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So you both contribute $17,500 401k plus $5500 Roth = $46k per year to retirement?! You realize with just a 6% annual return that equates to $3.8 million after 30 years assuming $46k/yr in contributions? 10% annual return will equate to $8.3 million. Sounds pretty ridiculous to me, unless you are also spending $200k/year right now. What's the point of having so much money if you don't enjoy it?
WHat if they do enjoy it now and still save a bunch? We max both our 401ks and our Roths as well as invest other after-tax money. We still enjoy ourselves. Here's the thing: who knows 100% that we will be able to invest like this every year until retirement? We may lose one or both jobs or have medical bills. Who knows. We maximize our investments now while we can. We also plan to retire early. This all factors in.
WHat if they do enjoy it now and still save a bunch? We max both our 401ks and our Roths as well as invest other after-tax money. We still enjoy ourselves. Here's the thing: who knows 100% that we will be able to invest like this every year until retirement? We may lose one or both jobs or have medical bills. Who knows. We maximize our investments now while we can. We also plan to retire early. This all factors in.
^^^^All of that. Many of us max out (to federal or employer max) our 401K's and our Roths, and still have a respectable living. Obviously there are things we "do without" that we otherwise could buy if we weren't saving, but I kinda doubt we're all living on beans and rice and ramen and spam while huddled under one bare light bulb in an unfurnished SRO with a threadbare blanket and thriftshop coat reading a book from the library.
More savings means more options. It means retirement can be that much sooner, or we have more flexibility if our jobs turn south for whatever reason. It's all about balancing what we have/want now vs. what we're aiming for in the future and how soon in the future.
^^^^All of that. Many of us max out (to federal or employer max) our 401K's and our Roths, and still have a respectable living. Obviously there are things we "do without" that we otherwise could buy if we weren't saving, but I kinda doubt we're all living on beans and rice and ramen and spam while huddled under one bare light bulb in an unfurnished SRO with a threadbare blanket and thriftshop coat reading a book from the library.
More savings means more options. It means retirement can be that much sooner, or we have more flexibility if our jobs turn south for whatever reason. It's all about balancing what we have/want now vs. what we're aiming for in the future and how soon in the future.
exactly
And here's a key add-on to both what you and I said: You can always stop or cut-back future contributions if you feel you have already reached your goal or decide for whatever reason that you are going to overshoot them. However, you CANNOT go back in time and add/up your contributions in past years when you realize how much you missed out on compounded earnings.
The earlier contributions have the opportunity to make the biggest impact so I'm all-in right now.
^^^^All of that. Many of us max out (to federal or employer max) our 401K's and our Roths, and still have a respectable living. Obviously there are things we "do without" that we otherwise could buy if we weren't saving, but I kinda doubt we're all living on beans and rice and ramen and spam while huddled under one bare light bulb in an unfurnished SRO with a threadbare blanket and thriftshop coat reading a book from the library.
More savings means more options. It means retirement can be that much sooner, or we have more flexibility if our jobs turn south for whatever reason. It's all about balancing what we have/want now vs. what we're aiming for in the future and how soon in the future.
I would assume folks that are contributing nearly 50K a year to their retirements, are making significant enough bank that it does not prevent them from living a comfortable lifestyle.
I can't imagine a couple making $60k, or $75k (family income after Tax) a year contributig 46K and living off of 15 - 30k. That seems very unlikely.
But a couple bringing in $150K a year, or more?? (living off 100k, banking 50k for the future) -- sure, especially depending upon the area they live in, that's not at all difficult to imagine.
Unfortunately, most people in America are not making that much money, and thus making such significant retirment contributions will be beyond them.
I would assume folks that are contributing nearly 50K a year to their retirements, are making significant enough bank that it does not prevent them from living a comfortable lifestyle.
I can't imagine a couple making $60k, or $75k (family income after Tax) a year contributig 46K and living off of 15 - 30k. That seems very unlikely.
But a couple bringing in $150K a year, or more?? (living off 100k, banking 50k for the future) -- sure, especially depending upon the area they live in, that's not at all difficult to imagine.
Unfortunately, most people in America are not making that much money, and thus making such significant retirment contributions will be beyond them.
True, but even people making 50K can contribute a respectable percentage of their income. Back in the day I was making an amount that, inflation adjusted, would equal about upper 40's today. As soon as my employer would allow I started contributing the max they permitted to a 401(k), which was 12%. Granted, I was young and single and dependent-less back then, but combined with the company match (I think it was 4%), that made for a good start towards retirement. If anyone is putting ~16% of their income towards retirement consistently, they'll be in a pretty good position when the time comes. The absolute dollar amount may not be huge but if they're only making ~40K/yr during their working lives then their retirement needs also won't be extravagant.
Having said that, I totally get that it's easier to save the more you make, as there are certain necessities that are "fixed costs" as it were. It's a lot easier to cut the food budget substantially when you've been going out to dinner every night than when you eat homemade beans and rice 6 times a week and "splurge" off the McDonald's dollar menu (or a $5 pizza) as your one treat night.
As for maxing out, by definition you almost need to earn more than average to be able to do so. My wife's employer has a generous 30% max for 401(k) contributions, but that still means people there have to earn over 58K to hit the federal limit.
1. what's your contribution amount for the year?
2. About how much is your salary?
3. Do you find it difficult to contribute the full 17,500?
4. what's your company match?
1. Full contribution for both myself and my wife.
2. HH income is high, nationally speaking, slightly above average for where I live.
3. This year has been more difficult than prior years because we've done some medium sized jobs in the house and have a 3rd kid coming.
4. dollar for dollar, up to 6%. plus a profit sharing amount that usually runs nearly 2.5%, but can be as low as 1.5%.
i had already stated that. i said in a regular forum it would be 3-5 percent, but in the finance forum i would expect 10 percent, since the niche is different. to go from 1 out of 15 to 3 out of 5 is just not realistic.
were not ever going to meet each each other and were behind a computer, why do we have to constantly misrepresent how much one has in a 401k or how much one makes.
im honest. im entry level. ill be starting at roughly 30,000. im using this forum to look at resources for starting a 401k and roth ira. im in my 20's.
I WANT to max out my 401k, but that will be 60 percent of my gross. Unless I got a part time job, I could not max it.
realistic responses can lead to realistic discussion.
saying i fully fund my blah blah blah and have a net worth of 5 million blah blah blah is great for your online character profile, but not helpful for people like me looking for advice.
granted there ARE people who are like that, but there arn't 60 percent of people like that. there is likely less than 10 percent of people like that.
i'm 31, but when i was first starting almost 9 years ago now, @ $50,000 in NYC, i contributed 6% of my salary, so i was nowhere near even thinking about maxing. in retrospect, I could have contributed more then and wasted less money having fun on the weekends in NYC. I increased it slightly every year, usually by 1%, and then after the crash in 2008, i increased it to 15% of my salary (to 'buy low'), then continued to let it increase 1% every year. once i got closer and closer to the max, it was easier to bump it up by a bigger percentage to get the max.
But a couple bringing in $150K a year, or more?? (living off 100k, banking 50k for the future) -- sure, especially depending upon the area they live in, that's not at all difficult to imagine.
Very good points raised by synchronicity and jamiecta. I guess it all depends on how much you are earning now too. I make well above this amount and can only manage to save about half of what jamiecta saves. I don't even live a luxurious lifestyle, but I'm definitely not starving either.
WHat if they do enjoy it now and still save a bunch? We max both our 401ks and our Roths as well as invest other after-tax money. We still enjoy ourselves. Here's the thing: who knows 100% that we will be able to invest like this every year until retirement? We may lose one or both jobs or have medical bills. Who knows. We maximize our investments now while we can. We also plan to retire early. This all factors in.
If you plan to retire early, then you also need to save another $10k/year or more to an after-tax brokerage account on top of the $46k in retirement accounts. While your retirement accounts will have enough money for you to live off of from the age of 60 onwards, you need another million or so in your brokerage account for the ages of 50 thru 60, assuming you want to retire at 50. That million also needs to be saved in a shorter period of time while you are still working.
Very good points raised by synchronicity and jamiecta. I guess it all depends on how much you are earning now too. I make well above this amount and can only manage to save about half of what jamiecta saves. I don't even live a luxurious lifestyle, but I'm definitely not starving either.
I'm sure it depends upon how much you earn, as well as your family situation, geographic area, etc..
Someone who is paying for school tuition, or elder care, or who lives in a very expensive area of the country, may need to have a significantly higher income before they feel they are able to max out these accounts.
Its definitely a personal financial decision.
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