keep contributing even during a stock market crash. I learned that lesson and kept investing in 2020. It paid off handsomely.
  4. Don’t borrow from your 401k. I haven’t done this because I never had to. It’s the wrong move because your retirement fund will be depleted and you’ll miss out on compounding. Your retirement accounts should be earmarked for retirement.

Those are the main lessons I learned from 24 years of investing in my retirement account. I hope these lessons will prevent some young investors from making similar mistakes.

Max out your 401k

Of course, every 401k plan is different. Your retirement plan might not have any good investment or the fees might take a huge bite out of your total return. Here is an easy way to see how much fee you are paying – sign up with Personal Capital and use their 401k fee analyzer tool. This free tool will help you figure out how much you’re paying. I just checked my 401k and I’ll pay almost $5,000 in fees by the time I’m 55. That sounds like a lot, but it is actually very low. All my investments are in low-cost index funds. Anyway, if you’re paying too much in fees, you probably should move your investment over to funds with lower fees.

personal capital helps reduce fees

For most people, maxing out your 401k contribution every year is the easiest way to become a millionaire. You will pay less tax and you won’t leave any employer matching on the table. As a bonus, the contribution is auto deducted so you won’t even miss the money. Start investing while you’re young and the magic of compound interest will supercharge your 401k and ensure a comfortable retirement. Don’t wait until you’re 55 to start investing because it will be nearly impossible to catch up.

How are your 401k accounts compared to my table? Are you ahead or behind?

If you need help keeping track of your finances, sign up with Personal Capital to manage your portfolio. They have many great tools for investors including the 401k Fee Analyzer and the best retirement calculators on the internet. I log in almost every day to check on my accounts.

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Joe started Retire by 40 in 2010 to figure out how to retire early. After 16 years of investing and saving, he achieved financial independence and retired at 38.

Passive income is the key to early retirement. This year, Joe is investing in commercial real estate with CrowdStreet. They have many projects across the USA so check them out!

Joe also highly recommends Personal Capital for DIY investors. They have many useful tools that will help you reach financial independence.
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253 thoughts on “What if You Always Maxed Out Your 401k?”

  1. The 401(k) clearly is the single easiest tool to use to build wealth. You just have to do it. Unfortunately for many of us, we don’t realize how much maxing it out will benefit us in the future. Same as you, I really stunk it up in my twenties. Thankfully, once I had a 401(k) again at around 30, I started maxing it out and was able to build a $250K portfolio rather quickly during my remaining working years that should end up at around $1.4-$1.5M by the time I am able to withdraw.

    Reply
  2. I found 401k loans to be very helpful for me but I can see how that could get a lot of people in trouble. But for someone with a high savings rate I think this is less of an issue. For my situation, the 401k loan allowed me to not take a break from contributions but still have funds available for a home down payment. I did another 401k loan to qualify for a refinance by paying down the mortgage to meet LTV (circa 2010). I was able to avoid PMI both times.

    Both are long since paid off.

    Reply
  3. I have a mixed opinion about maxing out your retirement account as a way to become a millionaire. It is good for someone who doesn’t want to take an active approach towards financial independence or has enough residual income to tied to a 401k.
    There are other investment vehicles than can get you to a million faster.
    I don’t have a million yet but in less than 5 years I was able to grow my wealth almost from to 600 000. If I had max out my retirement account I couldn’t have done it with a 52k salary.
    I do contribute to my retirement account but enough to not paying extra taxes.
    Just a though. Thank you the reading it was a good time reading.

    Cheers
    Dalia

    Reply
  4. I probably commented on this back in 2018 so forgive me if I’m redundant. I actually did max out my 401K every year. There were two problems, one was I’m an old guy and 401K’s weren’t adopted that quickly after they were created by the IRS code, my company didn’t adopt one until the tenth year of my employment. The other was that if you were one of the more highly paid people in your company, and as an engineer I was, then if the plan became “top heavy” (too much fat cat money and not enough worker bee money invested) then at the end of the year the plan would refund some of your contribution back to you. In other words your contributions would be capped below the legal maximum because not enough of your fellow employees were participating. So I wasn’t able to invest as much or as long as someone entering the workforce could now. Also the limits of contribution were much lower then than now because they’ve been increased from time to time to adjust for inflation. Even with those limitations though I still retired at 60 a 401K millionaire and then some. It does work and you don’t miss the money assuming you are being paid enough to afford it.

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  5. “Can you believe that half of all US households have no retirement savings at all? It’s true.”

    It’s sad and hard to believe, but I believe it. Even nurses I work with, who I know make good money, spend far more than they save. I was somewhat guilty, but not to an extreme because I always saved. But it took me longer than it should have to finally max out my 403b. Had I not discovered this community, I still might not be maxing out my retirement accounts, though I’d come close! If anything, this post makes me sad I didn’t start sooner investing in my 401k, but better late than never! Fortunately, I maxed out my Roth IRA starting in my early/mid 20s.

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  6. I wonder who can really afford to max out a 401k nowadays if you don’t work in tech or finances? Only the top 1% again..until when!?!?!?!?

    Reply
    • It’s less out of your paycheck than you would think but still a good chunk of money I’ll agree. I think it is very doable for a single person making $60K who isn’t living in a very high cost of living area. Basically, they would live on a $40K income. And many do it with less even but have to be very frugal (e.g. bike to work (no car), >$150 monthly food budget, has roommates, no cable TV, etc).

      Reply
  7. when people read advice to merge to one traditional IRA they should be aware that it prevents you from performing a mega backdoor roth, if you’re lucky enough to work at a company that allows it, and you’re lucky enough to make enough money to need it. Now because I followed the internet conventional wisdom, I’d either need to roll my traditional ira into my companies 401k, or convert the traditional ira to a roth. otherwise the whole thing gets taxed.

    my old companies 401k were safe. hosted at good companies (ML or fidelity), offered decent investment options at low fees. If that wasn’t the case, or if there were 15 different jobs in 15 years, maybe its worthwhile to consolidate. But I regret it as consolidating has limited my options.

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  8. Hi Joe,

    My take is that it is worthwhile to focus on the things which one can do now rather than lamenting on the past things in which one should have done. What’s over cannot be undone. Focus on the present with the view on of the future. It’s more practical as per my perspective.

    WTK

    Reply
    • That’s a good approach. I rarely look back, but I want my son to start investing as soon as possible. Young people need to know it’s a mistake to put off investing. This is a hard lesson to learn.

      Reply
  9. Every year this post updates and every year I curse missed opportunities. My own accounts have had $126,377 dumped into them from January 1 2008 to last week, and they’re now worth $224,816 (which I’m completely pleased with), but I wish younger me had wrung some extra pennies out of his paycheck and bought while the buying was great in the middle of the recession.

    ps: we just got back Saturday from two weeks in the Yucatan and your recommendation of Pescaditos for their blue crab taco was SPOT ON. I could eat more of those than would be healthy. So good! We also hit Parque de las Palapas the day before we left, and ate a whole lot of street tacos, and suffered no consequences other than full wallets and happy bellies. Thanks for the tips!

    Reply
    • Don’t feel too bad. I’m behind the pace too. We all made similar mistakes. That’s why I’m trying to encourage young people to start investing as early as they can.
      Great to hear you enjoyed Mexico. Pescaditos was great. I hope we get back there someday.

      Reply
    • Thanks for bringing this post back to the fore! This year’s update: $148,097 invested from 2008 to a week ago, $280,247 current value (current 401k and past accounts now in a rollover IRA). What a wild ride 2020 was.

      We’re planning another Mexico trip for January 2023. Blue crab tacos and cheladas at Pescaditos are on me if you’re in town. 😉

      Reply
      • As of today’s update, $156,253 invested has a current value of $329,720. It’s now worth more than double what I put in. Compound interest is fantastic.

        Per these numbers, I only contributed $8,156 in 2021. We’ve decided to only get employer match and put everything else into a taxable brokerage account. Wife and I are on track for a tax-advantaged seven figures by our mid-40s and want to have something more accessible to FIRE on before we hit 59.5. It’s a great problem to have.

        Reply
        • Great job!!
          It’s a good idea to diversify with the taxable account as well. I think we put a bit too much in our 401k plans to minimize taxes. That will become an issue when we need to take minimal withdrawal later. I guess we’ll deal with the issue then. I’m sure there are some kind of ways around it.

          Reply
  10. I like the message here, and it works for today….but folks looking at it historically, it may or may not compute to something meaningful today.

    Back in the 90s, I couldn’t put more than 15% into my 401K….and I didn’t make anywhere near what I would need to for that to equate to a max contribution. In fact, it probably took 8-10 years for my salary to get to the point where I could hit the max limit. It’s only been in the last 10 years or so that plans evolved to let you maximize regardless of income.

    And borrowing….again, I think it’s the right message, but reality is often different. You have to realize if you borrow, that money is no longer working for you…but there are times it makes sense.

    Reply
    • You’re right. I made mistakes too. I stopped contributing for a couple of years during the dot com crash. Also, I picked some crappy funds when I was young.
      However, this doesn’t include employer matching. If your employer has a good program, it’ll give you a chance to improve.
      Great job saving since the 90s. I’m sure you’re doing much better than the average household even if you couldn’t contribute the max back then.
      Good point about borrowing too. It’s best to avoid it, but sometimes you need it.

      Reply
  11. I’m an immigrant like you. But what if I max out my 401k and then I have to move back to my home country and need the money?

    Reply
    • That’s tricky. If you plan to move back to your home country in a few years, then it’s probably best to contribute just enough to get the employer matching.
      Once you move back, you can withdraw the following year and just take the 10% penalty hit. If you don’t work in the US anymore, then you’ll be in a lower tax bracket and probably won’t have to pay a lot of taxes.
      I plan to stay in the US so it’s not a big issue for me. Good luck!

      Reply
  12. Great write up on the benefits on Maxing out ones 401K. Ive been doing this for the past two years and already ive seen a massive increase in my retirement savings. I am approaching my late 20’s but I have been fortunate to have learnt from a young age the benefits of compounding.

    Great article, I look forward to hitting that million dollar mark in the next 10 years.

    Reply
  13. Having worked in Benefits for nearly 30 years I can tell you that you’re spot on. Those that consistently contributed to the company plan had significantly higher balances than the median national averages and were able to retire early with seven figure balances (or more!).

    Many folks don’t realize that not every employer offers a plan. When you have access to one don’t throw away the opportunity. Today’s workers are much more likely to job hop and the next employer may not provide you the chance to invest such a larger amount on a tax-deferred basis. It hurts so many people. Job hoping can also impact if there’s any waiting period before you can jump in. Take advantage when you can!

    Employer matches make a difference as well over the long haul. Take advantage of the free money when it’s available…again the next job may provide a watered down version, or worse – none at all.

    Reply
    • It’s pretty amazing how much those early contributions can grow. That’s why I’m contributing to my son’s Roth IRA now. $1,000 doesn’t sound like much, but it’ll be huge in 50 years.
      Good point about job-hopping. It’s a pain to move your 401k. I think it’s best to open a traditional IRA. Then move your 401k there every time you change the job. That’s probably the easiest way.
      Thanks.

      Reply
  14. Thanks for providing the table of where I should be if I had maxed out my 401k.

    I actually thought I would be way behind (my 401k eligibility would put me starting in 2007) because I lost the entire amount in 2011 because of the divorce (I max out each year since I started working).

    I must have invested in some stuff that has done way better than your example because as of now I am maybe only $10-20k below what I should have been affording to the table despite the 4 yr total loss).

    Before this job my former workplace did not have a 401k offering but instead I got a pension (which I retained from the divorce)

    Reply
  15. The 401k is definitely a great vehicle, and if people have access to one they should use it.

    Not everyone has access to a 401k however. In which case I still recommend saving as much as you can into alternative tax-deferred vehicles like a Roth IRA, or a Solo-401k.

    That was my situation for a number of my earning years. It all worked out fine because I focused on saving.

    The important part is to just keep saving. Early on in the wealth-building journey saving is *much* more important than the returns earned.

    Reply
  16. So, what if you aren’t sure about your company’s 401K? I do the match but beyond that I’m not sure. My company uses Empower Retirement and the fund options are limited. I’ve read many complaints about them. Some ppl even complain about the hassle of getting their money out! I’m still trying to figure out what fees I’m paying for the index fund I chose and when I called the rep couldn’t easily access that info (??).

    Reply
  17. I have worked 15.5 years and have $776,000 in my 401k. But I also got some employer contributions and I also contributed after-tax money in the past 13 out of 15.5 years. For example for 2019, I am contributing the pretax max of $19,000 plus and additional $9000 aftertax, plus my employer contributes $28,000. Why don’t more people talk about after tax contributions?

    Reply
  18. What taxes will you pay when one day you will withdraw your 401k?

    The table shown is a 401k fully invested in S&P500, isn’t it?! It might be easy to be fully invested in equity when the capital is relatively low compared to your yearly salary, but what about now that your 401k capital is more than $600K, do you still keep it all-in in S&P500?

    Thanks

    Reply
    • No, I don’t keep it all in S&P 500. The chart is just to show what it’d look like.
      I’m more conservative now so that’s another reason why we underperform the S&P 500 index.
      We plan to mitigate the tax problem by building a Roth IRA ladder. We should have 10+ years to transfer some investment from traditional IRA to Roth. That should help with the taxes.

      Reply
  19. My wife took a loan from her TSP (similar to a 401k). It was for an extra college degree and to help pay for some surprise condo assessments on our rental properties. I think there are some circumstances when it makes sense to borrow for a TSP or a 401k and these qualified in my opinion.

    The extra college degree may mean a promotion or a lucrative job change in the future. The rental properties are part of our overall retirement strategy, so I don’t view it as a stealing from our future retirement plans. It’s more of a shift of assets.

    Reply
  20. Maxing out makes sense if you are an american or intends to live in the USA forever. I’m working here but I plan to move back to my beloved country as soon as I can and plan to take my 401k with me so that means paying taxes AND 10% penalty cuz I cannot wait until I’m 60.
    Thanks God I didn’t max out and invested in a brokerage acct most of my money!

    Reply
  21. I keep wondering once in a while if I made a right decision not maxing out my 401k my first few years out of college. I was saving for a master’s degree and because of my low salary, it literally was one thing or the other. Good thing is I did graduate with no debt which gives me peace of mind and now I max out my 401k every year.

    Reply
  22. Unfortunately, I don’t have a 401(k) as a contractor. I did (finally) start a SEP-IRA, but it’s too late to see huge savings with that, even if I could max it out which I can’t right now. Still, something is better than nothing and late is better than never, so I’ll just plug away at it the best I can for the next 30 years and hope for some good returns.

    Reply
    • I believe that as a contractor you can start your own 401k in addition to your SEP IRA and annually convert the SEP to a Roth IRA (if you have W2 income to put in the IRA’s, you might be able to contribute too. Something to check with your tax advisor). It has been awhile since I looked into those on the IRS website, and I haven’t looked into the retirement accounts info lately. Good Luck!

      Reply
  23. Yikes! Im 57 yrs old and I have $256,000 in my 403B, but we do have $355,ooo in TD Ameritrade…plus rental real estate…but still feel very behind!!!!

    Reply
  24. A few factors make my current 401k nowhere near what it could have been for the years I worked. The first being that in residency which is the first time I made money there was no 401k option but rather a pension (to be honest I’m glad I had that option as it was considered part of your benefits package and based on the average of your 5 highest years of salary) and years worked. Because of that I probably will get a 13k/yr pension which is not much but it is a bit bonus.

    The main thing was I lost my entire 401k value when I divorced (in 2011 it was worth 140k when I lost it).

    I have maxed it out every year since but because of those two factors I’m much lower in value. Luckily my other investments will more than make up for a good retirement cash flow

    Reply
  25. In the first years of employment, I started a 401k with my employer. They had a list that you had to decide from. Since I had little knowledge has to reach was best for me, they recommended the least risk since I was older. I closed my 401 when I left the company. Returned a year later. I know of people who shared with me their 401k losses during 2008, thru our company though, they match our contribution, I’ve haven’t started one. Im much older, but definitely, can’t retire. any advise

    Reply
    • We lost a lot of money too in 2008. However, we kept investing and the stock market recovers. If you have 7+ years, you should invest as much as you can. You should come out ahead even if the stock market crashes. How long do you have left until retirement?

      Reply
  26. I am at a point now where I can max out my 401(k) annually. I have done so for the last 5 years and hope I can continue to max it out. I contribute to a Roth 401(k) and my company matches $5,000 this year up from $4,000 last year. Upping the limit of our contributions would of course expedite my goal of retiring sooner!

    Reply
  27. Canadian Here! Age 47 (wife 40) our combined totals: RRSP (401k) = $600k. Taxable= $900k. (Canadian dollars). House paid. All new money goes to taxable for dividend income. We seem ok by your data. Great post! Mark

    Reply
  28. Isn’t a great thing to see your money grow?

    Even if you can’t contribute the max, we always recommend starting with something. You can build wealth at any time, no matter your income. It’s just about starting and building when you can.

    What if everyone could retire with $1.6 million? Now that would be a sight to see.

    Reply
  29. Lets give hope to others given the fact that most people have not max out their 401K. Most do not understand that the goal is to be debt free and financial free.

    Hope. Do not worry if you have not max out your 401K for 30 years. According to my numbers all is really needed is 10 years of max out contributions if you live modestly and do not live a wasteful or opulent lifestyle. Even if you are 60 or 65, you can save 10 years and should be sufficient to the End of Life.

    Reply
  30. Unfortunately, I only recently started maxing out my Roth 401k and Roth IRA. I don’t even think I have 100k combined, so I’m way behind. Plus, I’m also 40. I’ll be signing up for the personal capital to give it a try. Thanks for the write up RB40.

    Reply
  31. Another reason to max out retirement savings if you have kids: Retirement money doesn’t count for financial aid, even with the fancy expensive colleges. I’m regretting not having put away more for retirement a long time ago! (We always contributed 12% once we started working and did IRAs before that, but we had the opportunity to do 12% + 403(b) + 457. Now we do all three plus in 2017 we started doing backdoor IRA Roths after 8 years of not contributing to IRAs.) In fact, knowing what we know now, I would have maxed out retirement before starting on 529s.

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  32. Great post as so many others said. But it is just so hard to not want the nice car in your 20’s and nice house in your 30’s…
    25 years later, I made some mistakes and did not max, but did pretty good. Also wish we had known to just do the index instead of performance chasing. Seems to me the real wildcard for many of us Gen X will be future house values in 15 or so years.

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  33. I feel like I’m behind on my 401ks. This is my first year that I will be maxing out my contributions after many years of contributing 60% of the max. I started to max out my IRA account a couple years ago after letting it sit for many years without a single penny of contribution. Better late than never!

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  34. Ok Joe,
    I would like your opinion..Im a bit worried we are short ! Im 55 and my hubby is 61..we have a combined $567,000 in 403B and Roth and scott trade. We own 4 rentals we get around $1045 positive cash flow monthly. We still owe $65,000 on our house, and $85,000 on a cabin in Wisconsin. We need to downsize our house in the next few years..I save 28% in my 403B..but my hubby wants to retire in a year..we still have alot of debt..What is your take ??

    Reply
    • It sounds like you’re doing pretty well with the rentals. If you have social security, then you’ll probably be okay. It depends on how much you spend each year. Try out the retirement planner at Personal Capital. That’s pretty useful.
      You need to input your annual expense, investments, and a few other things. It’s hard for me to say without the full picture.
      Good luck!

      Reply
      • Thanks so much Joe !! I guess my husband spends much more $ than me , this has me a bit worried, but I am still working until 65 so I will focus on having zero debt and keep putting $$ in my 403B. He still has a truck and tractor payment he needs to get rid of, and we need to downsize. IT is scary nowdays with how much $$ you need to live.

        Reply
        • You need to sit down with your husband and talk about retirement.
          – Track your expense. this step is crucial.
          – Put your numbers into the retirement planner or talk to a financial adviser. This will give you an idea if your retirement fund will last.
          Good luck!

          Reply
  35. I started my current job April 2007 and have maxed out every year, including going up the year I turned 50 when the IRS allows you to put away more. I’m at $330,000. So your graph is pretty much right. (My employer has no matching). It’s also helped keep me out of that next tax bracket, especially in years when my non-retirement mutual funds assess gains, bumping up my income. Unfortunately I wasn’t able to max contributions earlier, but even with the 2009 downtown I’ve still recovered nicely. My advice, take the bus to work, drive an old car, and max out as early as you can and move it to an IRA rollover when you leave a job. Too many people are too tempted to cash out when they change jobs.

    Reply
  36. With all that information out there, I still can’t believe that half of all US households have no retirement savings at all. That’s very depressing.

    Of course that they don’t take into account other assets or private savings, but sill, who wouldn’t want to save in special accounts without being taxed?

    They are leaving money on the table.

    Reply
  37. I have a question regarding investing the whole amount of your contribution into stock investments? My 403b plan at my work has an option not to invest the full amount into stocks and you have the option to put it into the stable income fund which is no risk savings account. I have 70% in stocks and 30% in the stable income fund. Do you believe I should have all my contribution invested 100%? I know that the stock market could have a correction, would I be taking a huge risk? I am 46 yrs. old, I plan to retire at age 56 I currently have approx. 230,000 saved so far and has been maxing out my contribution to the limit for the past several years.

    Reply
    • When you’re young (20s and 30s), it’s best to put 100% in stocks. If there is a crash, there will be plenty of time to recover.
      For you, it is trickier. 30% in stable income fund is probably about right. It depends on your risk tolerance.
      Just go with what you’re comfortable with.
      What you can do – Keep maxing out your contributions.
      – Don’t sell when the market crash. Keep investing.
      Good luck!

      Reply
  38. Good advice, and interesting chart. It’s always nice to see a stake in the ground to benchmark to. Too often people speak in descriptive not specific terms.

    When I first started working in 2007, I decided to max out the 401k. Thankfully I did that and maxed it out 3 years in a row. I then went five years without a 401k. I’ve been maxing it out again since 2015, and have ~$250k in total now. If the market holds up in 2018, should have ~$300k by the end of the year.

    One thing I would add to those who say that they only contribute the match – you should make the max contribution if you can afford to do so. Unless you have a near-term need for the money, you should let it grow there as opposed to letting it grow in a brokerage account. the 401k investment is pre-tax and all the dividends received can be reinvested tax-free. If you do it right and control your expenses when you retire early, you can work on laddering it into a Roth IRA.

    Reply
  39. I’m a little behind the chart, but not by much. I didn’t get access to a 401k until my 3rd year of full-time employment, so that slowed me down a bit.

    Because of it I maxed it out every year since and I feel pretty confident about how far I’ve gotten. A large part is thanks to your blog and writing has definitely served as a big part of my inspiration towards being able to retire early. I still haven’t quite pulled the plug, but I’m still relatively young so think I have a few years of work still to go.

    Reply
  40. This post is a little depressing because I haven’t had access to a 401k through work for the past 6 years and I’ve missed out on so many contributions. I’m working on making up for that by investing in taxable accounts but it’s just not the same!

    Reply
  41. Good Accumulated Value table based on the number of year worked. One additional use-case one can find based on this “Accumulated Value of 401k” table is:
    Say, you’ve worked from 1996 thru 2010 for your old employer, and have now rolled over that 401k into rollover-IRA. And you have not worked for that employer from 2011 onwards.

    How much balance you are expected to have ? to arrive at this math:

    A: Go to 1996 start-date, and based on max contributions, you should
    have an accumulated value of: $808,179

    B: But, you have not worked with that company for the past 7 years (from 2011).
    The past 7 years of max contributions would have yielded a value of $201,099
    (years worked: 7 value from the table)

    Since you did NOT work for the past 7-years, you subtract this $201,099
    from the 1996 accumulated value of, $808,179 from Step A == $607,080

    So, if you worked for a company from 1996 thru 2011, expect to have $607,080

    Additionally, you can also ‘guesstimate’ your Accumulated value – to include
    “Company match” portion.

    Say, your company match portion may be about $3K – 6K over those years (mostly based on your salary/bonus, and their match percentage). If that match amount is approximately 1/3rd of your own contributions., you simply multiply $607,080 with 1.33 (your own contributions + 1/3rd match ~~ 1.33) yielding total Accumulated 401k value of about $807,416

    Now, that rollover IRA has a $100K shy of this amount, buts that is mostly due to assets held in funds with different (lesser) performance than your benchmark: VFINX (Vanguard S&P 500 index fund)

    Reply
    • Thanks! That’s a good way to extrapolate it. Although, it’s easier to keep it simple. If your retirement savings is more, then you’ve done well. If less, then you made some mistakes. I think it’s already really tough to exceed those amounts because most people didn’t start saving early enough.

      Reply
  42. “Can you believe that half of all US households have no retirement savings at all?”

    Its not as bad as it sounds. They only count money in retirement accounts such as 401k / IRA. It ignores all other assets.

    I could have $5M in a savings account and $0 in an IRA and I’d be in that 50% of people with no retirement. But I’d like to retire with $5M in the bank. of course thats not the norm but theres plenty of people without a lot of 401k/IRA assets who can retire comfortably.

    A good 10-20% of people have pensions and/or social security that would provide them a decent/comfortable retirement. If you have a fat pension you’ve no need for a fat 401k.
    15% of people own businesses often worth significant amounts.
    Another ~15-20% own rentals and other properties worth a lot of money.
    But yes there are people without enough to retire.
    10-15% of people are simply poor and I really don’t expect fat retirement accounts among the poor.
    Of course another % of people are just not good with their money.

    Reply
    • I’m sure business owners are better off than the average workers. Hopefully, most of them figured out how to invest by the time they retire. The truth is people will make do somehow. Retirement might not be as comfortable as when they were working, but most people aren’t out on the street.

      Reply
  43. Oh, man. If this isn’t resounding evidence of how glorious life can be when you max out your 401(k), I don’t know what is. Awesome post, Joe. One of the best ones I’ve seen in a while about 401(k)s and the power of compound interest.

    I’ve firmly come to believe the following:

    Trickle-down economics doesn’t work. And trickle-down government doesn’t work either. The only way you’re truly going to save yourself is with trickle-down selfonomics. It’s all on you, baby. And the sooner you come to this realization and start taking advantage of the retirement tools provided to you via the tax code (e.g., the vaunted 401(k), the better off you’ll be.

    Hail self-reliance. Hail compound interest. Hail the 401(k)!

    Reply
  44. Very good information, Joe. The average retirement savings in US don’t look good. Many people need to ramp up the 401K contributions. Maxing out the 401K is great, as long as you don’t need the money. Taking a loan from 401K is not recommended, as it defeats the purpose of saving, and there are tax consequences.

    Reply
  45. I can’t see the charts/tables/photos to see where I line up with maxing out my 401k. Anyone else having this problem?

    Reply
  46. I am trying to convince myself to put more money into my 401k but my 15 or so fund options are terrible. Fees range from 1.0-1.5% and have poor ratings. What do you do in this situation? I have good company match so I am putting in 9% (about $7500 per year) to get all of that and I’m maxing out my Roth IRA but I don’t know what to do after that. Any advice on where you would put more?

    Reply
    • You’re doing the right thing by getting all the matching and max out Roth IRA first.
      After that, I’d still probably go with the 401k even with the high fees. It’s the simplest way to do it.
      Or maybe you can split the money. Put half in 401k and half in a brokerage account. That way you can compare their performance for a few years and see which is better.

      Reply
  47. I am 32 years old and have about $850,000 between my 401k, IRA, Mutual funds, and checking/savings. How much would you expect this to be in 30 years? In 30 years how much would that be in our current dollar?

    Reply
  48. Am 46 and my spouse is 52. I have been in work force since I was 30 and worked for 16 yrs since then with a break of 5 months in between. My spouse started work when he was 32. Both of us always maxed out our 401ks since then. Combined 401k amount right now is 970K.

    I am planning to work for next 7-8 years, that is until our only daughter completes her under grad. Spouse is planning to work for next 13-14 years.

    If both of us do not touch our 401K amount of 970K that we have now until I turn 59.5, how much will it be in 2030 (14 yrs from now, when I will be 59.5 yrs)? Will we be able to retire comfortably? We are first generation immigrants to this country and all this is new to us.

    Reply
    • Your family is doing extremely well. Congratulations! I would check a couple of retirement calculator.
      1. FireCalc.
      2. Personal Capital’s Retirement Planner. This one is my favorite. You can read more about it at the link provided.

      It’s tough to predict how much your investment would grow. There are a lot of factors. This is why Personal Capital’s Retirement Planner is good. It use real data and you can make modifications as needed.

      With nearly a million dollar, you should do extremely well. 14 years is a very good amount of time. I’m sure you’ll be multimillionaires when you retire. Good luck!

      Reply
      • This is me again. I am 48 now and have 765k in 401k now. Planning to work for another 6 years, max out 401k these 6 years and also contribute catch up contributions for 4 years (from 51-54), until 54 and call it quits. My daughter will finish her undergrad by then. Hubby is 54, 600k in 401k. Planning to work for as long as he can, as he enjoys his work and he is about to get his PhD soon.

        Reply
        • Hi…This is me again. Update- Got displaced at work again. I was planning to work for another 3 years ideally until my daughter finishes her undergrad. Now I am not sure if I have energy and enthu to look for new job again as I need to update my skills in order to market myself. However, my finances got stabilized since my previous post in Feb 2019. My 401k is now little over 1.1M and my spouse’s is around 950k. I feel comfortable with my retimement savings, however only thing i miss is that I want to contribute also for my daughter’s college along with my husband. I’ll take a break for couple of months until end of Jan and see what I really want to do.

          Reply
  49. What are your thoughts once you have max out tax deferred vehicles such as 401k, Health savings account, and IRAs? Would you invest in either an individual brokerage account, whole life insurance, or tax deferred annuity?

    Reply
  50. First, when I read the title of this article, I was like WTH, I thought it would be some motivational or logical kind of article, but actually, it’s a well-written guide to becoming a millionaire. The graph charts were very helpful to understand the concept easily; I guess I haven’t maxed out my 401k, thanks for sharing the way to becoming a millionaire. Keep sharing such stuff on your site, it will be very helpful to people.

    Reply
  51. I’m 27 and have about 13k total in my Vanguard Roth and Traditional IRA(around 3k was a rollover from a previous employer) and I also have about 13k in my 401k. My employer matches up to 6% if I’m not mistaken. Each investment is only getting about 5-6% rate of return. I also just started contributing the max to my Roth (don’t ask why I waited so long..) and am contributing $600/month to my 401k, which is about 17% of my paycheck . I don’t have any debt and have about 12k or so in the bank.

    Honestly, at my age, I have no idea if I’m doing well or not. I’m doing my best and trying to save as much as I can but I feel like I’m not getting anywhere. Is my situation good in the large/long term scheme of things? I also feel that unless I have more income, it would be very difficult for me to max out my 401k at this point in time- I only make 43k a yr.

    Reply
    • That’s not bad and you should keep investing. At your age, the ROI doesn’t matter as much as your saving rate. The more you save, the better off you’ll be.
      Yes, focus on increasing your income first. Once you make more money, it should be easier to max out your 401k. Good luck!

      Reply
  52. This was a great article! It is scary to think that people reaching retirement age have little to no savings! Starting as early as you can to save up is so extremely important! A huge tip of advice for anyone reading this article is to take advantage of how much your company matches your 401k contribution because they are basically giving you free money!

    Reply
  53. I started my 401k about 20 years ago and opened an IRA a few years before that. I didnt have any big plan about investing other than I just put some money in there, maybe 10 – 15%. Seemed like a good idea to do but retirement was like 30+ years away. I started maxing it out during the recession which turned out to be a good move. Now my accounts are pretty huge despite making a lower middle income paycheck. I read a lot about finance, but didnt have any complex plan in action. I picked decent funds and set everything on automatic. I didnt even check on it that much until the last few years. In some ways I feel like I havent really put that much effort into it (other than the going to work part). Starting young and maxing it out if possible will definitely put you in a great position down the road.

    Reply
    • Maxing out during the recession was the best move you could have made. That’s the right time to invest as much as you can. It’s really amazing how much compound interest build wealth as the years roll by.

      Reply
  54. My 401k is just about in line with yours. If I add in my taxable investments, which I just started growing this year, then I’m a little ahead. I started contributing 20% to my 401k when I first started working. I thought I was a rockstar back then, contributing such a high amount. That’s before I encountered the world of fire, and I have since ramped up all my investments. I definitely could have contributed more, which gives me an idea for an interesting blog post. Could I have maxed out my 401k when I first started and where would I be today? Thanks for sharing!

    Reply
  55. Joe,

    We wished we had this amount in your chart after working 29-30 years but we are behind. I wished we had this info when we started working in 1986-1987. In our company, I thought we had to wait a year in order to start a 401K. So, I am ashamed to confess that we did not start our 401Ks until 6-7 years later in 1993. Back then we were NOT aware of the benefits of 401Ks or had any clue on investments. We lost 6-7 years and we are on your 24 years of service track.

    I suspect that even if we did start on day 1, I doubt that we would have 1.3mil each as per your chart due to the limit we are able to put into the 401K. The company does match 3%. For MANY MANY years, I was not able to MAX out my 401K until 2007. Due to HCE in our company, we were only allowed to deduct a max of 7% of our salaries for the 401K in 1993. For recent years, I recall that if you made under a certain amount which may change yearly you can deduct 15% and over that salary you can only put in 10% of your salary into the 401K. After 30 years, my wife was only able to max out her 401K just the last 2 years so the HCE really limits your ability to max out your 401K until your salary is high enough. Since we are financially conservative, we only select fix interest rate for the 401K. It ranges from 3.5 to 7% thru the years. This year it is 4.8% and in 2017 it will be 4.4%. We like fix interest since we rather sleep at nights and not worry about the stock market.

    Adam

    Reply
    • Good point about not able to max out your 401k early on. Some companies have more restrictions.
      You are still doing very well. Congratulations!
      I think munis are great for the next few years. We’ll probably see a lot of swings and you’d get much better sleep with fixed interest.

      Reply
  56. Another great article. Thanks Joe.

    In my day, we had access to the Defined Benefit Plans. The employer helped so that at age 60 or 65, we had enough for life retirement income. Those days are gone for most except public employees.

    It takes a lot of focus these days to set up a retirement account and fund it on a regular basis.
    It helps to have a guide like yours to review the benefits of compounding…again and again. It can’t be stressed too much for the average family as there are so many temptations to spend now and regret later.

    Having made all of the money I did in my professional career, I never would have imagined that we would struggle in our seventies and eighties because some of our investment companies went bankrupt and we just made some poor decisions. We won’t be on the streets, but we have to be mindful of our income and expenses. Social Security has made a world of difference and if we did not have it, despite our investments, I would be working every few years for life.

    This can happen to anyone. Now…we enter the world of ? with the Trump election. I have never experienced such an unpredictable time for the average citizen in my 80 years. Blogs like yours are a beacon for discouraged, confused, and frustrated middle class families. The fact is that not everyone earns $200,000 or $100,000 or for that matter $50,000 a year. In a way, the internet has created huge opportunities for all citizens and become the great equalizer. It’s great to watch your income, investments, and savings grow year by year, and show us the way. Bravo!

    Reply
    • The 401(k) accounts aren’t as good as pensions because most workers don’t contribute enough. It’s a bit ironic because everyone wants more control. However, when they have control, they can’t do the right thing.
      You’re right and you never know what’s going to happen in the future. I guess you can’t trust any company 100%. I’m bracing for big volatility over the next few years. We are way overdue for a big crash and I just hope we get through it okay.

      Reply
  57. I’ve been working now for about 10 years and have consistently been able to contribute to my 401K, although have only begun maxing out contributions the last 5 years or so. However, benefitting from some good market performance and the bounce-back after 2008, I’m still on track with your chart (right around $300K in the 401k). I gotta keep it going though, not to ER yet!

    Reply
  58. I started putting into my 401K when I turned 25, only a couple of years after I started working. I started maxing it out fairly quickly after that. My balance is currently around $445k which lines up with your chart fairly well. I would be closer to $550k had I not parked most of my 401K money into a cash fund a couple years ago, which so far has turned out to be a bad move.

    Reply
    • Great job! How long have you been working? Sounds like almost 20 years.
      Yeah, I think market timing is tough. It’s probably better to keep invested in the retirement accounts. I do a little market timing in our dividend portfolio, but very little.

      Reply
  59. So I started investing in a 403B plan in 1982. Being young with a young family, it was nearly impossible to invest but I found a way and continued to increase over the years. The company matched up to 3%. A dream to max out but that was not in the stars. I set aside money for 2 colleges and purchased a home. I also was able to set aside money for a car for both kids when they graduated. Everything played out fine with the kids (a very bad financial investment but water under the bridge). Now at 55, I have a total of $1M. I am currently maxed out on contribution (with the over 50 benefit). I would be much better off had it not been for the horrible post 9/11 market crash (lost 50% – which equates to a 100% improvement to get the money back to start). Hoping to get the max from SS but who knows. Also found myself unemployed for a brief period but parlayed that into a higher paying career path. All this sounds great, right? Well based on my current income, I will only have 60% of my income level to live on. Not so great. My method is based on taking a percent of your current income that you believe is livable at retirement age, then plan around that number. I’m guessing 90% of people will struggle to make this happen.

    Reply
  60. 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.

    Reply
    • 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!

      Reply
  61. 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.

    Reply
    • 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.

      Reply
  62. 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.

    Reply
    • 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!

      Reply
  63. 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.

    Reply
    • 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

      Reply
  64. 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.

    Reply
  65. 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!

    Reply
  66. 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?

    Reply
    • 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!

      Reply
  67. 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.

    Reply
  68. 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.

    Reply
  69. 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.

    Reply
    • 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.

      Reply
  70. 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?

    Reply
    • 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.

      Reply
    • 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.

      Reply
  71. 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.
    Thanks.

    Reply
  72. 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.

    Reply
  73. 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.

    Reply
  74. 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.

    Reply
  75. 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%.

    Reply
    • 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…

      Reply
  76. 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.

    Reply
  77. 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!

    Reply
  78. 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! 🙂

    Reply
    • 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.

      Reply
  79. 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?

    Reply
    • 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.

      Reply
  80. 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.)

    Reply
    • 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.

      Reply
  81. 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

    Reply
    • 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.

      Reply
    • 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.

      Reply
      • 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.

        Reply
        • 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.

          Reply
          • 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).

  82. 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!

    Reply
    • 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!

      Reply
    • 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.

      Reply
  83. 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.

    Reply
    • 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.

      Reply
  84. 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.

    Reply
    • 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!

      Reply
    • 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.

      Reply
      • 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.

        Reply
  85. 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?

    Reply
    • 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.

      Reply
      • This is me again. I am 48 now and have 765k in 401k now. Planning to work for another 6 years, max out 401k these 6 years and also contribute catch up contributions for 4 years (from 51-54), until 54 and call it quits. My daughter will finish her undergrad by then. Hubby is 54, 600k in 401k. Planning to work for as long as he can, as he enjoys his work and he is about to get his PhD soon.

        Reply
  86. 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?

    Reply
    • 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.

      Reply
  87. 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.

    Reply
  88. 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?

    Reply
    • 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!

      Reply
  89. 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.

    Reply
    • 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…

      Reply
  90. 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.

    Reply
  91. 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 🙂

    Reply
  92. 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.

    Reply
    • 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.

      Reply
  93. 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.

    Reply
  94. 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.

    Reply
  95. 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.

    Reply
  96. 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.

    Reply
  97. 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.

    Reply
    • 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.

      Reply
  98. 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.

    Reply
    • 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.

      Reply
      • 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.

        Reply
      • 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.

        Reply
  99. 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.

    Reply
    • 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.

      Reply
  100. 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

    Reply
    • 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.

      Reply
      • 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).

        Reply
  101. 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.

    Reply
    • 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.

      Reply
      • 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 .

        Reply
        • 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.

          Reply
    • 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!)

      Reply
      • My company does this too – matches on a per paycheck basis. BUT, I do like the higher paychecks at the end of the year too. The company matches 4%, but I am hourly and never work the same number of hours each week (some weeks it’s 45+ hours, some weeks it’s less than 30). To partially front-load I found my largest check, calculated 4% and rounded up a bit to make it a nice round number. I pulled out my spreadsheet and filled out the entire 26 paychecks of the year with that number, and then started upping the contribution at paycheck 1 going down the line of paychecks until I hit the $18k. If I dump in $2k/paycheck for the first 3-4 months of the year, I’ll have the rest of the year with $125 contributions. I get a “pay raise” when the contribution drops, my contributions are at the beginning of the year with more time to compound, and if I do for some reason get laid off after that first 4 months, I can put that last entire paycheck towards the 401k and still max it out.

        Reply
  102. Love your blog. Excellent post!

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

    Reply
      • 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.

        Reply
        • 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.

          Reply
  103. 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 😀

    Reply
      • 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 🙂

        Reply
        • Wow, nice work! I’d love to get up to Mega Backdoor Roth conversions but I’m not there yet. I’m maxing out my: 401(k) match, HSA, Roth IRA, and working on filling up my unmatched 401(k) contributions. If I get there Mega Backdoor Roth would be next on the list but I need a raise first!

          Reply
  104. 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.

    Reply
  105. 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.

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

      Reply
    • Wait, do you mean to say your super fund is like our (US) social security? It does not sound like our 401k at all.. Our government can’t take our 401k from us but our social security is a different matter.

      Reply
  106. 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.

    Reply
    • 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.

      Reply
  107. 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.

    Reply
    • 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..

      Reply
      • 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.

        Reply
        • I also hope to retire early. I see those years after I stop working full-time before I start collecting Social Security as an opportunity to draw down my traditional pre-tax funds and/or do Roth conversions in relatively low-income years with little tax liability. Sure I’d like some taxable funds and contingency/legacy funds in my Roth IRA, but I’m mainly focused on building my 401(k) for retirement.

          Reply
    • If your company provides a 50% 401k employer match or higher and immediate vesting, it might still make sense to put money in your 401k plan even if you can’t afford to leave the money in there. You can put in the max amount, get the match and then withdraw the funds immediately after if your company’s plan allows. You get to withdrew $1,500 on a $1,000 contribution but would only have to deal with a 10% early withdrawal penalty of $150. You still net $350 on the $1,000 contribution for going through the 401k plan and taking advantage of the employer match. You also get the funds quickly after immediately withdrawing it from the plan. Just food for thought here on how a plan can still benefit you even if you can’t afford to keep the money in the retirement account.

      Reply

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