How Much Should People Have Saved In Their 401Ks At Different Ages

The 401k is one of the most woefully light retirement instruments ever invented. The worst is the IRA which limits you to contributing only $5,500 only for individuals making under $60,000 a year and married couples making under $116,000 a year. Meanwhile, you have to make less than $114,000 a year as a single or $181,000 as a married couple for the privilege of contributing after tax dollars to a Roth IRA, which I do not recommend before maxing out your 401k.

Give me a pension that pays 70% of my last year’s salary for the rest of my life over a 401(k) any time! With the government only allowing individuals to contribute $17,500 a year in pre-tax income into their 401ks in 2014, once again, our politicians fail us with their regulations.

The average 401k balance as of January 2014 is around $99,000 thanks to an incredible 30% rise in the S&P 500 in 2013. Even so, $99,000 is incredibly low given the median age of an American is 36.5. As an educated reader who is logical and believes saving for retirement is a must, I’ve proposed a table that shows how much each person should have saved in their 401ks at age 25, 30, 35, 40, 45, 50, 55, 60, and 65.

We stop at 65 because you are allowed to start withdrawing penalty free from your 401k at age 59 1/2. Meanwhile, I pray to goodness you don’t have to work much past 65 because you’ve had 40 years to save and investment already!

HOW MUCH YOU SHOULD HAVE IN YOUR 401K AT DIFFERENT AGES

The assumptions for the below chart are as follows:

* For the first full year out of school, you only contribute $8,000 to your 401k.

* After the first year, one maximizes their contribution every year to their 401k plan without failure. We already agree that $17,500 a year in contribution is much too little, therefore contributing less is illogical.

* Average starting working age is 22. But you can follow the number of years working as a different guideline if you graduate later or earlier.

* $17,500 is used as the conservative base case maximum contribution amount for one’s entire working life. Hopefully the government will increase the max contribution amount over time.

* No after tax income contribution, although more power to you if you have the disposable income to do so.

* The low end column assumes $17,500 X the number of years worked after contribution $8,000 the first year. There is no company match or growth.

* The higher end column will assume $17,500 X the number of years worked X a 5%-10% constant rate of return. There is no company match in the high end either.

* Excludes any company match or profit sharing completely. The idea is that by excluding company match and profit sharing, that will more or less make up for the years in which one loses money in the stock or bond market. Furthermore, each company’s 401(k) match program is different.

* The Lower and Higher Amounts encapsulate at least 60% of all 401k levels for those who contribute the maximum amounts.  There will be those with less, and those which much, MUCH greater balances thanks to higher returns.

* You are logical and not a knucklehead. Just by searching this topic, you are taking ownership of your retirement and are thinking ahead with an action plan.

FINANCIAL SAMURAI 401K RETIREMENT SAVINGS GUIDELINE

401k Savings By Age

From the results, we can conclude that even after 43 years of consistent saving, you only have around $743,000 to $3,500,000 in your 401k. Let’s say you live for 20 years after retiring at 65, you only get to live on $37,150 – $175,000. If goodness forbid you live to age 95, then you can only live off of $24,766 – $116,600 a year!

We know from simple economics that thanks to inflation, a dollar today will not go as far as a dollar 40 years from now. Private school tuition will probably cost over $100,000 a year in 20 years, so who knows what medical, food, shelter and energy costs will cost then. One thing is for sure, prices will be much higher.

You should check out my article on “How To Better Manage Your 401K For Retirement Success” where I highlight three different scenarios you should run to see if you’ll make it. Fidelity came out on 2/14/2013 highlighting the average of their 12 million 401(k) plan participants is up 12% to $77,300. For workers 55 years of age or older, the average balance is $143,300. These are terrible numbers.

TRUST NOBODY BUT YOURSELF

Contribute the maximum pre-tax income you can to your 401k for as long as you work. This is the absolute MINIMUM you can do to help ensure a comfortable retirement. After you have contributed a maximum to your 401k every year, contribute at least 20% of your after tax income after 401k contribution to your savings or retirement portfolio accounts. That way, you will have potentially DOUBLE the amount in total retirement saving if your household income is $100,000 or more.  If your household income is closer to $50,000, you should still see a nice 30% boost to your retirement savings if you consistently save 20% of your after tax income.

Treat your 401k just like Social Security and write it off completely from your mind. Do not expect either accounts to be there for you when you retire, just like how you should never expect the government to ever help you when you’re in need. Just imagine 30 years from now, the government deciding to raise penalty free 401k withdrawal to age 80 from 59.5? Unfortunately, you need the money at age 60, and because you withdraw, the government imposes a 30% penalty on top of the taxes you have to pay. Don’t think it can’t happen. Expect it to happen!

The only thing you can count on is after tax money you’ve invested or saved. This is why after maxing out your 401k, it’s good to open up an online savings account, which have higher interest rates on average than your traditional bricks and mortar bank due to lower overhead costs. Your goal should be to then build as many passive income streams as possible.

Consider raising your after-tax savings percent after 401k contribution to possibly 50%. It won’t be easy, but if you practice raising your savings rate by 1% a month until it hurts, you’ll find it easier than you think. The most straight forward method is to make your 401k maximum contribution automatic, and save every other paycheck for the rest of your working life. Once you maximize your 401k and save over 50% of your after-tax income for at least 10 years in a row, you will be financially free to do whatever you want!

Recommended Actions For Increasing Your Wealth

* Manage Your Finances In One Place: The best way to build wealth is to get a handle on your finances by signing up with Personal Capital. They are a free online platform which aggregates all your financial accounts on their Dashboard so you can see where you can optimize. Before Personal Capital, I had to log into eight different systems to track 28 different accounts (brokerage, multiple banks, 401K, etc) to track my finances. Now, I can just log into Personal Capital to see how my stock accounts are doing, how my net worth is progressing, and where my spending is going.

One of their best tools is the 401K Fee Analyzer which has helped me save over $1,700 in annual portfolio fees I had no idea I was paying. You just click on the Investment Tab and run your portfolio through their fee analyzer with one click of the button. Their Investment Checkup tool is also great because it graphically shows whether your investment portfolios are property allocated based on your risk profile. There is no better free online tool that has helped me stay on top of my finances more than Personal Capital. It only takes a minute to sign up.

* Check Your Credit Score: Everybody needs to check their credit score once every six months given the risk of identity theft and the fact that 30% of credit scores have errors. For over a year, I thought I had a 790ish credit score and was fine, until my mortgage refinance bank on day 80 of my refinance told me they could not go through due to a $8 late payment by my tenants from two years ago! My credit score was hit by 110 points to 680 and I could not get the lowest rate! I had to spend an extra 10 days fixing my score. Check your credit score for free at GoFreeCredit.com and protect yourself.

Photo: Occupy SF Tent, by Sam. Might be your home if you don’t max out your 401K and save more!

Post updated as of 4/2/2014

Regards,

Sam

Sam started Financial Samurai in 2009 during the depths of the financial crisis as a way to make sense of chaos. After 13 years working on Wall Street, Sam decided to retire in 2012 to utilize everything he learned in business school to focus on online entrepreneurship.

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Comments

  1. Thomas says

    I agree with everyone, saving and making money is one’s choice. No one can force it on you. I am definitely of an opinion to save as much as possible so that I retire rich :)

  2. Jai says

    Thank you for the wonderful article. I came across your site just today when I was discussing 401K balances with friends. It is refreshing to know that I fall within your acceptable range. At 47, I have more than $1.2 million in my 401K. What I consciously did when I was younger was to contribute the max to my 401K and invested it in equities (100%). When the market went sour a few years ago many friends withdrew their money and put it in cash. I stayed the course and I am glad I did. Since my portfolio now generates over $200K per year (I don’t have any expenses except gas – I have solar installed, insurance and basic necessities) I have decided to call it quits and just travel. Although, I can always fall back on my Finance degree if I ever need to go back into the workforce, I sure hope that my budgeting for years have paid off. It is interesting that former co-workers always made fun of me when I turned down their happy hour invitations. Now, I think they are thinking differently. Thank you again for the article.

    • Financial Samurai says

      Hi Jai,

      No problem and nice to hear from you. Nice job saving early and often! Life is too short to slave away all day, especially if you have the means to support yourself.

      Before I retired from corporate America last year, I decided to sign up with Personal Capital, a free wealth management tool online that keeps track of my money and sends me notifications of my net worth. With a $1.2 million 401(k) balance, I HIGHLY recommend you sign up, run your 401(k) fee through their 401(k) Fee Analyzer and see where you can optimize. I am now saving $1,700 in fees I had NO IDEA I was paying! I have a feeling you are probably paying over $5,000 in fund fees a year.

      Best,

      Sam

      • Jai says

        Hi Sam,

        Thanks for your reply. My money is actually being managed by Vanguard and your point about fees is something I am going to look at. Because my portfolio is over seven figures, I am considered a flagship client and management of my assets should be considerably less than investors with less than seven figures.

        I truly enjoyed your articles and I will be sharing them with friends. There is a saying that it is not what you make but what you save. I am not sure who came up with that but I hold it true to heart.

        Thanks,
        Jai

    • thomas47 says

      Jai – That is impressive. I am 47, but $240k behind you…and your balance has probably moved up substantially since your posting.

      I have always maxed out 401k to the IRS limits, but my investment choices could have been better. Even so, I feel fortunate to see that I am on the high end of Sam’s chart.

      It is inspiring to see how well you have done.

  3. Ken says

    Hi Sam. I am self employed with only a Rollover IRA with roughly 10k in there. I have been adding the max (5k) for the past 2 years to that account but I’m 30 and I’m afraid it will be growing much too slowly since it is currently earning 0% interest/return. I looked at SEP quickly, but from what I found I can only contribute up to 25% of my net earning every year. That isn’t as much as I’d like to save so I’ve been stashing cash away in an online savings account earning 0.9%/yr. What would you suggest to sock away more pre-tax dollars? My wife is a teacher so she has a pension that she contributes to right now.

  4. Ana says

    Hi Sam. I like your article… in my opinion, it is a true eye opener.

    I live in Florida and will be turning 40 this month. I am single, no kids, no debt, other than a mortgage on a townhouse. I have around $192,000 in my 401k allocated in domestic and foreign stocks for the most part. I contribute 8% of my every paycheck to my 401k.

    I also have $80,000 in a regular savings account and $20,000 in regular stocks. My Roth IRA is about $6,000.

    I have a townhouse that I bought back in 2003 for about $150,000 and it’s now worth $110,000. I owe about $99,000 on this house, so I am not under water, but I feel I shouldn’t be trying to “pay off the mortgage” yet. Since the housing market is still deflated here in Florida, I don’t think my money is being put to good use by paying off my mortgage, even though I know I could slash that debt in a few years. This townhouse is being rented out by the way.

    I make $92,000 a year, and with bonus, a little over $100,000 a year.

    I know that I have too much cash in my savings account that’s basically just sitting there, and would like to know what’s the best way to invest it, plus do you agree that I shouldn’t be paying off my mortgage yet? Thank you in advance.

  5. Sam says

    Sam, I’ve enjoyed the material. I also really like your follow-up posts. I think the thing everyone who reads this needs to remember is: this is what you believe people SHOULD be saving (as you said in one of your follow-ups). I agree with you on many points. Take care and good luck to you in the future.

    • Financial Samurai says

      Thanks mate. Yes, the savings numbers are recommendations. Folks can either use the chart for motivation or to grumble.

      Life is one big gamble. Live dangerously if you wish. I’m more conservative, which is why I save aggressively to be financial independent earlier.

  6. Tomas says

    I would say this isn’t totally unrealistic. I understand it is difficult for most but similar to Financial Samurai, I graduated in ’06 and started off making 55k. I saved right around 7k my first year and from second year onwards I tried my best to put the max into my 401k knowing that saving early would be easier as I was single and had fewer expenses.

    I’m 28 now making just over 110k (with bonuses) and have 165k in my 401k (actually about 40% of that is Roth) and about 30k in my company pension. It looks like I’m in the range according to that chart. I would be doing better but I had to take a loan a few years ago for a down payment on my house. My only regret is not being more aggressive in my investment fund choices. I got scared off after losing a bunch during the financial crisis of ’08. Had I come out of my fixed funds in ’10 swinging, probably could be over 250k at this point.

    It certainly is not easy to save. There are always things to do with that paycheck. I don’t expect to save as much the next few years as I go back to get my MBA (total tuition is almost 100k for some schools). Having kids will also be a financial hurdle. Looking back I am glad I was able to see down the road a bit, not buy that new car early on and save a bit more compared to my peers.

    One suggestion I have is to use some kind of a scaling max contribution per year. I recall when I started working I could only put around 14 or 15k and every 2 years or so it has slowly crept up. This way it can be a bit more accurate.

  7. Julian says

    I suggest running far far away from any company that does not provide any company match or other company match for retirement savings. I think the table would look alot different with some sort of min. match assumed.

    • Nick says

      Hmmm…what if I worked for a company that didn’t even offer a 401k because I had no choice and was unemployed for 2 years and the job market sucked??

  8. Sarah says

    All the lucky people on here. I’m 40 and have zero in my account and zero in any 401k. I just finally started a job making decent money (1600 usd a month) and I’m hoping to save enough for retirement in 25 years by moving up the ladder slowly but surely.

    Do I even stand a chance? I worked my entire life but it was always fast food min wage because that’s all I have been able to get. I used to make about 700 to 800 a month so now that my money is doubled and I’m making a ton, I want to take this advantage big time. Any advice?

    • Joseph says

      Like most Americans, you probably won’t be able to retire at age 65. I know plenty of people in their 40s and even 50s who have nothing saved up, despite living frugally all their lives. It is just the nature of today’s economy. America is already undergoing some major cultural changes, where more and more families are living with parents, siblings, other relatives, or even close friends. Also considering the amount of debt that all levels of government are accumulating, I don’t see how our current economy is in any way sustainable in its current form – in my opinion we will all be screwed in less than 10 years, no matter how much money you’ve saved up.

  9. stoutboy says

    It’s true Sam is utterly unrealistic and glib over the difficulties facing today’s graduates: “I did it back in my day! So can you! Just work! Hard! Hooray for the free market!” This pretty much sums up his financial acumen. But where I do agree with him is with his emphasis on developing the habit of saving, and doing so right away, and keeping with it. The charts he provides probably do more harm than good for many people who will just end up feeling like an even bigger loser. But the point is that anyone can save no matter what their salary is. Maybe it’s 10% of pre-tax, maybe just 5%. But even that amount will add up big time over the years. Do not let your 20s slip away–those are the golden years of compounding. As your circumstances improve, save more. There is always a way to cut costs.

  10. Brian says

    I am 44 and my wife is 42. We both work and make a pretty good salary – gross at around $210k. Unfortunately, her company only allows her to contribute 3% due to her income level. They consider her “highly compensated”. Have you ever come across this?

    I contribute 12% and I am trying to increase it each year by 1%. Together, we have about $400k in 401k. Past that, we have very little, maybe $20k in other small investments.

    I refinanced our home last year to a 15 fixed so we could have it paid off by 60ish, but I am wondering if we should be more focused on building retirement. Thoughts?

    • Wookie says

      In my experience (actually my wife’s experience) ‘highly compensated’ is computed company by company. It has to do with how the low to mid earners in the company contribute to the 401k in comparison with the high earners.

      Short of going all ‘Financial Samurai’ on your co-workers and brow-beating the lower paid folks into upping their savings game, I’d add this to the ‘cons’ pile for your wife’s present employer. It’s possible she could do better in this regard if she looked around at other employers in her industry.

    • Financial Samurai says

      I’ve heard of this 401k limitation before, and it is unfortunate, but a way to try and keep things fair for all. The bright side is that she’s highly compensated and can always save and invest with after tax money.

      You’ll have to ask yourself how much longer you think you can work, and calculate your burn rate and alternative income streams in retirement. Only you will know whether you have enough.

      $400,000 sounds good so far, but that can be burned through in 10 years, depending on your spend. Let’s hope there’s SS, a pension, or continued growth in the 401k by the time you retire.

  11. Don says

    As with a lot of people on this board you look at these numbers and think wow! How could anyone put away that much? I thought the same thing. Then I ran some numbers of my own. My wife is 30, I am 27. My 401K is $19,000, her IRA is $42,000, we have approx $23,000 in the bank (which may seem like a lot but we were saving a ton, she is currently on maternity leave and didn’t want to have it tied up just in case) and another $10,000 in gold and silver (which was much much more). Add that up and you’re looking at $94,000. Things are going much better then I thought but didn’t realize what we have. We are currently paying off a mortgage and before I retire would like to own 3-5 rentals. There is something to be said for diversifying you’re money. It doesn’t all have to be in a 401K or IRA.

    • Financial Samurai says

      The main thing is that if we stay disciplined and save year in and year out the amount begins to get huge.

      There is a turning point where the returns from your 401k or IRA start outstripping your contributions. That is when it really starts to build folks!

    • moneyman says

      hey don , like most people on these sites that respond, i have to call bullshit. people like to hear themselves talk. 80 percent of the population are screwed and to blame them is nonsense, unless you are a cop teacher mta fireman or goverment , tax suck you are on your own and screwed. you support and pay for what you cannot get yourself , that has to change. peoplel like my self who have familys and a house and what it takes to survive , no pensions , and thrown in and out of private sector jobs 401 ks shut off and suspened, etc. no raises more hours more work no bonus no promotions and big paycuts, saving that kind of money in any investment is a fairytale, the majority of people retired in the country are living on ss and air wake up it will all come together in a ugly way down the road.

  12. Robert says

    I love your advice and strategy on investing. One must start young and do it now! . Be aggressive! I started when I was 20, my first job with a 401k. At least invest enough in your 401k to receive the company match! My mistake was not being aggressive. Although I was investing in my 401k, it was being funneled into a U.S treasury money market fund. 1-2% growth won’t cut it.. At age 27 (1994), I looked at my statements and had $5000 in my account. I was going nowhere fast. I picked up some investment books and read. I learned more by reading than I had learned in college. I changed my investments and 20 years later have over $500,000 in it. Now I look to broaden my investment strategy by looking into real estate. I currently own a home. I’m looking at passive income. I’m also looking into a side business as there are rules that allow one to sock away up to $50,000 into a 401k. My only criticism is with your numbers in your chart. The max one could put away in a 401k as far back as 1998 was $10,000. Because of government regulations, the max was even lower in the early ’90s.

  13. Lan says

    I love this article and though I don’t have nearly as much as what is published right in front of me..i think it’s something I can look at as a guide and goal for myself. I have been wise with my money and learned that living below your means and saving the rest for rainy days is key..

  14. Kevin says

    Hi,

    I’ve been a big saver over the years and find myself about 1year behind the chart you have above so I figure I’m in decent shape. However, I was recently married and am having trouble figuring out how we are doing now that we have two retirement accounts at two different ages. I’m 31 and she’s 27. I make about $100K/yr and she makes about $60K/yr. We have a combined retirement balance of about $150K between savings, 401k, and PARA. Any insight on how to figure out where we stand as a combined household?

  15. deregulate_this says

    This article is absolute BS. “Contribute the Maximum Amount Per year”. Look at how the wages have not increased and have gone down in many professions. 401k plans were created to allow “high income earners to save money tax free”. Now, the consumers were sold a bill of goods. They got the 401ks instead of pensions…. but, they didn’t get the high incomes to make up for the shafting of the 401ks. The reason banks and Wall Street firms want 401ks is so they can add hidden fees into all of the investments. They get to skim off the top of all your purchases, sales, balances, and dividends. 1% per year in fees comes out to 28% of the value of your investment by the time you retire.

    I think we need to be able to pay the same “percentage” of our investments that the Billionaires pay. Let’s say a Billionaire trades $500Million for 100Million shares of a company ($5/share) and pays a $7.95 flat fee. We should have that same option of paying $0.0000000795 per share for our trades as well. This shows you how bad a “Flat Tax” would be for us. Our $7.95 fee for our 10 shares subsidizes the rich people and their millions of shares. Flat Taxes and Flat Fees hurt the small investors and small income earners.

  16. Walmart Worker says

    Try doing this working at walmart my friend. Impossible.. contribute $300 a week, hahaha… I make that per week. This system don’t work for anyone under say 50k. Im 28 and have 12k in 401k.. I just pay 6% and company matches 6%… don’t want to give up free money. Yeah.

  17. Cindy says

    Hi,

    My husband will be eligible for his pension at 55. He is 48 now. We have $220,000 in our 401K plan now. What amounts do you suggest when you are getting a pension too?

  18. David says

    Your numbers are out of line. Did you take into account 2008 and the beginning of 2009 when most people lost 40-50%?

    I have about 168,000 and I’m 39. I fall out of your range but I’ll be getting a federal pension when I retire.

    • bp says

      You could take most of the risk out if you use a conservative investment option and still maintain the low end of the chart… especially if you eligible for a company match. Also, it’s worth noting that investors who left their money in the market have recovered since 2009.

  19. George says

    Financial Mess.
    PLEASE HELP…
    I have a traditional and roth IRA, I had 90K in the traditional and 35K in the ROTH..
    I made bad investment choices..I invested in bearish ETF’s (TZA,FAZ,SOXS,VXX).
    In one year my account shrunk to 30K in the traditional and 20K in the ROTH..
    I am 48 years…someone please advice on how I can clean this mess I am in..
    I do not sleep at night…I have a 5 year daughter..
    Any help or advice will be appreciated….THANK YOU.

    • Hank says

      Based on history of Dow Jones, it appears that Index number has gone up over the period and the overall trend is up. Of course, there are periods of ups and downs but we can’t predict those short peaks and valleys. Hence, investing Pro ETF’s are better than bearish ETF’s if you have the time in your hands. It seems like you have over 20+ years prior to your retirement and that will help you to prepare your retirement nest. Long distance runner appears to do better than short and I hope you achieve your plan by investing quality Pro ETF that has low expense.

      Good luck and post again.

  20. Sol says

    HI, I’m 37 with 25,000.00 in my 401K. I know its not much for my age. I’m look to do some catch up but not sure how. I’m currently contribution 10% from my annual of 75,000.
    Thank you and appreciate any advise you may have.

  21. Travis says

    I turn 40 in 10 days. I have $156K in my 401k. My wife has $155k and she is 38. Each of us put 20% of our check into 401k, and the company we work for adds another 6. We will have our home paid off in 10 years if all goes well. Together we make $110K, which is good for the area where we live. We have 2 small children. The mortage runs $1000 a month and daycare is $800. We only bring home less than $4000 a month…only 43% of our gross. Half of which is already spoken for before you get into food ($500), Electric ($220), Phone ($150), Gas ($400), Car Insurance ($100), kids college/car fund ($100). We just recently got internet and the lowest satelite package available for another $75 a month. That leaves us with $655 a month for unforseen bills. Quite common thanks to our high deductible insurance plans that we were recently forced to take. There isn’t anything left to save unless you want to cut into what little safety net we have.

    The numbers you list are somewhat absurd to me. I can only assume that the cost of living and subsequent payscale is MUCH higher than where I live. A decent job here pays $30k. There are not many jobs that pay as well as ours, and very few that pay more. To put it into comparison, we built a 4 bedroom, 1800 sqft (top floor) brick house with a full unfinished basement on 7 acres. Total cost (in 2006) was $175,000 including the land. Current appraisal has it valued at $220k.

    • Financial Samurai says

      It depends on when you want to retire.

      A $150,000 401k at a 4% withdrawal rate now is $6,000 a year. Even if you triple your 401k to $450,000 in 10 years that’s only $18,000 a year and everything else has gotten more expensive too.

      You can call me absurd, and I won’t say what you have is absurd. But just do the math.

      Where do you live?

  22. Alex McMatthews says

    Next month I will have been with my company for 20 years. I started right out of college with no savings at $25,000/year. My current house was just appraised for $1.75M and I owe $600k. I own a condo worth $300k in FL that is paid off. I have $475k in my 401(k), about $150k in college funds for my kids and another $100k between my IRA and my wife’s old 401k. I just turned 43 and am wondering what I will need to retire at 65?

  23. Emily says

    Hey Sam!

    I had recently sent you a message through your forum site, but I just realized that your last activity was quite some time ago. The topic has to do with an older blog post about reselling watches that I saw on another site so I was hoping you could get a chance to answer it through the forum. I don’t want to spam your more recent post with irrelevant comments!

    Thanks!

    Emily

  24. Lex says

    I’ve been following this post for a while now. I’m 42 yrs old and should hit $300,000 by mid year 2014 if all goes well. I also hold 6 figures in company stock and my company matches. I’ve been with the same company for 23yrs. I invest the most each year. I’ve learned to live without for 10+ years now.
    Here are some tips:
    - follow the funds in your 401k & make changes if needed depending on performance
    - stop chasing the latest I-phones. Inve$t that extra $35-$40 per month that you are wasting with Apple. Do the math!
    - Stop saying “it can’t be done”, “I can’t afford it” …and my favorite “It’s too late”

    • Financial Samurai says

      Nice job Lex! People will be amazed when they do the math and stick with savings over the long run. With a huge bull market in 2013, if you saved and invested, you won. If you splurged and went into consumer debt, you just fell seriously behind.

  25. Jason says

    I just found your site the other month and I am going through the older posts and came across this one. I am curious, what sort of income and assumptions do you have for people in their 20s on your chart.

    I’m 25 and have around $23k in my 401(k), and I feel like for my age I am doing extremely well with that. I am just wondering because I feel like income level, the local area’s cost of living, and other factors could have huge effects on your chart.

    For example, are your numbers based on the cost of living in New York city and the incomes that come with that? Just curious.

  26. Riverboat says

    Love this website, gives me motivation to keep moving toward retirement goals. I have put money into my 401k religiously since I started working out of college at age 22, maxed out since 1998. I am now 50 years old, married with 3 kids, one in college the other 2 in high school. I have $795k in my 401k. I think I’m doing ok. I have also saved enough to send my oldest to a private college with her taking only a Stafford loan and me not taking any loans. The 2 behind her will be the same way. Of course, knock on wood and fingers crossed my employment continues through age 65. In 3 years when youngest reaches college age plan to sell our current oversized home and buy a smaller one leaving us with no mortgage, maybe buy a condo in Florida at that time as well. We’re getting there but a long way to go. You can’t make excuses, you have to make good decisions. You also have to keep an eye on things and take advantage of strong markets such as we had in 2013. My business had its worst year ever yet I made 37% on my investments. I’ll take it.

    • Stan Sharma says

      I feel you are in a great (and envious) situation. I’m curious to know, outside of your retirement accounts, what other monetary vehicles did you use to save money? Did you maintain a large stock/ bond portfolio? did you use 529 plans for saving for college? I’m 29 yo and I’m looking for advice.

      Thanks

  27. William Balch says

    Where to begin? I’m a married, father of two, 43 Years old male, unemployed and have no 401k or investments. However that being said, I’m looking into a career change, school etc.. I own two houses, paid off. combine value around 250-300k. We have a small income, and I have around 30-40k in cash to invest and I have NO idea which way to go.

    HELP!

  28. Young Investor says

    Hi,

    I’ve been investing for a long time now. I’ve been maxing out my 401k and investing after-tax income privately as well. A return to school means that I won’t be making as much as I was, so my savings will have to lessen for a while (but not completely stop).

    My question is this: what’s do you think is a good balance to strive for between saving money in retirement type accounts like 401k’s and IRA’s (tax advantaged, but can’t touch for a long time) vs. saving it privately, like in private investments (not tax advantaged, but I can cash out whenever I want)? For instance, I’m thinking of the scenario in which I want to tap into my savings to make a major purchase (for example, buy a house) or in case of emergencies.

    Ideally, I’d be able to max out the retirement accounts and then put whatever’s leftover into private investments, but in the short term I won’t be able to do that.

    Any thoughts?

  29. Stan Sharma says

    I’m 29 yo, married with no kids. Me and my partner have about $160k in our 401ks which we are maxing out. We purchased one house (to live) and I have a rental condo in India which is paid off. Have $20k in a stock portfolio. We are lucky to live a low cost of living state (TX) with no debt (except mortgage).

    We have about $250k in liquid money sitting in savings accounts which we dont know what to do with. We dont contribute to IRA since we are eligible for tax benefits (combined annual income >200k). What investment alternatives do we have with the liquid cash? I’m concerned that we’re sitting on a pile of cash which is depreciating.

    Constructive suggestions welcome.

    • Sunil says

      Hi Stan
      Having that much cash is not a good idea. It will lose its value over time. You can do a back door Roth that Sam has suggested in one of his other posts and put that money in index funds. SP 500, large, mid, small caps and international (20% each) and just leave it there. You can also look at investing in rental properties to give you capital gains along with income. You are doing quite well for your age!

  30. Wookie says

    OK, I’ll add a few things to the conversation. I’m still digesting the tone of this site, but it feels like it’s skewed towards ‘college educated’ salaries or motivating folks to get there. Nothing wrong with that, and it’s maddeningly difficult to write advice that resonates across the universe of potential readers.

    I work in an industry / place (aerospace engineering in the Pacific Northwest) where starting salaries are in the $65 -70K range, and 1st line management salaries mid-point at roughly $150K. I’m a 1st line manager, and my pay is in line with the range. I figured out a while back (before I went into management) that I wouldn’t get filthy stinking rich here, but I’m doing interesting work, I’m well compensated, and early retirement was up to me and savvy investing.

    The basic thesis of the article is that you should max out your 401k contribution at $17.5K as soon as you can, and stay that course. While many have weighed in with some variation of “You’re on drugs, I can’t save that much!”, I say “Save even more.”

    Sam notes that there is such a thing as after-tax contributions to a 401k, but pretty quickly dismisses them in comparison to outside after-tax investing. What *I’m* doing is investing 25% of my income in my 401k, which takes me well outside the $17.5K limit. Roughly half of my contribution (at current salary rate) is after tax.

    Here’s the nugget that I didn’t see discussed above: At the point that I want to roll my 401k over into IRA accounts, the after tax contributions (along with the company match) can go into a Roth IRA. This is a huge advantage, and one not many people understand. Roughly a third of my seven figure 401k (I’m close to early retirement) is eligible for a Roth rollover.

    I have somebody working for me who is married to an engineer in the same company. They actually carve off their after tax contributions to their 401k yearly into Roth IRAs. This gives them access to better funds at cheaper expense ratios. I’d investigate that for myself if I wasn’t within two years of retiring. The rules for this stuff (pulling out of an active 401k) are complex and vary company by company. I’m just throwing it out there for those who have never heard of it.

  31. Chezwick74 says

    Hi Fin-Sam,

    I’ve always considered myself a saavy investor concerned about financial independance. After looking at your age/$ projections however, I’m shocked and a little ashamed as to where I currently am in comparison to how I felt I was doing. In a nutshell, I am 39 years old, began investing at 24 or 25 and have not stopped since, despite a 7 month stint of unemployment. My salary was greatly reduced after I lost my job in 2007, from about $61K a year at age 32 to about $53K a year currently, which I’ve had to build up to over the last 7 years, having yet to reach my pre-layoff level not even considering inflation. I’ve attempted to save/invest around 15% of my annual salary and have a number of investment vehicles, currently rounded off as follows:

    - IRA account: $79,000.00 (pre-tax dollars; active contributions from 2000-2007)

    - Savings account: $12,000.00 (post-tax dollars; I attempt to contribute whenever possible)

    - Mutual Fund account: $16,000.00 (post-tax dollars; active contributions 2005-present [$100/month])

    - Whole Life custom policy: $13,000.00 (post-tax dollars; active contributions 2005-present [$200/month])

    - 401k account: $22,000.00 (pre-tax dollars; active contributions 2009-present [$440/month including match]).

    My total savings/investments is roughly $144,000.00. My wife (38) and I have about $50K left on our mortgage. Neither of us have any school loan or credit card debt. I pay my car off next month, she has about 4 years/25K left on her car loan. She makes about $25K/year more than I do and with her pension, 403b, mutual funds, whole life and savings has about $125K saved. We have no kids and do not plan on having any.

    I am going to open a Personal Capital account as you recommended. How else would you suggest I go about meeting the benchmarks you establish in your article? An admitted vice for my wife and I is travel and the frivilous spending that accompanies such activities. We did a wine tour last weekend and spent a ridiculous amount of numerous bottles of wine that were totally unnecessary. It’s a behavior that frightens and disturbs me, and is engaged in despite my insistence that we buckle down in the spending department.

    • Financial Samurai says

      Howdy,

      Thanks for dropping by. For your income, I think your progress is great, so don’t get down about it. With a house almost paid off, and a pensions from your wife, you guys are sitting pretty.

      My recommendation is to ask yourself two things: 1) how much longer do you want to work, and 2) does your savings practice hurt a little each month? If your savings doesn’t hurt then I don’t think you’re saving enough. And if you can’t see yourself working for another 10 years, then I encourage you to boost your savings more.

  32. Dave says

    I whole-heartedly agree with trying to save responsibly for your retirement, but at the expense of comprising your enjoyment of life now? Some of those who are earnestly saving for their retirement will be dead before they are able to draw upon it or enjoy it! Life has to be a balance between the here and now and the uncertain future. Certainly plan for you old ager responsibly, but balance that with the ability to enjoy life now. I am 58, I’ve been in USA for 13 years since 2001 and managed to stash around $440 K in 401K/IRA I have around $100k in savings and, as I live in California, around $500k equity in my home (Unfortunately still around a $250K mortgage). I also have a modest UK pension due for my employment with Rolls Royce in UK. I do however try to balance enjoying life now with my plans for retirement. I always recall my UK buddy who came over here a couple of years earlier than me, and dropped dead of a heart attack at 40! Fortunately he lived in the here-and-now and made the most of his life while he could, with little thought to retirement. (Perhaps he had some foresight!). I’m not saying don’t plan responsibly for retirement but don’t forget to enjoy life now it may be all you have! I am fortunate enough to earn a good salary in California, but I don’t’ for one minute feel I will need to live on 75% or more of that when I retire. After all I put $24k a year into mortgage, $20+k into 401K and $6k into IRA. That is around 2/3rd of my salary in investments I won’t need to make when I am drawing retirement. Not to mention (hopefully) much reduced taxes and reduction on travel expenses+ social security (if there is any left by then). I realize health might be an expense (god bells the American capitalistic health system… at least Obama’s trying ;-). For those less fortunate than me I agree: your plans to commit the maximum to 401K and IRA are totally unrealistic. Like most financial experts you need a reality check. In the words of one (in) famous European Royal… “Let them eat cake” I hear you say. (Marie Antoinette for those not up on European History). Perhaps the best evidence to support the lack of reality in what you say is the pitiful average that US citizens have managed to squirrel away (close to a miserly $100K at a age 60?) Seems like at some point the whole system will need a reality check if our aged population is not to live their later years in abject poverty?

    • Dave says

      apologies for typos (few too many beers last night :-)
      I meant already at 2/3rds not reduced by 2/3rd, and should have said ‘god bless America’ not ‘god bells America’ (dang those spellcheckers!)

  33. Shine Mathew says

    Hello Sam,
    Thank you for sharing some useful information. What are your thoughts on the financial tools that few websites have to offer like WellsFargo. MassMutual, etc. ? Is it wise to invest according to the investment strategy the tools suggests us? I am currently 28 & have $0 in my 401k and I would like to start contributing. Any suggestions would be helpful.

    Thanks,
    Shine

  34. C. ADAMS says

    Hi Sam, thanks for posting this but I must admit that I’m surprised, I thought I was doing very well! I am turning 26 in a few weeks and have 30k in my 401k. I just opened a Roth last week. I put 11 percent in my 401 and 3 in my Roth. I have 30k in stocks and purchased a house last year for 85k down and have a mortgage of 140k. I’m hoping to pay that off in 10 years. I make 48k which I think is low for my age. (I work in Boston in finsnce). I’m getting my Mba and paying out of pocket. I also have no other school loans or a car loan. Should I can the Roth IRA? What should I be investing in?

  35. GoodLife says

    You guys are amazing, I am 37 and 401K @ 277K, incl. ROTH. Savings about 65K, own a townhouse that is being rented, but reality is that until I sell and pay tax won’t know what I get. Estimate 50-80K. Salary not bad 120K, but already been divorced once, and second divorce is imminent… Apartment is 1k, but i share with 2 others and since I manage it all my share is 300 inclusive. Second wife wants to live for 2-3k / month hahaha… Life is not bad, but I feel relationships are killer, they always take $$$ out of pocket, if i did not marry till 45 and started as I did at 18 putting cash away, I did be so well off.

    So my request of you, yep you, the 20 year old reading this, forget your girl, get laid over coffee, save money, live cheaper, and move up in your job ASAP. Oh and if you spend money, spend it on yourself only! Yea, go to islands, ski, travel the world, but make sure you do it cheap. And don’t ever pay for anyone to come with you, they have money, if they don’t they need a better job.

    Not resentful, it feels good that I paid for 2 x MBA’s for both wifes. One makes 90K, other 140K, I never got my money back, and getting laid 1ce per month is a privilege. Point of the story, feels good to be good to others, but also makes you poor and stupid.

    Ok, got to run to gym, then $2 club to dance all night and drink water ;-)

  36. AmericanDreamer says

    Fortunately as our general population gets older there are other alternatives to the traditional 401K for people to extend their dollar through retirement

    One obvious example is reverse mortgages which don’t offer the best terms but unless you have kids or grandkids who you want to give your home it can extend your retirement savings significantly.

  37. k says

    This article seems geared toward a very narrow slice of American society who have enviable job security and annual income. I have worked since I was 15 years old and I opened my IRA at 25. I always contribute to it and to an employer-sponsored plan. That said, I’ve never made more than around $40,000 net. Additionally, I spent 6 years helping to care for a parent with dementia, paying off a (used) car and paying down school loans. The idea that I could devote 44% of my income exclusively to retirement savings is lovely but unlikely. I’m proud I’ve been able to save anything at all, honestly.

    I probably won’t be able to retire at 65, but I’m not sure this article helps me get any closer to where I’d like to be. It is so far beyond the realm of possibility that I can only shrug and say, “Must be nice.”

    • tomb says

      Do your best a don’t worry about someone else’s obtuse numbers. Remember this guy is in NYC and your local economy is probably much different.

      • NOVA says

        How about you do the same and compare yourself to other Community College graduates your age and not worry about others?

  38. mysticaltyger says

    It is not reasonable to expect people making 50K per year to save $17,500 AND save another 20% of their after tax income on top of that. I make about that much and most people would consider me a savings Ninja (saved over 13K in the 401k in 2013, pus another 1k in regular savings)…and I simply cannot save that much unless I was living rent/mortgage free (which I’m not).

    • tomb says

      Yes, the Fin. Sam’s numbers are way off from other sources who suggest:

      35 yo. x1 annual sal.
      45 yo. x3
      55 yo. x5
      65 yo. x8

      I am ahead of the 35 yo. number, but not even close to FS’s unrealistic numbers. To think that many 22 yo’s would be maxing, or even contributing the low end is very unrealistic.

      • Financial Samurai says

        And who are these actual sources? Freelancers who are not retired who wrote about retirement?

        I’ve pressed the eject button already and have created a viable passive income stream so I no longer have to work if I don’t want to. I’m writing about retirement based off experience.

        You can choose to get motivated by the figures or bash them for being unrealistic. Either way, it’s your financial life. There is a retirement savings crisis in America.

        • tomb says

          The source is Fidelity. They assume most start at 6% @25, which is more realistic.

          Good for you for beating the system.

          Regarding myself, I have been maxing for 2-3 years, so yes I’m plenty motivated and I’m ahead of many. I’m just not ahead of your numbers. Not sure I was bashing anything, just pointing out that your numbers are a bit unrealistic for the great majority. There is a middle ground between your numbers and the people in crisis.

          • Financial Samurai says

            Fidelity is a great source, but I’m asking you about the PERSON writing the article if there is an article.

            The smartest thing large businesses and media platforms have done is to leverage their brand and hire a bunch of freelance writers who know how to write and research, but don’t exactly have the experience to write what they are talking about. It’s the greatest slight of hand trick there is today online.

            Fidelity is great, and has millions of accounts. They represent the masses. But if you want to be like the masses, who save under 5% of their annual income, get into major debt, and then stress about money, that’s fine. But I want better for my readers and community.

            • Jay says

              I agrees with Sam, the numbers is just a guidelines for ‘above average’. I like Sam’s #s than other writers, because I felt that those # from the other articles are too easy to achieve and it’s most likely just a ‘feel good’ article for general masses.

              If you want to get ahead from the masses, you need to do extra. It’s ok, that you can’t max out at the beginning of your career, but work towards it. It’s easy to say the numbers are unrealistic and not trying. Instead, the numbers should be the motivation on how you can achieve it and beat it. It does not matter where you start, it’s how you finish, if you can reach the age 65 numbers when you are 40, then you can retire at 40, or many ppl call it financial independence.

            • Wookie says

              I’m struck by an irony here… Your business model relies on hack responders like me to generate content / buzz / page views.

              Addressing another thread on this page, I was a disappointment in high school, took a while deciding to go to college, and I turned out just fine.

      • NOVA says

        Tom,

        You are a Community College graduate. Why do you think you should be better than average? Consider yourself lucky in your situation because most kids I know who mess up in high school end up not doing very well in life.

  39. larry says

    I’m 34 with 93k in ca. pers 457
    Plan at work.I also will be entitled to 60%
    0f my highest years salary at 65 through
    A pension.do I need to fund a Roth also?
    I have 22k in wells Fargo earning next to
    Nothing that I want to invest.

    • Wookie says

      The country seems to on a long downhill slide away from defined benefit pensions. The question you have to ask yourself (and I asked myself) – What if the pension goes away during my 30 year career span? I was told this year that my pension will no longer grow starting in January 2016. I’m lucky, this happens to be my target retirement date anyway.

      Throughout my “wealth accumulation” phase, I have planned on a holy trinity of pension, IRAs and Social Security – as well as being debt-free. My plans assumed that one of the trinity may fail for whatever reason. I could still retire (albeit less comfortably) if two of them fail.

      So I’m in the camp, “Yes, you should fund a Roth as well.” It will give you options as your situation changes.

  40. wellington says

    your “low end vs high end” are insane to say the least. And such contribution rates are unrealistic, unless you come from money, don’t start a family, don’t go to grad school, didn’t join the military, or work in a “in-demand” field when you graduate. I bet your typical 30 year old doesn’t have 130, 500 to 200k put away for retirement. Simply…..dumb.

  41. Brett says

    I’m in agreement with most what you’re saying – save early, save often and save until it hurts a bit. But one thing not mentioned above is that your investments will continue to earn after retirement. If you manage to save just 1.5MM by the time you retire after a career pinnacle of $125k/year, even a conservative investment return of 5% will earn 75k/annually without even reducing the principle balance. When the house is paid off, kids are educated and gone, etc. many folks who thought they needed more will find that is more money than they know what to do with.

    And, there’s no rule that says you can’t reduce that principle balance – it’s easy to figure out how much principle + investment income you can take annually assuming given ROR, principle balance and life expectancy. Just make sure your estimates are reasonable.

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