Point of maxing 401k in early 30s (funds, paying, million)

[crumik]

Hi,

I started reading about personal finance, and I see common advice 'max 401k, max Roth IRA, then buy stuff'. And OK, following this advice, in October 2018 I started maxing my 401k. Numbers right now look like this:

current age: 31 1/2
current 401k balance: $12.400
current salary: $111.000


Now, I go to some random calculator, like this:
https://www.bankrate.com/calculators...alculator.aspx

And fill all the numbers (avg market return 7%, annual increase 2%, employee match 50% until 6%, retirement age 67). What I get is:

ending balance at age 67, with employee match: $3,758 million
ending balance at age 67, without employee match: $3,110 million

Even if I assume market return 5%, I get:

ending balance at age 67, with employee match: $2,457 million
ending balance at age 67, without employee match: $2,000 million


Those numbers look really, really high. My question becomes: what's the point, if all of those numbers are so high, I will never be able to spend them? Am I missing anything here?




Thanks.

[MLSFan]

if you start early, you can also stop early

if you are worried about having too much at 67, then why work until 67? retire at 60 or whatever

best reason to have a large account? it would take a lot more than losing your job to wipe you out financially. this means less stress which is worth a lot by itself

real question is, what else would you be spending the money on? nightlife and drugs/booze?

[Moneyman2019]

The biggest assumption is that you will stay at that place for 30+ years or continue to be employed at a six figure job with that type of match.

[NewbieHere]

That amount maybe years from now. $3-$5million sound high now but what if it cost you $500k to live a basic live. I’m exaggerating of course, but you get my point.

[leastprime]

OP, Too far into the future to even guess. You will discover and finally know your answer when you are closer to your retirement.

[leastprime]

OP, better to have more than not enough

[Rickcin]

Missing something, yeah, about 30 years!

Easy to calculate the math on paper, however the reality and unknowns in life get in the way and can easily change those calculations.

Depending on your exact portfolio, I would have trouble believing it would average a return of 5% year after year. Even if your diversification was perfect, it would have to be continually readjusted to obtain a 30 year run with a steady 5% growth.
Any interruption in employment will effect the plan as well as unexpected items that could arise such as medical issues, unexpected housing costs or family issues could slow down your contribution.

Sure it looks promising and like a slam dunk on paper, however you still need to consider inflation and taxes that are all deferred until you start withdrawing your funds.

Looks good on paper and perhaps in an ideal situation it could happen but remember,what appears to be a great amount of money now, on paper, will have a lot less value in thirty years from now.

[k374]

what's the point? well, how about instead of retiring at 67 you are now able to retire at 55 or have that as an OPTION, that is the point. Compounding power is on your side, as Eisenstein said "Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it"

[DonaldJTrump]

It's unlikely most people will reach that high balances

[wheelsup]

Running it at $24k annual contribution starting age 31 and $12k in savings going until 65 at a 4% after inflation return (7% avg annual return) yields $1.8m in today's dollars.

$1.8m would pull about $70k in today's adjusted dollars plus social security.

Now run the numbers if you have a heart attack, or get married and then divorced, or lose your high paying job and are unable to contribute past the age of 45, or...or...

You get the point.

Save early and often, when your peers get older and start freaking out over retirement you'll be done saving and can just let it ride and maybe even downshift your job, retire early (check out the FIRE movement) or adjust your lifestyle in your later years to be more comfortable.

The key with retirement is to stuff as much as possible into it as you can early on (like in your late teens/early 20's).