Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Still though, for a great number of American workers, the 401k is yet another racket, the retirement snake oil. The absurdly high fees in many of these plans decimate their potential. The national average expense ratio is over 1%. This amounts to $100,000s of potential lost earnings over one's career. And the 17.5k limit is unfairly low, given that there are 401k variants for business owners which permit them to sock away incredibly large tax deferred amounts.
Most people don't even come close to contributing $17.5K to their 401ks. If only!
So, if you reduce the return to 10.5% to account for fees, and you assume you only contribute $400 per month and never raise the contribution, you'd end up with:
$1,015,367.80 at the end of 2012.
I did NOT include an employer match.
If you started out in 1982 contributing $400 per month and increased it $25 per month every year, you'd have:
$1,343,179.90 at the end of 2012. At this point, you'd be contributing $1125 per month, which is $13,500 per year, below the limit of $17K for 2012.
So, if you started at 22, you could have $1.3 million without even maxing out by your early 50s.
3% of 1.3M is 39K per year (a conservative withdrawal rate)...That is enough to live a decent lifestyle even in a high cost area if your house is paid off. It's certainly more income than most retirees have.
Still though, for a great number of American workers, the 401k is yet another racket, the retirement snake oil. The absurdly high fees in many of these plans decimate their potential. The national average expense ratio is over 1%. This amounts to $100,000s of potential lost earnings over one's career. And the 17.5k limit is unfairly low, given that there are 401k variants for business owners which permit them to sock away incredibly large tax deferred amounts.
The fees in SOME plans can be pretty high. However, the ones that I have administered over the years have been closer to 30-75 basis points.
As for the $17,500 limit, it is RARE to see a plan where more than a handful of employees contribute anywhere close to the statutory maximums, even among the highly compensated employees.
In one plan, 401(k) participation was 35%. The major reason cited by employees was that there was no employer match. Now the employer matches up to 5% and the participation has increased to 60%, which is pretty meager.
The fees in SOME plans can be pretty high. However, the ones that I have administered over the years have been closer to 30-75 basis points.
I agree with this. I have seen some really crappy plans, and some really good ones. And they don't necessarily have anything to do with the type of job you have. I have a psychiatrist friend who, until recently, had a plan where the fees for most of the funds were ~ 1.4%. They were American Funds, which are good funds...but not at that price. I have another friend who was a preschool teacher, making ~30K per year...yet she had the cheaper "A" shares of American Funds in her plan (~ .60% -.80% expense ratios).
I feel fortunate that I can choose from a mix of low cost index funds in my plan (.21% to .25%) or from actively managed funds with reasonable expense ratios....some from the lower cost "institutional" share classes.
I have chosen active funds and my asset weighted expense ratio is about .81%
I am always appalled at how little people save. I should be used to it by now, but it still drives me crazy. I think every company should have automatic enrollment with auto-escalation (which means your contribution goes up if you get a raise).
those who do take advantage and save do very well eventually if they follow through. the issue is statistics are always used to dilute those who do with those who din't so it looks like nobody is saving much. that is not true at all.
balances of 401k funds have quadrupled in just the last decade. that is an amazing amount of growth and savings.
Fidelity looked at 1.1 million 401(k) participants who stayed in the same company plan continuously during the 10-year period that ended Dec. 31. The average account balance for the 10-year continuous group increased by 324 percent to $199,800 from $47,100
Another thing: I wish the catch-up started at 45 or even 40, rather than 50. The 20s and 30s see most people's salaries eaten up by school loan repayment, kids, home and just getting started with life. Salaries are lower here too. The 40s and up represent the peak earning years, and most people's kids will be on their own at this point. This is where a lot of people could afford to max out their 401k and establish a healthy foundation. I read somewhere where the average 401k balance at retirement is less than 250k. I'm not sure that is going to prove sufficient.
again ,statistics don't tell the whole story. that 250k may represent little of what those folks really have.
it is not about just a 401k balance. if you did things smart the equities and big growth stuff that qualifies for special capital gain rates should be in your taxable or roth.
many have 401k's and sizeable ira's.
in fact with all the job changes many like myself took all my 401k money out and rolled it over to my ira.
i restarted a new 401k 2-1/2 years ago and maybe have 60k in it. i had mid 6 digits in the old one before i took it .
never judge what people have from any of these surveys. until they ask all of us they have no idea what anyone really has.
even the gov't one only surveyed 150,000 in the entire country.
something as infinite as net worth is all over the place.
Do you exist? I'm just wondering if anyone on here has done or know someone who did.
We both worked for the same company and maxed out our 401Ks every year from 40 YO. Once kids colleges were taken care of, mortgage paid, etc. We retired at 62, not 55. Also had military pension. Biggest expense retiring early is healthcare, we had Tricare so not a problem. Haven't needed to hit 401K as yet (5 years later).
I wonder about that. A lot of news stories indicate over 50% of retirees have no savings other than the equity theu have in their homes and social security.
Quote:
Originally Posted by mathjak107
again ,statistics don't tell the whole story. that 250k may represent little of what those folks really have.
it is not about just a 401k balance. if you did things smart the equities and big growth stuff that qualifies for special capital gain rates should be in your taxable or roth.
many have 401k's and sizeable ira's.
in fact with all the job changes many like myself took all my 401k money out and rolled it over to my ira.
i restarted a new 401k 2-1/2 years ago and maybe have 60k in it. i had mid 6 digits in the old one before i took it .
never judge what people have from any of these surveys. until they ask all of us they have no idea what anyone really has.
even the gov't one only surveyed 150,000 in the entire country.
something as infinite as net worth is all over the place.
you see me dis-proving alot of those headlines all the time.
doing well never sells like complaining about something does.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
