How Much Should I Have Saved In My 401(k) By Age?

Are you looking for a 401(k) savings guide? This post will go through how much I think you should have in your 401(k) by age in order to have a comfortable retirement in your 60s and beyond. My goal is for all of you to become 401(k) millionaires before your retire.

Unfortunately, the 401(k) is one of the most woefully light retirement instruments ever invented. The maximum amount you can contribute in 2024 is $23,000, up from $22,500 in 2023, and up from $20,500 in 2022.

A 401(k) is part of your new three-legged retirement stool. The other two legs include your after-tax investment accounts and your side hustles. In other words, it's up to all of us to take care of our own retirement needs and not depend on anything else.

Although the 401(k) pales in comparison to a nicely funded pension, even more disappointing than the 401(k) is the IRA. With the IRA retirement plan, you can only contribute $6,500 in pre-tax dollars. Further, you can only contribute if you make under $76,000 a year as an individual and $125,000 as a married couple. What about the rest of us?

Meanwhile, you have to make less than $161,000 a year as a single person or $240,000 as a married couple for the privilege of contributing after- tax dollars to a Roth IRA. You can only contribute the maximum $6,500 in 2024 if you earn less than $136,000 as an individual or $230,000 as a married couple.

Give me a pension that pays 70% of my last year's salary for the rest of my life over a 401k or IRA any time! At least with the 401(k), anybody can contribute.

Average 401(k) Retirement Balances

Based on Fidelity's 2023 report, the average 401(k) balance is $121,700. Here’s a more filtered breakdown of the average 401(k) balance by age range in 2022.

  • Age 20-29: $14,600
  • Age 30-39: $51,200
  • Age 40-49: $120,200
  • Age 50-59: $206,100

According to Vanguard, another money management giant, the average participant 401(k) account balance at Vanguard was $112,572 at the end of 2022, down 20% from the close of 2021. The median 401(k) balance at Vanguard was $27,376 at the end of 2022, an annual drop of 23%.

In 2023, the average 401(k) balance by age is around $120,000 thanks to a rebound in the stock market. However, if you look at the average and median 401(k) balances by generation, they are all still pitifully low.

Here is Fidelity's 401(k) balances by generation as of 1Q 2023.

401(k) balances by generation 2023

The Average 401(k) Balance By Age

Let's focus on what people should have in their 401(k) by age. The entire goal is to accumulate enough money in your 401(k) and other retirement accounts to eventually live financially free.

Given the median age in America is about 36 years old, the average 36-year-old should have a 401(k) balance of around $121,700. Unfortunately, $121,700 is still pretty low. But the median 401(k) balance overall is only about $35,000.

401k balance by age 4Q2020 - 401k Savings By Age

As an educated reader who is logical and believes saving for retirement is a must, I've proposed a 401(k) savings by age recommendation table that shows how much each person should have s(a)ved in their 401k at age 25, 30, 35, 40, 45, 50, 55, 60, and 65. The amounts are much greater than the average 401k savings by age in America.

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

401k Savings By Age: How Much You Should Have

To determine how much you should have saved in your 401k by age, I've come with some assumptions that have encapsulated in a chart below.

The assumptions for the below chart are as follows:

  • Low End column accounts for lower maximum contribution amounts available to savers above 45.
  • Mid End column accounts for lower maximum contribution amounts available to savers below 45.
  • High End column accounts for savers who are under the age of 25. After the first year, one maximizes their contribution every year to their 401k plan without failure.
  • 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.
  • $18,000 is used as the conservative base case maximum contribution amount for one's entire working life.
  • No after-tax income contribution, although more power to you if you have the disposable income to do so.
  • The rate of return assumptions are between 0% – 10%.
  • Company match assumption is between 0% – 100% of employee contribution. $61,000 is the total 401k contribution for 2022. But in 2023, the total 401(k) contribution between employee ($22,500) and employer ($43,500) is $66,000. Hence, find yourself a good employer!
  • The Low, Mid, and High columns should successfully encapsulate about 80% of all 401K contributors who max out their contributions each year. There will be those with less, and those which 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 401(k) Savings By Age Guide

Here is my 401(k) savings targets by age.

401k savings by age targets

From the results, we can see that even after 38 years of consistent saving, you'll only have around $1,000,000 to $5,000,000 in your 401k in a realistic cycle of bull and bear markets. In other words, I believe everybody should become 401(k) millionaires by 60.

If you're just starting your 401(k) savings journey, you could get lucky and achieve the high end column with consistent 8%+ annual growth and company profit sharing after 38 years. After all, the maximum 401(k) contributions will be much higher over the next 38 years than the previous 38 years.

But it's most likely that most people reading this article should follow the middle-to-low end columns as a 401(k) savings guide. The median age in America is roughly 36. Meanwhile, the median age of a Financial Samurai reader is closer to 38.

Investing Matters Because Inflation Matters

Let's say you live for 25 years after retiring at 60. You only get to live on $40,000 – $100,000 a year on the low-to-mid end. Sounds feasible in today's dollars, but not so much in future dollars due to inflation.

If goodness forbid you live for 35 years after retiring at 60, then you can only live off of $28,571 – $71,000. If we use a 2% inflation rate to calculate what $1,000,000 – $5,000,000 is worth today, its only worth about $5500,000 – $2,355,000.

We know that due to inflation, a dollar today will not go as far as a dollar 30+ years from now. Private university tuition will probably cost over $100,000 a year in 20 years. That is ridiculous since education is now free thanks to the internet.

Then there is the incredible growth of healthcare costs that is the most worrisome for retirees. For example, I've been paying $23,000+ a year in healthcare premiums for a platinum plan for my family of three. This is despite us all in good health.

Does that sound affordable for the average American household who makes $68,000 a year? Absolutely not, which is why employees should not underestimate the value of their overall work benefits.

In fact, inflation is the reason why it takes $3 million to be a real millionaire today. Make sure you own assets like stocks, real estate, and more to let inflation work for you!

Below is a great inflation chart by consumer goods and services. Medical, college tuition, food, and housing are categories that have inflated the most.

Inflation chart by category

To help grow your net worth, I recommend diligently tracking your net worth with Empower. Technology has come a long way since tracking our money by hand or with an Excel spreadsheet. Remember, what is measured can be optimized.

Depend On Nobody But Yourself

Contribute the maximum pre-tax income you can to your 401(k) for as long as you work. This is the absolute MINIMUM you can do to by on the right 401k savings by age path.

Below is a chart that shows what you could have in your 401(k) if you max it out each year starting in 2023. The right hand column shows what you would have in your 401(k) with 8% compound annual returns.

In other words, everybody who consistently maxes out their 401(k) each year will likely be a 401(k) millionaire by the time they turn 60.

What you could have in your 401(k) if you max it out every year starting in 2023

After you contribute a maximum to your 401k every year, try and contribute at least 20% of your after-tax income after 401k contribution to your savings or retirement portfolio accounts.

This 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. Here is the recommended order to contribute to your retirement accounts.

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. It's 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 75 from 59.5? Unfortunately, you need the money at age 60. 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!

Taxable Investment Portfolio Is Key

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 after-tax brokerage account. Consistently contribute a percentage of your paycheck each mont into your taxable investment portfolio.  I recommend at least 20%.

Your goal should be to then build as many passive income streams as possible. The more passive income streams and active income streams you have, the more financially free you will be.

Challenge yourself to raise your after-tax and 401k contribution savings percent 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.

A straightforward way to maximum savings is to make your 401(k) maximum contribution automatic. Save every other paycheck for the rest of your working life. 

Max out your 401k and save over 50% of your after-tax income for at least 10 years in a row. If you do, you will be financially free to do whatever you want!

401(k) millionaires chart

Recommendation To Growing A Larger 401(k)

Now that you know what the appropriate 401(k) savings by age is, it's time to manage your finances like a hawk. To do so, sign up for Empower, the web's #1 free wealth management tool. Empower will enable you to get a better handle on your finances.

In addition to better money oversight, run your investments through their award-winning Investment Checkup tool. I will show you exactly how much you are paying in fees. I was paying $1,700 a year in fees I had no idea I was paying.

After you link all your accounts, use their Retirement Planning calculator. It pulls your real data to give you as pure an estimation of your financial future as possible using Monte Carlo simulation algorithms. Definitely run your numbers to see how you're doing. 

To track my 401(k) savings by age guide you must max out your 401k each year. With investment returns coupled with company matching, you'll be amazed how much you will accumulate over the years.

I've been using Empower since 2012. In this time, I have seen my net worth skyrocket thanks to better money management.

Retirement Planning Calculator to help with your 401k savings by age

Build More Wealth Through Real Estate

In addition to investing in stocks and bonds through your 401(k), I recommend diversifying into real estate. Real estate is a core asset class that has proven to build long-term wealth.

It's important to own a tangible asset that provides utility and a steady stream of income. Unlike stock values, real estate values tend to be much less volatile.

With real estate, you can earn a steady stream of passive to semi-passive income well before age 59.5, which is when you can withdraw from a 401k penalty-free. Inflation also helps boost the value of real estate while decreasing the real cost of debt.

My Favorite Private Real Estate Platform

Take a look at Fundrise, my favorite private real estate platform. Fundrise runs over $3.3 billion in assets focused on investing in residential and industrial properties in the Sunbelt region. Valuations tend to be lower and yields tend to be higher in the Sunbelt / Heartland.

Fundrise

You can also check out Crowdstreet, a leading private real estate platform for accredited investors. Crowdstreet finds the best deals offered by the best sponsors for users to individually invest. Most of the deals are in 18-hour cities where there's greater growth and lower valuations.

I've personally invested $954,000 in real estate crowdfunding across 18 projects. My goal is to take advantage of lower valuations in the heartland of America. My real estate investments account for roughly 50% of my current passive income of ~$300,000.

private real estate investment dashboard

Follow my 401k savings by age guide. But in the meantime, also build a passive income portfolio so you can live a better life today. Given you cannot withdraw from your 401k without penalty until 59.5, it is your passive investment portfolio that matters even more.

How Much Should I Have Saved In My 401k By Age is a Financial Samurai original post. Everything I write is based off first hand experience because money is too important to be left up to pontification. Join 65,000+ others and sign up for my free weekly newsletter as well.

1,093 thoughts on “How Much Should I Have Saved In My 401(k) By Age?”

  1. Your numbers are too high if for those of us who have a USG pension, like your parents did. The Foreign Service pension is 1.7% of the average of the top 3 salaries per year of service, up to 20 years, then 1% for every year after 20 years of service. The CS pension is 1.1%. Plus, lifetime health insurance. I have just under what you estimate, but I also have a lifetime annuity of several thousand dollars a month. My spouse, on the other hand, has half of what he should have according to your chart, but he immigrated to the US in his 30s and didn’t work for several years as a dependent overseas. We’re not worried because he will get his own pension when he retires — less than mine, but still plenty between us. I know you’ve written articles on the value of pension and I try to tell everyone, especially my kids, that pensions are the gold standard.

  2. Hi Financial Samurai- I am 30 years old and have $300K in my Roth 401k, 0 in 401k. I have payed taxes on 100% of the 401k (Employer match and after tax contributions). How should i benchmark vs. the charts. Should i assume if it was a pre-tax 401k I would pay a blended tax rate of 20% in retirement so i would have a pre-tax $375K 401k?

    I think taxes will go up long term but want to make sure I comparing same numbers.

  3. How accurate can this be? I’ve had multiple jobs over the years and each time roll the 401k into my personal IRA then start a new 401k at my new employer. So I might show up as having a small amount saved in my 401k, meanwhile in reality I’ve saved hundreds of thousands but it’s been rolled into my IRA.

    1. Agreed, and the average 401k calculation seems to be a nearly useless statistic since I also have 5 IRA accounts (one from prior employers and a Roth) plus a 401k and if you take the average of my 401k+IRA accounts, it is only 1/6th of what I have in total. They need to track the total of all retirement accounts associated with a person not individual accounts.

      1. So it means the average total 401(k) balance is probably higher, and Americans are saving more for retirement than this data shows. All the more reason to follow my 401(k) by age guide.

  4. Many advisors says to save for 80% income replacement in retirement. I just don’t see myself needing that kind of nest egg. I’m currently tracking at 62% income replacement on earnings of $180k/year.
    When I look at my monthly expenses & debits, 70% of those I would not have in retirement; including 401k contributions, Mortgage P&I, 529 college savings, daycare & school expenses, life insurance (?), plus excess cash for savings. Assuming my retirement savings at least keeps up with inflation, why would I need 80% income replacement at retirement?

  5. Greetings, would you please add the years as a column in the table titled “what you could have [had if you’d maxed out your 401K]”. Next time you refresh this table, it gives us a sense of baseline and what we should be aspiring to if we “max” against that time frame.

    I use the chart as a baseline to see how we’re personally doing – are we above or below the max trend. Granted where you work and employer match makes an impact, but it would be nice to know how things could have worked in the theoretical max — by year.

    Thank you!

    1. Financial Samurai

      It’s actually flexible for any year based on the number of years you’ve worked or your age.

  6. SavingsGoals

    It’s odd to have a savings chart that doesn’t take into account average working income. Isn’t it impossible to know how much one needs to retire on, without calculating what the retiree was living on while working?

    My parents retired early and are doing well. Living in their paid off house, gardening, walks around the neighborhood twice a day, free weekend outdoor concerts at the park, senior golf discounts ect.

    My wife and I have a little more expensive tastes and plan to travel more in retirement… so we are being more aggressive. We also want the freedom to follow our only daughter wherever life takes her. So obviously we’ll need more income and are saving accordingly.

  7. So I always wonder about these avg/median 401k balance surveys. Like how are people gonna retire off of that, they’re always soooo low! Like maybe people just have a lot of 401ks with different financial institutions or something? My 401k balance is pretty low, but that’s because I move companies quite a bit and rollover everything into an IRA. So my IRAs make up the bulk of my net worth.

    1. Simple answer? They won’t. Until this country gets their collective heads out of their a**es, proceeding generations are going to continue to “have it worse” than the generations that came before them. If you think most millennials or Gen-Z’ers are going to be able to retire, without companies offering pensions, or with their pathetic 401K’s, you got jokes.

      The collective 1%’ers who find this blog are completely out-of-touch with the struggles of most average Americans.

      1. You hit it on the head. The 401k was meant to supplement the Pension for higher paid workers, not replace it entirely. Anyone that can hit these numbers without living out of a van eating top ramen is completely out of touch with 90% of the workforce. If you aren’t a highly successful entrepreneur, STEM worker, or Finance bro, these numbers are literally impossible to meet. I can max out my 401k and roth ira while not being completely broke, but I know that i’m a rare case. Like you said, when you have been given the knowledge and tools/upbringing to work hard and succeed, its hard to relate to many people. It isn’t just knowledge and work ethic, there’s a systemic issue in the USA.

  8. I am 53 and started saving late in life. I didn’t start making decent income until my 40s. I only have about $150-175k saved in retirement and other liquid accounts. I want to invest in real estate. My parents dabbled a little in it and made out very well. I have about $30k – 50k to invest and wondered what you might suggest if you were in my shoes?

    1. John, truly this is a ‘better late than never’ scenario. I would suggest joining your local REIA groups and partner with someone looking for an underling to mentor. You can bring cash to the table, or energy to do the grunt work, or both. You can join BiggerPockets.com and contribute/learn in the forums as well. Real Estate is get-rich-slow for the most part, a lot like paper investments. But if you still have a W2/1099 job, you can parlay that money into inexpensive buy/hold investments using the BRRRR methods (before the term was popularized, it was simply buy what you can afford to remodel/upgrade, rent it out and refi to release the money for leveraging another property). Yes, the housing market is bloated in pricing now so deals are harder to come by. Yes, it will correct as all things do but will it be this year or 2027? And yes, you can make money if you do your homework.

  9. I used this chart as motivation for the last 8 years and just hit $250K today! That was after paying off 80K in student loans. I continuted to live like a student (monk) with roommates and biking to work everyday for almost 4 years to get those knocked out. I kept living like that for another 4 years and today i finally hit the 250K mark at 31. I still have some work to do to get caught up to the high end of the chart, but very excited to try and hit $500k in the next 4 years.

  10. First of let me thank you on all the content you provide for the readers. I find it hard sometimes for the generalization you make even with average numbers and such not considering personal circumstances such as family, student loans etc.
    Like for example what sense does it make to have a table for doing max contribution to 401k since day one in the workforce. I mean who can do that in real life unless they are well-put in every aspect such as loaded parents, inheritance, rich(which technically means they won’t need 401k). Do you think such numbers help to motivate or de-motivate folks trying to get ahead?

    Thanks and best regards

    1. Hi there,

      My goal is to show people what is possible if they max out their 401(k) over time. For me, if I’m behind, I’m always motivated to try harder and do more. I get pumped when I see what’s possible.

      But I can definitely see how some people might get them motivated if they are very far behind the chart. It depends on one’s personality and outlook on what’s possible.

      At the end of the day, we can only count on ourselves to build wealth and achieve financial freedom. So we all have to ask ourselves, how badly do we want it, and what are we willing to do to get it? Everything is long-term rational.

      I suggest people buy my Wall Street Journal, best selling book, Buy This,Not That and sign up for Empower to track their net worth and optimize their investments.

      But the fact of the matter is, most people won’t read my book and get hands-on with their finances. And that’s OK if they are also OK with not having as much wealth compared to those who do.

      All is good whichever path!

      Sam

    2. I have done max contributions and I did not have “loaded parents”, nor an inheritance, and was not rich. My father was a blue collar worker and my mother had a sixth grade education, was a housewife and worked as a security guard at the mall. I started working in a call center and worked my way up in my career. I max out my 401k and always have since my first job at 22, my on the job trainer told our class to max out our 401k and we’ll be glad when we’re 40. I had three roommates in an apartment at the time I started working, I am now well within the maximum for my age according to Sam’s chart. My spouse has a high school diploma and also worked at the same job I did when we met, call center. The point Sam is making is, slow and steady wins the race. We own a $800k home fully paid for and carry zero debt. We own our cars outright and take an international vacation once a year with our family. It is possible for two average “joes” to make it in life.

  11. Francis Calhan

    I’m 51 married with 4 kids. Only 1 of them is young and at school still. Neither of us have ever been high earners, always just scratching out a living. All our money went into paying for the house, vehicles and kids hobbies etc. Always living in the overdraft but just about keeping head above water. I started late but better late than never. Now 51, house is currently worth about £600k (had my entire finances restructured & scrutinised and I made better investment decisions courtesy of ferrochrome securities”) and only £12k left on the mortgage which should be cleared in the next 2 years, my dividend and earnings from annuities have made me pretty comfortable. I’m still going and the future never seemed brighter.

  12. Was feeling good about my retirement savings when comparing to others, to only be a bit disappointed at your targets. Mid 30’s with 2 small kids and my wife and I trying to spend as much time with them until they get older and aren’t as interested in us any longer. Will pick it back up in a few years I suppose… won’t ever catch up!

    1. Sorry about that. I guess it all depends on who you are comparing yourself to? On Financial Samurai, we are very aggressive in terms of saving and investing try to achieve financial freedom ASAP.

      But I’m sure you are doing great! So, please don’t let my charts get you down. Everybody has their own path to take.

  13. So for those people in their sixties with limited 401K funds. This has been the story for some time. So where are these people now? Broke, eating Alpo from the store, living in a tent?

    I read about all the coming financial Armageddon but seems to not yet have appeared.

    1. I’ve been reading about financial armageddons since I woke up to personal finance in the 70s. We’ve had a few bubbles pop, some resets, and continued budgetary foolery for all these decades. And yet, by most sane math models, if one doesn’t succumb to consumerism debt lifestyles even a modest but consistent rate of saving, investing and working can support their lifestyle.

  14. Thanks for the proposed guidance on how much to save in my 401(k) by age. It gets me motivated to save more because I now see what’s possible.

    To the people who are angry at the guidance, I encourage you to ask yourself how much do you really want to achieve financial independence. Just because the 401(k) amount is higher than what you currently have doesn’t mean you’re right and this guidance is wrong.

    This type of insular, fixed-mindset thinking is what will keep you middle-class or poor. You can shout at the internet for disagreeing with you. Or you can take action to improve your financial situation.

    A bear market obviously makes growing your 401(k) balance more difficult. But all the more reason to buy more shares now.

    1. No problem Andy.

      Yeah, it’s human nature to get angry and blame other people for our problems. But blaming other people for our problems won’t solve anything.

      Hopefully, this post acts as a guide to encourage people to save more, invest more, and pay closer attention to their finances. This is especially true now as another recession is coming due to aggressive Fed rate hikes.

      Let’s get in the mindset that nobody will save us. Therefore, we’ve got to save ourselves.

  15. Fredrick Hembeck

    This is a little out of touch. To max out 401k is $22500 in 2023. If one makes 60k, maxes out the $22500 then does another 20% of what remains into after tax brokerage account they are left with 30k to pay ALL other bills. These are not reasonable suggestions and anyone who comes here looking for Germaine info will surely glaze over when they get to that section.

    1. I use $18,000 a year as a base case contribution about after a couple of years of work. There are three columns in my chart.

      If you make $60,000 a year, then it is feasible to contribute $18,000 a year or even the maximum to $22,500 in 2023.

      You can get upset, looking at the 401(k) by age guide, or you can get motivated. At the end of the day, it’s your life and your choices to make.

      Related posts:

      Achieving financial independence making $40,000 a year

      20 side hustle ideas to make more money

  16. Josh Johnson

    I appreciate where the author is coming from and agree with the retirement breakdown by age. We live in northern CA and have a net worth of 1.3M with $882k in 401k and $135k of that being in Roth accounts. I’m 43 and my wife is 45 and we’d like to retire when I’m 58 and we should have $5M in 401k/Roth at that point, I max out my 401k and my does probably 80% of max and we max out our Roth IRA’s after that, $13k this year in 2023.

    Where I disagree with the author is when he says to ‘write off’ any pre-tax retirement savings as if they won’t be there and only trust in post-tax retirement, if that was a true belief then a person should only advocate for pre-tax savings only to a company match and then save only in post-retirement dollars after that. While I don’t trust the government AT ALL there are things beyond my control and my view is to control what I can control. If you’re going down the road that the government will change the rules on retirement income there’s no reason they couldn’t do the same thing with regular investments through additional taxes or others ways.

    The core principle of the author that is saving and living within your means I wholeheartedly agree with, just not some of the outlying beliefs.

    1. Hi Josh,

      When I say “write off” your 401(k) after maxing it out, it’s a mental trick so you keep building your taxable portfolio. Chances are high our 401(k)s will be there for us after 59.5. But The goal is to build as large of a taxable portfolio if you want to achieve financial freedom sooner.

      But if you don’t want to retire before 59.5, all good too. It’s nice to find a job you enjoy. Social Security is also a bonus, which we’ll get, but I don’t want to depend on in my models.

  17. Great post that is clearly wildly applicable to us all. From my perspective it is always interesting to look at expectations. As a physician we often make less than the median household income in the US for the first 3-8 years of our careers/training depending on specialty. We benefit by ultimately graduating into much high incomes following completion of all formal supervision and training (i.e. residency or fellowship). I think this highlights what is achievable if your set out with a ‘savings’ mindset and make it a habit. These habits turn into consistent growth, and this consistent growth turns into a sizeable nest egg (or more). For individuals in similar careers (specifically ones that substantially increase reimbursement later in life) we can often feel the need to catch up to our peers who began this process in their late teens or early twenties. Thanks for the great post as always!

  18. Michael Muccio

    I would recommend against contributing anything over the employer match in the 401(k). Taxes will be higher in the future and all you are doing is setting those assets up to be cut by 75%! Govt keeps printing money. Brokerage account, Cash Value whole life and maybe, maybe a VA with downside protection. But a 401(k), IRA or Roth, are garbage.

    1. So your crystal ball says an effective tax rate of 75% in the future so don’t take advantage of tax-advantaged programs now beyond their matches, and Roths will be garbage because… they will be taxed? Would that same crystal ball not also see taxable incomes including capital gains, interest, dividends and such also be taxed at 75%? Trying to get a handle on what this prediction offers benefit to not using tax-reducing accounts now (401k, IRA) when a dollar is more valuable than presumably it would be in the future.

  19. Max out your 401k at 20,000 huh? The average annual income for a household in my zip code is 28,333 according to the last census. Be mighty tough to live on 8,333 a year wouldn’t it?

  20. “With real estate, you can earn a steady stream of passive to semi-passive income well before age 59.5, which is when you can withdraw from a 401k penalty-free.”

    I believe this statement is false but please correct me. I have learned you CAN withdraw penalty free from your 401 K at age 55 PROVIDED you are not employed. This key point is rarely mentioned.

    How the Rule of 55 Works
    The rule of 55 affects how and when you can access your retirement savings. If you are between ages 55 and 59 1/2 and get laid off or fired or quit your job, the IRS rule of 55 lets you pull money out of your 401(k) or 403(b) plan without penalty.1 It applies to workers who leave their jobs anytime during or after the year of their 55th birthday but only applies to that last job you had so if you’ve had a long career at your last job, you certainly can withdraw penalty free.

    1. You can withdraw from your 401(k) early as well with the rule of 55. But it is also true that you can withdraw at age 59 1/2 from your 401(k) penalty free.

      But relying on our tax-advantaged accounts for retirement should be an afterthought. It should be considered bonus money instead.

      If you have to start withdrawing early from your 401(k), I would suggest you continue working on building your taxable investment accounts.

  21. Ugh, i was feeling pretty on track for this beginning of the year. Down 20% in my retirement porfolio since Christmas. (I’m pretty tech heavy funds… only my Apple stock has held up ok).

    Went from $320K to $250K in a few months .. painful. Oh well, I’m about 20 years out from being 62… so I got time i guess. Main worry is the stock market crash leading to a housing crash in 6months – a year. That would lead to a major recession.

    1. This is the best thing that could happen to you with 20 years left. This gives you the chance to contribute more at much lower prices. My personal advice is don’t try and time things, or think you can out smart the market. Just keep contributing!

  22. Great article! I’ve always maxed out my 401k contributions, but in the last year, I bought 2 rental properties. As I continue to learn more about real estate, what are your thoughts about not contributing to the 401k and instead diverting toward real estate, especially in these times?

    1. I think you should max out your 401(k) every year no matter what.

      You can also strategically invest in private real estate funds instead of going all-in on individual rental properties.

      For example, you can invest in Fundrise for as little as $10 and dollar cost average each month.

      I’ve invested $810,000 in private real estate since 2016 to diversify and earn more passive income. I have reached my limit in terms of the number of physical rental properties I want to own.

    2. 2021 was definitely a year to forgo investing in your 401K .. atleast since hindsight is 20/20. But since we are crashing now and down 20%..i would be plowing extra into your 401K now and forget about the rental properties for awhile. Rents are gonna pullback this year and housing prices are gonna retreat if the stock market keeps falling. Real estate lags the stock market.

      1. Just keep buying. Over the long run, things generally turn out fine.

        I still think real estate is going to hold on due to tremendous undersupply. But no doubt prices are cooling. Real estate could easily decline by 5-10% over the next 24 months. But if inflation peaks in 2022 and the Fed stops raising rates, real estate will likely continue to outperform.

  23. Michael Biasatti

    Great site, I really learn something reading it. Question. I’ve been contributing to my company’s 401K for the last 10 years. The match 8% (or 50% of the first 8%, I ‘ve never fully understood how that works). Last year I was finally able to contribute the max, hooray. That year they began offering for the first time a Roth 401K as well (no match, the match only goes to the 401K). My question is should I contribute half the annual max to each which for me would be about 18% total. I’d still get the max, but also be able to build up some tax free retirement holdings. I’d lose out of lowering my taxable income somewhat by reducing the 401K contribution though. I do fully fund a ROTH IRA outside of work. I’m 53 and several years ago divorced and lost half of my 401K so I’ve been trying to really amp up contributions, just want to make sure my logic in splitting contributions makes sense. Thank you.

  24. Hi Financial Samurai.

    After many years of abandoning doing anything active with my finances – when I was younger I bought some stocks, opened an IRA, Roth IRA, etc. – did a lot of the “right things” – for a few years now I’ve felt paralyzed. (I’m 52). I think it started in 2008 when my IRA and Roth IRA lost most of what I had saved up. It blindsided me – I took what I had left – 9K in the Roth and 5K in the regular IRA – and put it into cash and haven’t touched it since. I know my money is “safe” but I know this isn’t the best thing I can do with it.

    I don’t know where to start. But reading your blog has inspired me to start acting and start doing something.

    I am married and making about 70K after taxes. My husband makes about the same.

    Do you have some thoughts or guidance as to where I should start or what I should do, any next steps?

    Would appreciate your help so much.

    Thank you.

    1. Hey Gina,

      The issue there was you sold when the market crashed and then sat in cash while it recovered, (don’t feel bad, many people do this.)

      Yes, it’s super scary when the market crashes, but over time it recovers and has delivered an 8% return over the long run. Never sell in a crash, buy more everything is on sale.

      If you’re nearing retirement you’ll need a couple of years of spending in bonds so you can draw on that if the market crashes so you don’t have to sell stocks.

      Google a “three fund portfolio vanguard”, that will get you on the right track.

  25. Ernst Sigmond

    Age: 32 1/2
    Salary: 60k :(
    457B (government version of 401k): 10k
    Roth IRA: 40K
    Taxable Personal Investments: 14k
    Cash Savings: 32k
    Pension Plan: 2% at age 62

    Looks like I’ll be living my retirement out of a tent.

    1. Don’t worry too much! I didn’t even start my formal profession until 29 (I went to grad school then law school). You are in WAY better shape than I was at your age (I’m 49 now). Just save as much as you can, and apply for any and all promotions. Is your pension 2% per year at 62? That’s pretty good, after 30 years, you’d have 60% of your salary.

      At 29, I had zero in 401k and no other retirement savings, and over $200k in student loan debt. Today, 20 years later, I have no student loan debt (thanks to PSLF), had $900,000 in 401k/TSP, even though the first 8 years of working I got no match. I say “had” because due to the latest dip in the market I’m now at $840k or something. I did contribute the maximum and was aggressive in my allocation.

      But it shows that you can save a ton in your 401k just contributing the max every year and not even getting a match for 1/3 of the years. But given your lower salary, my main suggestion would be to try to get promoted to higher-paying positions if you can, maybe take additional educational courses if you need to.

      Great job so far, by the way!

  26. Hmm, I’m a bit behind because I’m 31 and only have 150K in the 401K. I’m a high earner and can put the full amount in each year. Was wondering if there’s any tips/tricks to “catch up” to the 500K mark by the 35 year-old mark?

    Perhaps through some 401K backdoor (if any exists), or some optimal way to pick funds in 401K?

    Or would you say chasing alpha isn’t worth the risk in a 401K?

    Kind Regards,
    Angie

    1. Angie,

      You are not limited to the 19,500 a year in a way… you see in the chart that the maximum allowable total contribution to an employee retirement plan for someone under 50 is actually 58,000. …. You can put in 19,500 of your own, say in a Roth 401K, then between employee match and your additional after-tax contributions with an immediate Roth conversion, you can essentially put 58,000 a year into the a Roth 401K. I hope that makes sense.

    2. I think your matching contributions is way off. I agree that the employee contribution rate is OK, but I never have seen any employer offer more than a 100% match up to the employee contribution of 5%. This is far less than the $58,000 stated. All calculations from there are meaning less.

  27. So is that part about the gov. changing the rules a real concern or hyperbole?
    Because of one thought the gov. was really going to raise the age and impose a 30% penalty, wouldn’t the correct response be to not open a 401k at all, but simply your own private investing account. 30% penalty would more than offset any tax advantages

    1. Should hedge and do both IMO. There’s probably a 20% chance the government does change the 401k rules not in our favor during our lifetimes. Just like with Social Security. But that also means there’s an 80% chance it keeps things generally the same.

      But I always believe in taking advantage of what government benefits are provided and focus on taking care of your own finances.

      See: After-Tax Investment Amounts By Age So You Can Comfortably Retire

  28. Does this average of 200k of retirement savings take into account of all the 401k’s that have been left with a previous employer? This is where in reality the average is probably higher. If one changes jobs 2 or 3 times and leave few hundred thousand in each, if combined, the average will be higher….thoughts?

  29. Age: 51, single, no kids
    Salary: 64k/yr
    401k: 560k (contribute 25%)
    ROTH IRA: 10k (stopped contributing, wish to max 401k)
    Investments: 1k
    Savings acct: 10k
    Pension: 50k at 2.8%/yr
    HSA account: 3k
    FHA account: 30k
    Cryptocurrency accounts: 110k
    Home mortgage balance: 65k
    Auto loan: 13k
    Desired Retirement age: 55yo
    Retirement state: Texas

    Am I on track?

    1. Alyssa Johnson

      Looks like you are on track moneywise, but just curious, what are you going to do with all that money? What gives your life meaning? Has it been enough to play the money game and collect a big enough pile of gold coins for “the end”? I’m nowhere near this, and there’s no way I’ll ever catch up, so I guess I am focusing on what priorities in my life are important. I can die happy homeless in the streets if I can find meaning beyond hoarding $$$. I am trying to be smart, but there’s no way I’ll ever earn enough to get this kind of retirement income. I’m an environmental and data scientist with 3 kids and my husband is a carpenter. I wonder what will become of us folks who are doing practical things like building houses and restoring the environment? Are we doomed because investors and programmers are dragging prices up? Do you all ever think about that, about who is actually doing things of practical value and what will become of them and what will be left for you besides numbers on a screen?

      1. this is not super helpful IMO Alyssa. For poster Hoping, you don’t say if you are male or female but I think a common planning age is to plan to live until around age 80. If you retire at 55, you need 25 years of savings. Have you put together your retirement costs? How much will healthcare cost? Will you pay off your mortgage and only have upkeep/taxes/etc? Will you take vacations and how much per year will that cost? Will you stop buying fancy work clothing and so your clothing budget can be a little less in retirement? These are the types of questions I’d ask to budget what I’d need for retirement and see if I was on track. I hope this helps!

      2. Donna Wanner

        Agree! But instead of criticizing what the “money hoarders” are doing, and what they value, let’s just focus on how helpful and soothing this train of thought is for those of us who do not have a wonderful retirement plan. We have traded it for daily meaning in our jobs, which has its own type of value. Not better, not worse, just different! (I am a teacher.)

    2. I think you should try the financial checkup site he recommends. I think to retire you need a little more…I was hoping to retire at 62 (when my kid graduates college) with 2 million in 401k. However, I don’t know your expenses. But with 100k in crypto…is that still accurate because I saw 50% losses recently but should come back up. What coins do you have? I just started buying them last week.

  30. Can you re-do the article with different goals for different people? As an example, as a single man living in rural South Dakota you can retire like a king with $1,000,000. Can you show us the goals based on cost of living and family situation, maybe a spreadsheet?

    1. Exactly. Moving to a location with no mortgage, free healthcare, no property taxes and an overall lower cost of living. Ireland I mean. And by referencing the 4% rule, the capital is not necessarily running out after 25 or 35 years. Potentially increasing.

  31. How does COVID experience and lengthy moratoriums on non-paying rent evictions alter your recommendation on using rental properties for passive income?

  32. Oh wow, thanks so much for giving us an insight of how much you should have in your retirement age by age. Whilst I’m a little far off the mark (behind), I’m lucky I have investment properties that grow in value as well. Regardless, I’ll always work hard to make sure I’ll have a comfortable retirement. Thanks so much again for this post!

    1. If you have no debt, then just add up reoccurring costs, its probably less than 25K a year. Groceries , eating out, utilities, Insurance, internet, cell phone, you get the idea. Anything above this is gravy.

  33. least squares

    Hello,

    General question for the group: Based on Fidelity’s rule of thumb, “Aim to save at least 1x your salary by 30, 3x by 40, 6x by 50, 8x by 60, and 10x by 67.”

    What is meant by salary? As salary isn’t defined. Is it your desired salary in retirement, or your salary of your highest earning years, or your starting salary, or your salary of your last working years, or the average of it all?

    Thanks!

    least squares

    1. Salary ‘now’. Save 1x your 30s salary by 30. Save 3x your 40s salary by 40. Etc. so 10x your final salary by 67. FWIW, I never paid attention to this particular rule, but many people need a bit of a slap in the face to wake up and do the hard work of saving early.

  34. RetirementReady

    I have $190,000 in my 401K plan and in my very early 30s. Am I on the right track for retirement? I want to retire at age 55.

    1. Calculate how much your taxable investment portfolio and your 401(k) can generate an income with a 1%, 2%, 3%, and 4% withdrawal or return rate. Then compare the numbers with your expected expenses. I will just run the numbers through retirement calculator by Personal Capital. It’s the easiest.

  35. Hi Sam,

    I’ve been visiting your website for at least a couple years, but this is the first time I commented. Just wanted to say, “Thanks for all of your hand work and thoughtfulness you put into your articles. It’s been insightful and helpful.”

    I’m 42, married and 3 kids. Income 267k. We’ve slowly saved about 1.5 million in all accounts (401k, 403b, 457, Roth, HSA). 325k in equity in our home and have 150k more to go on the mortgage. 1 rental property, but it has not generated much income.

    I’m trying to get to retirement when my youngest goes college which is 12 years from now.
    When I crunch the numbers, I’m still pretty far away from FI. So I need my day job. But I have to admit, it’s a big grind. On the other hand, I feel fortunate as it pays well and offers a good pension. Any advice or suggestions motivating myself to keep going for another 12 years?

    1. Jfc bunch of #FirstWorldProblems whiners on this forum. “I only have a million dollars, what am I going to doooo?”

      1. They are one culpable legal tussle or a healthcare incident away from poverty, just like the rest of us. Attempting to maximize one’s ability to avoid or soften their future existance isn’t a bad thing. They aren’t dissing the poorer segments of our society. They’ve actively saved and lived within their means without arrogance.

        If you led with ‘retirees tend to die of boredom, so don’t go there’, I could see the legitimacy of your snark. But why?

        1. Thanks BadDNA,

          I grew up poor and I never want to go back to it and I don’t want it for my kids, ever.

          On weekdays as a kid, I only had one meal a day, and two on the weekends. And my two pair of pants didn’t fit me. I hated that. So, I made choices to go for a job I don’t love. I’m grateful and I feel lucky to have opportunities that could pull me from that. But, on the other hand, I feel like I’m wasting my life.

          1. You know I’m in a similar situation as you though the numbers are slightly different, and I only have 2 kids. With that said, It’s hard to view another’s life to make this call, but I think you need to take a step back and appreciate what you have accomplished so far. Having a spouse, and 3 kids is a dream to many people. Having the ability to make educated decisions and the fortitude to push through obstacles to provide a quality life for yourself and you family is no small feat. I think if you are of the opinion that you are “wasting your life”, perhaps you need a new hobby. I would suggest maybe getting two of them. One hobby that allows you to focus time and energy with your family, wife and kids. And another hobby perhaps for yourself to balance out the stress/tension from your work life. I think the fact that you have a line on the time needed to get you to the “finish line” of retirement is huge. 12 years can pass in a moment, if you don’t stay focused. If you don’t think so, just look at your kids and think about their birthday 3 years ago (as applicable). What has changed, what events have you and your family gone through since then. I don’t think you should feel like you are wasting your life, if you are able to have the life you currently do. Children are a blessing (and surely a stressor at times as well), and should not be counted lightly.

            Also, think of the success story you are living. You came from a harden past, and were able to get to a high value job, and find balance. You will surely be a motivator for your children, and you are likely the catalyst for your family’s outlook for generations to come.

            Also, one thing to remember… Life goes in stages. When you do finally pull the trigger on retirement, and your kids have gone off on your their own adventures, you get to open the next chapter. You will have a long life (hopefully with no medical issues) ahead of you to do whatever you want. I think once you no longer have the job taking up 40-80hours a week of your life, and you gain all that free time back… you will find it has all be worth it.

            Picture this… You are set up to potentially be able to spoil your kids’ kids and that alone would be considered a great life in my mind. Buy them each 5 pairs of pants!

            Keep your effort on the path ahead of you. Any time you feel like you are wasting your life take a quick look back. You have conquered mountains. Be happy with where you are and where you are going.

          2. ReformedSailor

            I mean, if you’re smart enough to get a job that allows you a 267k salary and you’ve saved 1.5million by your early 40s, you’re clearly smart enough to figure out how to maximize your future self. Really, there aren’t a ton of other options for you unless you make more money/save more, spend less/take more risk, find a less stressful job etc. The point is that you are already light years ahead of such a huge % of both the US and world population that you don’t need to worry. Even if you did have a catastrophic medical emergency or legal trouble, you’ve got a skillset that is marketable and can quickly go out and get paid for those skills. So yes, I agree, someone posting about being financially insecure with a nw of 1.5million really seems out of touch. An American problem for sure…

        2. Todd Jacobs

          “They are one culpable legal tussle or a healthcare incident away from poverty, just like the rest of us.”

          What a ridiculous, bizarre, and extremely naive comment. They have $1.5 million already in retirement accounts, so no they are not just like the rest of us. And please tell us how that $1.5 million can be pilfered away in a “legal tussle”, whatever that is. And it’s obvious that these people have health and life insurance.
          And the yearly income is $267,000. Again, that’s no where close to “the rest of us” here in the U.S.

      2. He he, I know what you mean, but with 3 kids … you never have enough saved. I think he’s doing really well and knows exactly what to do upwards from here. It’s inspiring to see so many people focused on getting their kids into the right financial tracks and knowing how to save / invest money, not just squander it.

      3. You’re right. Insecure people who want a pat on the back and need to hear “Wow you’re doing great!”. I’m not disgruntled, I have a nice 401K and am nearly on target, but these people who list huge numbers then ask “am I ok?” are so lame. Probably the same annoying people that back in school would ask “is this gonna be on the test?”.

    2. Not sure where you live regionally.. but if you make $267k a year, paying off the remaining $150k of your home would be like a 2 year or less feat. If your mortgage is paid and you have $1.5 million saved up, seems like you have reached financial independence already to me. That’s $6,250/mo of no where to go because we have no bills forever income. That’s more than I make working 55 hours/wk with a licensed professional career. And I still have $60,000 of student loans, a house payment by myself and a kid. I think you could quit your day job today if freedom was really that important to you.

  36. Just FYI for the folks who insist that their tax rate will be lower in retirement, I retired a couple of years ago and my net federal income tax liability, expressed as a percentage of my taxable income, is within about 1% of what it was prior to retirement. In other words, my tax rate hasn’t changed. So be careful what you assume. You probably can’t delay enough taxes to offset tax-free growth for 30 years in a Roth IRA stock fund.

    1. Can you share your income and tax rate while working and income and tax rate in retirement?

      Most people will make less from their investments and retirement then from their careers while working.

  37. My wife and I already max out our 401k contributions and save 20% of our after tax and 401k contribution net income. We are in the process of ratcheting up our saving to 50% as you suggested by increasing 1% a month, but that has just started. My question is what percentage of this saving per month should we invest in the market in a standard after tax trading fund?

  38. What’s your take on Roth vs Traditional 401k? I’ve read about a couple of your articles on the Roth IRA, but haven’t been able to find anything specifically on the 401k. Right now I’m getting taxed at a marginal rate of about 35%

      1. Also it you are taxed at 35%, I can assure you can not put money in Roth because your AGI will be above the cut off value .
        Am I WRONG?

        1. Backdoor roth IRA. It’s how the wealthy (like the lawmakers who made this rule) are able to still contribute.

      2. Hey Sam, I think most would agree that 35% tax rate is high to consider a Roth. However, for those that are in a more reasonable tax bracket and are maxing out both a 401k and IRA, doesn’t it make sense to put some portion of the 401K in Roth? The reason is, you can actually get more money into your account that way. If you are not at the point of maxing out your 401k this doesn’t apply, but if you max it out you can have the full 19.5k available to you at retirement, versus only maybe 2/3 or 3/4 of that amount if you made traditional contributions due to taxes coming out. Yes you have extra money available now if you do traditional, but if you don’t have other tax advantaged options after maxing out a 401k and IRA, I think putting at least a portion of the 401k in Roth makes sense to get more money in the account. Brokerage accounts are of course an option, but we should also be taking advantage of the retirement vehicles in any way we can. Especially if you aren’t sure what age you want to retire, and may ultimately opt for a more traditional retirement at age 60 or later. Just my .02

            1. Sam / Brian,

              One approach could be to maximize pre tax contributions for 401K and then put additional savings into a Roth 401K. I believe you can withdraw the Roth contributions if you need them in the future without penalty (return of principle) before retirement age, but if you don’t need them immediately, you can withdraw them instead in retirement without tax or penalty on both the principle and any earnings. Essentially, option value on a portion of a taxable account. Instead, I believe if you invest beyond the $19,500 pre tax contribution in a taxable, non retirement account you would have ready access to both the principle and investment earnings without penalty, but would owe cap gain tax on the earnings. While principle withdrawal is also tax free in this scenario, if you keep the balance beyond retirement age (59) you would still owe cap gain (vs. Roth). So I wonder if funding a Roth 401K vs. taxable account is a way to maintain access to some capital (the original principle) but maintain the option to take everything tax free in retirement. Thoughts?

          1. I want to thank you for this post in general Samurai. I just cannot possibly understand why the networth of someone at age 60 is so low. I plead with my younger relatives, PLEASE max out a 401K your whole life, no matter what. Have to sell pencils on the street or eat generic Ramen noodles, or your kids have to go without haircuts? Who cares?… fund the 401K before anything. Even someone without the financial advantages of a college education would easily have 3 million dollars by age 60… and that is if you did not one other thing in terms of savings. I know that “some” people have hiccups in live, but it seems boggles my mind how little people manage to accumulate.

            1. I don’t think anyone with a good job that offers a 401K would have to resort to eating ramen noodles. More like cutting down on eating out, subscribe to only 1 streaming service instead of 4, stop needing to have the latest cell phone. Those things right there will allow a decent contribution to a 401k along with even a modest company match.

  39. We have a 529 for our child, but then took about $200k from our savings and worked with a financial advisor to build a zero-coupon muni bond ladder which begins to mature in January of her senior year of h.s. and ends about the time she should would be in her final year at a 4-year school. This way, we have options should she decide to pursue a different avenue of education or path. If she is talented enough to get grants/scholarships, then that money can be diverted to after-uni endeavors like starting her own business or even use it for a down payment on a home. And if she ends up being a complete burn-out (god help me) the money stays with me.

      1. ??? – Isn’t a 529 dedicated to education? As I understand it – if not used by the child then must be used by the parent but cannot be used to start a business. And if not used for education then penalties apply. Has something changed?

        1. You can also redirect to another child for their education expenses. But to answer your question, I believe you can always take out whatever money you put into the 529, with no penalty, but you forfeit the gains that the money you put in has acquired if you do not spend it on education.

          1. Dana, my understanding is that the gains are not forfeit, but they are taxable and there is a 10 percent penalty unless special circumstance applies. Some older information here:

            savingforcollege.com/intro-to-529s/what-is-the-penalty-on-an-unused-529-plan?sfc_wp=true

          2. Per Schwab:

            If assets in a 529 are used for something other than qualified education expenses, you’ll have to pay both federal income taxes and a 10 percent penalty on the earnings.

  40. Thanks for this Samurai, this is great advice.
    I’m currently thinking of the best advice someone like you and me from Wall Street background can give to the average saver during COVID-19 so that she/he can deploy savings for long term returns while significantly reducing risk.

    After having spent over 10 years working for the most prestigious names in the financial industry and having witnessed first hand two large financial stress periods (the Global Financial Crisis and the European Debt Crisis) I see that the most important are probably:

    1. Buying gradually on the way down
    2. Do not chase an upward trend in a bear market
    3. Do not try to time the market
    4. Invest, do not speculate
    5. Avoid binary outcomes
    6. Look for financially resilient firms
    7. Cash is King
    8. Diversify in other assets including currencies, commodities and high quality debt products
    9. Stay informed but remain cautious
    10. Duration of the coronavirus pandemic is key

    I’ve explained more in detail how to deploy savings in my new blog:

    Stay safe & healthy,
    BoW

  41. I’m late to the game as I’m just out of school finally and starting a real job at 30. I have VERY little experience with anything financial and I really would love to be more literate and comfortable with the subject.

    I only have one year of maxed out roth 401k, 5 years of maxed roth ira, 1 year hsa. Based on this chat, I’m SUPER behind. However, I keep reading people talk about, and you talk about, saving at least 20 percent of what you are making. However, I’m not certain where or what this is referring to. On top of the 401k? After you max your 401k out, (and I am now just out of range to contribute to a roth ira) , where are you suppose to be saving for retirement? I think this is different than other sorts of passive income like brokerage accounts/investments, but I may be wrong. Any enlightenment?

    1. AZ — there’s no one recipe that’s a fit for all of us. Offering something for you, particularly without having a LOT more detail on one’s lifestyle and circumstances (and stuff you might not want to share even as an anonymous web forum) — that’s hard. You are already shooting for self-ed, and that’s powerful. If you don’t have a lot of time, many folks like me will suggest you (and your S.O.) hire a reputable fiduciary CFA to map out a more personal plan after working up cash flow and balance statements. 20% is a guess. A hell of a lot better than 6% or 0.03% or going deeper in debt every year like a lot of the country. Or maybe you’d be happier at 32%? It’s up to you, really.

      However – all that boiler plate advice aside, clearly you are already well on your way just by being curious. Wish I was at your age. I don’t see where you mention having a family/S.O. — assume all of the below applies you as a family unit. I’m going to offend at least on reader here with this, but I’m going to throw it out anyway: If you and a spouse cannot agree on a money plan together, the relationship is doomed. Budget in the split/divorce costs now. Spouses and dependents play into a lot of decisions below. So in a couple of paragraphs, you might find a digest of this website and others to say:

      Do you have a ‘safe’ emergency fund that could cover your cost of living for long enough to get or create a job to replace your current income source? This comes from your cash flow statement. Three months, 6, 12? If not, why not? Some like me like CD ladders for the relatively higher interest rates, minor fee to cash out early, and FDIC-insured. Even $200/mo to get one to >$25k in a decade. Puny? It’s more than doing nothing and anyone making more than $25/hr can easily find that money. The point is crafting the habit.

      Others will say save as much as you can comfortably in any tool available. Have debt? What kind? Student debt sucks no matter what — and it follows you beyond bankruptcy to the grave — consider paying it off first unless there is something with higher interest rates. Debt that costs you more in fees+interest rates than what your diversified non-tax-advantaged investments generate should be paid off prior to investing further. If your investments are making more than debt, maybe service debt enough to make the minimum payments but all discretionary money goes into investments. Even that has caveats: maybe debt causes your undo psychological stress, and being more aggressive with it might do your mental health more good than some kind of economic optimization math.

      Bummer that you’ve ‘earned out for future Roth IRA contributions — that’s a good kind of income problem to have. Depending on your tax situation, maybe a Roth conversion ladder fits your needs. You are maxing out any 401k match? At least that amount should be the next line-item for your budget — free money. Is a Roth 401k in your best interest, or a ‘normal’ 401k for tax purposes? The normal 401k reduces your taxable income now — maybe that will save you more money than you would make than when you start dipping into the Roth 401k at 59-1/2. What can go wrong? Well, what kind of gambler are you? Assuming you are a US resident, do you think today’s tax brackets will be higher or lower than the future? Kind of hard to see how the government can continue kiting its debts in the future without higher taxes across the board or reduced support systems — but hey, anything can happen. Nothing stopping you at just the match rate contribution, of course, but you might want to pause on that until you max out your HSA (below).

      Your HSA investment account is maxxed out annually? Or did you only get a HSA _savings_ account? That decision is all about risk, too. Are you the type of person to leave your HSA balance alone when you have qualified bills that you could pay out of the HSA account? You might be using the plan as an investment vehicle, collecting all of your medical bills over this year and into the future in a shoe box, to reimburse your out-of-pocket expenses down the road. Maybe you’ll use that payout to buy a car or take a vaca with the S.O., family or friends. Lots of ways to play that, but HSA accounts are powerful in that: it’s an annual tax deduction for all HSA contributions up to the limit, earnings are tax-exempt when eventually used for qualified medical reimbursement, and you can use the account for non-medical ordinary taxable income in the future — if you live to 65.

      Got kids? A 529 or Coverdell might be worth exploring to offset the pain of paying for education. There are plenty of other ways to make private schools, public ed and higher ed easier to swallow: scholarships/grants/work-release (um, work-study)/working for the uni where employees get free/discount tuition/etc. Minor children with earned income can open their own Roths and contribute — using it as a savings account to draw the contribution principal out for edu costs and magically having a little left over for that 59-1/2 magic day.

      Maxxed out your contribution for the HSA? Then decide if you want to jack your 401k up higher, or invest in normal investments that are not tax-advantaged, or save a little for fun+living now (or do all three).

      There are other tax-advantaged angles to play with your investments — the above is only a portion. If you 401k+other investments/savings are at your desired % of your income (20 or otherwise), and you find you are happier now than you were yesterday, then you are doing it right.

      1. Wow thank you for such a long and thoughtful reply. To be honest, I’m not comfortable with hiring a cpa, even if fiduciary and being able to completely trust them. So, if I can do it myself. That is my goal.

        No SO (not sharing any accounts, all money separate, no joint money decisions), not married, no dependents. I am pretty sure I’ve saved enough for an emergency fund mostly in high interest savings accounts. I’ve never done CDs and will have to look into it, but I feel like investing would probably be better?

        Lets say I’m debt free.

        Is a Roth conversion latter, like a backdoor roth? I’ve heard of those, but are uncertain of how they work and how to do it. I maxed out my 401k last year, otherwise I have not had a 401k. There is a match, but I believe that works they match up to a certain percentage of what you put into it? Correct? So, it then becames more than the 19500 that you can contribute. I plan to max out my 401k from here on out. I picked roth because I foresee a rise in income taxes in the future as these are historically the lowest we’ve ever had as far as I’m aware (since income tax became a thing).

        I think I only get a savings account? How can I find that out. I did max it out and plan to each year. I’m really healthy so I plan on not touching the savings and just paying out of pocket if I need to for expenses.

        You mention jacking up your 401k higher. How is that possible if there is a maximum contribution limit?

        Can you elaborate on your “or invest in normal investments that are not tax-advantaged” statement? I think this might be the crux of my initial question.

        Any elaboration on other tax-advantaged angles statement?

        Thank you for your knowledge. It is greatly appreciated.

        1. I’m not sure I would write off a CFA or CPA completely — you are only buying their opinion based on a deep-dive into YOUR circumstances. But you certainly don’t need them. Self-ed will get you where you want to be, too.

          No SO, no kids and no debt. That’s a lot of typing the rest of us don’t have to do :)

          Yes, the Roth conversion is a lot like the backdoor ladder. Look into it carefully, ‘though. My wife does it, and does it well — but we are really sticklers for not feeding the IRS any more than necessary, so we meter in our conversions.

          401k — yes, most companies will match a few %. It is an enticement to join in on the savings. The maximum contribution amount changes most years. In 2019, it was $19k. If you are over 50 yrs old, there is a catchup contribution of $6k. The employer match is factored separately. I see on a website that the TOTAL employee+employer contribution was $56k. I didn’t mean to suggest you can go above those limits. Sorry — my diatribe above wasn’t proofed. BTW, what you choose in that 401k matters, too. I’m lazy and happy with what is offered to me in terms of a vanguard target date fund. I don’t use my physical age for it — I use the furthest one out (2060) to keep the equity/bond decay curve as far out as possible. I’m not in the camp where it is wise to invest into individual stocks (and certainly not company stock) in a 401k. Maybe a separate stock purchase plan if you can get shares at a substantial discount, but I fall into the camp of not betting on your employer for your ‘retirement’ funds. I also love index funds that have broad diversification and very low E.R.s. That’s just me, ‘though. Oh — have you set your beneficiaries on all of your accounts? Do you have a Will, POA, medical directive and other end-of-life paperwork in order? Sure makes life easier on the folks left behind after your demise. Sorry — that was random, eh?

          For the HSA, you can usually have your HSA account with any legit bank. My credit union only offers a savings account, paying basically MM savings rates. Old National Bank is one example where they offer both a savings and an investing option for HSA funds. Yes, you can invest your HSA funds into — you might have guessed it with me — a handful of diverse domestic and international low E.R. index funds with some similar bond funds.

          Out of order of topic here, but I like CDs as my emergency fund for a couple of reasons: they are a tiny bit more difficult to dip into (like, 5 minutes more of my time — but that is a barrier against impulse spending :) ), and they pay better than money market savings accounts. I like maximizing my yields where I can. At Ally.com, a savings account pays 1.6% , a money-market account pays 0.75%, and a 60mo CD pays 2.15%. Yes, I do chase yield up to a point. Having 5 of the 60mo CDs in rotation, rolling in the accrued interest to the next January CD, keeps money accessible annually for some other use, or to be recycled into the emergency fund. It’s pretty much a no-brainer — I keep one year’s expenses wrapped in it. I also look at it kind of like a fraction of my ‘bonds’ holdings — something there when the market goes south. Assuming that modern portfolio theory functions in the future as it has in the past.

          For folks who haven’t built up their emergency fund fully, they can have $100/mo or $200 or whatever amount xferred from their checking or savings account into an Ally savings account, and whatever has swept into that account by January is used to open a 60mo note. Rinse and repeat the next year and so on. When that first 60mo cert matures, it is swept up with the rest of the savings acct balance into a new 60mo cert. There are a hundred+ ways to craft this tool. The takeaway is to automate as much as one can, touch it rarely, and make (even small) psychological barriers to behaviors that are self-defeating. I’ll take 2.15% over 1.6 or 1.75% any day. Especially on an insured tool that I can break for a few months’ lost interest any time I am sufficiently motivated. If someone scoffs at using a CD ladder, this is a safety net, a parachute, not a tool to become independently wealthy.

          As for ‘normal’ investments, a simple trading account with Vanguard might be all you want or need for trading. I’m a buy/hold person — can’t speak to stock picking or daytrading. I diversify with broad index funds, reallocate annually. That appeals to my nature. There are some intriguing models for doing so with a few funds and maximizing returns (Paul Merriman has some fun podcasts about this), but I’m happy with boring stuff. If I make decent money/gains/dividends/etc. off of taxable accounts after I have fully funded my tax-deferred options, I guess I’ll just have to suck up the ordinary income rates and pay the IRS their fraction. That is what I meant by ‘invest in normal investments’. Hope that clarifies whatever confusion I created.

          If I ever quit my ‘semi-retirement’ job I have now (while I wait for my last child to finish grade school), I will likely explore real estate again. There are plenty of tax-advantages to having real estate in your portfolio, having others pay your mortgages (you use the bank’s money to buy your empire and tenants to build your escrow). It’s one of many examples of your own businesses working for you.

          I do invite you to find what appeals to you most for self-education. Reading stuff like ‘Your Money or Your Life’, ‘Simple Path to Wealth’, and a slew of other books will offer affirmation to your ideas or spark new ones. If you had debt, I’d suggest Dave Ramsey — I have issues with his yield math for investments (he is way more optimistic than I am about the world and what you can get out investing), but people like him or Suzi Orman offer excellent pedestrian info too many people don’t follow.

          Sam has a great website here, but he has a unique perspective based on where he lives and his relative wealth. Others have made tremendous strides on 1/10th of his income, living where housing/food/living expenses can be had for far less than his City-by-the-Bay. Radical Personal Finance (Josh Sheets) has a lot of crazy ideas, many that work very very well. Paul Merriman is interesting, as are the guys at Stacking Benjamins, the Money For The Rest of Us fella, Mad Fientist, Money Mustache, and many many more. Some will grate on you, some will seem whacked. But you’ll learn tidbits from all of them.

          I’ve prattled on far longer than I should have. Note that all of the above is simply my opinion, and is offered for ideas, not financial advice. I am NOT a CFA and not offering financial guidance beyond a bit of education. Kind of like Sam’s website here :) Do reconsider using a fiduciary CFA down the road as your fortune builds. There is a LOT that someone qualified and a good perspective on your total financial picture can probably offer — even if it is only confirmation that you are doing everything right (for several hundred dollars and some hours of your time with them). If they aren’t selling you something, they could be valuable.

  42. Andrew Martherus

    I think you’re underestimating the power of a Roth IRA. You suggest that no one should contribute to Roth unless they are already maxing their 401k, but that assumes they are taxed more now than they will in retirement. Right now my family is on one 5 figure income with 1 kid. Our effective tax rate is less than 5%. I won’t beat that even if I’m living frugally in retirement. It makes way more sense for me to take advantage of the Roth tax situation than to contribute more than the company match to a 401k.

    This also brings up the point you made about an taxable brokerage account. If you’ve been contributing to a Roth IRA and you retire before 59.5 years old, you can start withdrawing your contribution (not your gains) from your Roth IRA and live off of that until you hit the 59.5 threshold.

      1. Would it not be just as prudent to contribute to the 401k up to the match, then contribute to the Roth IRA up to the limit, then with any residual that can be afforded, push the 401k up further? Seems like the best of both worlds — particularly with an uncertain tax future.

        1. Why would you prefer to pay a higher tax rate … there’s no way you’ll be earning more money when you retire.

          1. Because the very low tax rates presently are unsustainable. We either pay for this country now, or we pay a lot more later. With politicians unable to do math for the last 40 years and the voters buying into Reaganomics BS, ‘later’ is more and more a certainty.

            Spreading one’s future investments (or ‘retirement’, if you want to use that word) across multiple tax-advantaged tools seems the smarter approach. Will Congress go after both higher future taxes AND changing the rules on the Roth? Who knows.

            Roths are Tax-Free (for now). As the annual contribution remains a relatively small number with a Roth, putting aside that amount (after taxes) isn’t much more than some of us pay in beer annually. If someone has the ability and current cash flow to ‘max out’ a 401k (my employer allows up to 50% of salary to be contributed), then the Roth will remain a small fraction of total annual contributions. Sam lives in a rarified world of high income. Many reading these blogs make <$100k and have to make decisions about contributing to this OR that. They don't have income levels that allow the maxing out of IRAs. My approach is to bank on both tools because future tax burden is uncertain, and any rise in future taxes favors Roths.

            Here is another take. Read it to its conclusion:

            exceleratedfinances.com/blog/2018/4/6/401k-or-roth-ira-whats-better-long-term

            1. We do NOT have a low tax rate problem. We have a high government spending problem. As with most personal finance issues, it’s an Expense/Spending problem, not an Income problem.

              There’s nothing low about tax rates above 20%. Many of us pay 30%-50% in taxes. That’s ridiculous.

              1. That’s another way of looking at it. I invite you to delineate the federal spending you would like to cut, ‘though I’m not sure I would disagree with much of it. Particularly since the adoption of Reaganomics and its abject failure to ‘balance the tax cuts and additional spending with income’ swill. The last 19 years have been horrid and the last three in particular shows what Washington really thinks of fiscal sanity. I do wonder about your effective tax rate is, even if you are in a ‘37%’ bracket. Sure, it’s none of my business, Hobo, but my peers in that income range pay nothing close to their advertised bracket.

                So to avoid all of our taxes going to interest payments like the kiting fools we’ve thus far been, what do we cut?

                https://upload.wikimedia.org/wikipedia/commons/e/ed/2019_budget_outlook_CBO.png

                1. “Effective” tax rates get thrown around a lot. Yes, everyone’s “effective” tax rate is always lower when averaged, but that does nothing to negate the fact that every “extra” 100K you earn once you reach the 37% tax bracket is taxed $37,000 — period.

                2. For those in the 37% tax bracket, let’s be clear where that puts them. The envious 1%. As the government’s spending on all fronts feeds the likely revenue and profits directly and indirectly of this fortunate 1%, and protects them, and provides them with the relative luxuries of existing within the borders of this nation, it is sometimes difficult to sympathize that they have to pay $37,000 for every $100,000 they earn. More than a quarter of their fellow citizens exist totally on $37,000 a year, or far less.

                3. >>The envious 1% … More than a quarter of their fellow citizens exist totally on $37,000 a year, or far less.

                  Envious, huh? I can promise you the bottom 25%, and probably the bottom 75%, hasn’t worked and sacrificed anything close to what I have to make it into the 1%. Unless someone inherits money, reaching the 1% wasn’t given to them. It wouldn’t be the 1% if it were easy.

                4. Mr. Hobo Millionaire –

                  Wow. Just, wow. The bottom 75% have worked and sacrificed just as much as you, in many cases, likely far more. Do we now coin a new term, ‘the 1% privilege’, referencing a 1% blind ignorance to the conditions within which others exist?

                  Were they afforded the opportunities (or plain dumb luck) that landed you better off? Did life events or circumstance cost them more, events that haven’t yet befallen us?

                  Granted, we may have had a different education (scholarly and life) that aided our current status. A significant fraction the bottom 75% may have done just as well as we have if they were exposed to a different culture of resource management, personal values — or simply opportunity. My personal experience with many working folks in the bottom 75% is shocking: they simply didn’t have family or neighborhood leadership that exposed them to the ideas and behaviors that grow or retain wealth. Their ignorance isn’t their fault, nor are they less capable than you save for a lack of knowledge base. For many of them, when they are taught skills and concepts Sam promotes, or any similar resource, most do better. And it is an ugly truth: as white males in the U.S., we’ve historically had a huge leg up on females and minorities out of the gate. Many hard-working individuals in those camps remain systematically underpaid even by today’s standards.

                  I’ve read your blog and your history on your website. I don’t wish to bash you for what you have accomplished — you’ve done admirably, and tell a great tale of what is possible. But I implore you to reread your statements. I don’t think they reflect who you likely are as a person.

          2. JB
            I am making more in retirement than working. I do agree that most probably will not and my “retirement” was early and now I manage my money. Once I hand the cash over to someone else, maybe I will no longer make as much.

  43. Do we combine our 401k and Roth into these recommended numbers? I have 240k in 401k and 65 in Roth and am 32. I’m on pace if I combine these numbers but a bit behind if not. Just trying to see if I need to bump up 401k percentage

  44. Not sure what to do.. I am 58 years old and soon to be 59. I will begin my pension at 60 starting at 55k and at age 62 will drop to 45k for the rest of my life. I have 350k in my 401k and 110k in my roth 401k. I have a rental property providing around 1k a month after paying the mortgage etc.. I own my home and no debt. My husband is still working and has about 50k in his 401k. Are we in a good posistion to retire? what should i dow with my $ in my 401k’s that is earning around 4% annually. I thought we were good until I began to consider inflation.

    1. Not enough details (expenses, healthcare, property taxes, social security). The thing that you can do is look at your asset allocation. 2018 was a tough year, but the 401k returns should have been much more than 4% in 2019, when S&P500 was over 28%. Review your asset allocation, and fees, to see what could be improved. If unsure, hire a fee-only financial planner for a session to get some guidance.

  45. I save in a Roth IRA so withdrawals will not be taxed for retirement. Investing young and consistently is a must if you want to retire a millionaire. I started young, and assuming 7% annual gains (about 10% in the stock market – 3% inflation) mine and my wife’s retirement should be shy of a million. That is assuming I never put another penny in (I will of course, and more than a penny). I was a graduate student (not much opportunity for high consistent contributions) and I will start up a new job soon. However, I did some construction work and subcontracting work when I was young and saved almost everything into investments. My parents recommended that and taught me about finance. I know not everyone has these opportunities, but finding work while young and being financially literate will go much further than higher income.

    Some others may say that having student loans may affect their contributions. It will, but my wife and I paid off our federal student loans in 18 months, I have had my experience with these debts and still have a stable retirement set up.

    It will be hard and you will have to make sacrifices, but worth every penny.

  46. We are approaching the low end estimate of 401k savings for our age… My wife and I just turned 40 and have a combine 401K savings of $200K. We have $350K in equity in our home because we bought in Los Angeles at bottom of the market in 2011. We only have 1 child and only plan to have one. We are doing excellent with our 401K savings compared to the median of the population at our age. My wife is a teacher and will have a nice pension from CA on top our my decent sized social security also check. Our goal is to move to a cheaper place to live in our twilight years… but will probably end up moving near our wherever our daughter ends up after college. (only child and all). We make $230K a year combined right now… but would never need that much when we were retired. Most , if not all our money goes towards our daughter’s sports, after school care and other academic pursuits. I could see us happily living in a smaller town outside Los Angeles.. on $100K in retirement… A number we might come close to with just my wife’s pension and my social security checks. I don’t see how we will need so much to live a fulfilling retirement. My parents are currently retired and doing fine on far less.

  47. Here are the Stats for myself:

    – 37 year old single male
    – 586K in 401K
    – 1.5 mil in mutual funds
    – 500K house paid off
    – Cash on hand with no debt

    Net worth: 2.8 Mil with plans to get to 10 mil by 2029

    1. That’s very good! Care to give details on yourself? Industry/location? When did you first cross 1M? Is that all just your NW or between you and spouse?

    2. Really? If this is truly your financial situation, good for you! Clearly, you are acutely aware you are very well off and need not worry about retirement. Why in the world would you post on this type of article? Most people read articles like these to find direction and encouragement. Your post, if true, does neither.

      So,if true, and I have my doubts, stop taking the time to brag about it and go away!!

      1. Wow — like where’d the hate come from. We have multimillionaires here like AC and people worth <$50k. All of them should be welcome. And AC is one debilitating medical event away from being just as poor as you or me, so his current net worth is one cell mutation, or one drunken car wreck, or one uncurable infection away from zero (or less). Since we've been brain-washed by politicians who's careers are funded by insurance/healthcare lobbyists into thinking we have the 'best' healthcare system on the planet (note: we don't), good ol' AC is just one day's worth of bad news away from being like us. In the meantime, he has shown what can be done.

      2. I wouldn’t want to accuse anybody of bragging on this board when they just set out facts. This person has been frugal or fortunate, but starting to push $3M in net worth at 37 should be celebrated and discussed, not shamed. He’s taking care of himself and perhaps planning an early retirement, not bragging.

        Take 4% of $3M and it starts to sound like plenty to live off every year; but if there is a downturn in the markets, a medical event for you or close family, or — sorry to be a downer — marriage and divorce, and then his $2.8M doesn’t seem so big. My wife and I are turning 56, and when we hit $3M a few years ago, I thought through all that could happen. $3M could turn into $2M, which could then get split in two, who knows. I personally determined that it had too high a risk of being too low in the future (esp because my wife’s family tends to live to 100…). So I’m still working, but given asset increase since then, I’m starting to feel better about me and my wife being protected into the future as I start to work less.

        This site offers me a nice forum for honesty and sharing of experiences, on a topic I sure cannot discuss with any friends or family (I don’t tell anybody my net worth). So my own vote would be never to accuse people of bragging. Anonymous bragging doesn’t really make sense, and anonymous lying about assets makes no sense. Let’s encourage discussion of early and outsized liquid assets and how to manage them, not shame them. I believe the saving and investing tactics that apply for $3M and $6M and $20M make sense scaled down to people with less money, and people with less have probably done better at keeping expense habits low.

  48. This!

    I think it’s extremely valuable to look at what “could be”. It’s very easy to become complacent with “what is”. I think this article provides the kick-in-the-teeth needed to take action.

    One problem I have with it is in the contribution assumptions. The 18,500 is assuming the person starts today. Given that $10,000 contributions were the norm not long ago, it doesn’t hold up well compared to that.

    401k’s are absolutely vital in order to be able to retire early. If you’re not maxing your 401k, you need to revisit your expenses and see if there’s any way you can get closer to doing so. Your freedom is worth it!!

    Cheers :)

    1. IRS adjusts the contribution limit based on inflation, so I am guessing $10K max many years ago are $19K in today’s dollars – at least roughly.

    2. Agree with it being a kick in the teeth to determine what is possible.

      After reading the article, I spent a lot of time reverse engineering various retirement scenarios. It also drove me to read my companies 401k plan documents to discover they allow in plan rollovers for after tax contributions into my Roth 401K. This has allowed me to contribute 57K to my 401k plus 6K through the roth backdoor each of the past 2 years.

      In the next 5 years, I should be able to migrate myself from the low end to the mid end which will put me on track for early retirement between 50-55 depending on market returns.

      Very valuable to know what the goal post is and begin working to figure out how to make it happen.

  49. I know the author can’t contribute to a ROTH IRA and many high-income earners are not afforded the opportunity to, but it’s still one of the best retirement options out there and should not be neglected from discussion. Everything gained is TAX FREE which is more than what can be said for 401K accounts. My strategy is to invest enough in my 401K to get the maximum that my employer will contribute, max out the Roth IRA and then put the rest of my investment money into a brokerage account that is divided between growth and dividend stocks.

    1. We are over the income limits for a Roth IRA but still contribute $12k a year (or the max for that year) into a Roth IRA through a backdoor conversion after maxing out our 401(k)s. Any amount we can after that, we put into regular brokerage accounts.

      The Roth IRA allows us to pull out any principal after five years tax and penalty free while still getting the tax-free earnings benefits. While we don’t plan to utilize the principal withdrawal feature, it is there if we need it during early retirement providing us with extra liquidity while not losing the tax benefits.

      I never know why I don’t see more people talking about utilizing this strategy if they plan on early retirement. It opens you up to another $12k in tax advantaged investing while providing a liquidity option you don’t have in your 401(k).

    2. Holy crap, I thought I was doing alright until I read this! Apparently I’m seriously behind! Now, keep in mind that I lost 1/2 of my assets in a surprise divorce 5 years ago, but I still thought things were looking ok until reading this. What do you think?
      Here’s my current stats:
      Age: 52. Single.
      401k: 350K. Contributing max yearly 19k + 6k catch up + std company match.
      Roth: 30k. Contributing max yearly 7K.
      Cash savings: 60k emergency.
      Investment account: 10k. Adding 1K + per month.
      Pension: It’s pretty weak but it’s something nonetheless. 6% of my gross is added by company at no cost to me. Currently 30k. Projected to be only about 140k at retirement.
      House: Memphis TN. Paid off. Valued at 270k.
      Debt: zero
      Salary: 100k plus random bonus / overtime.

    3. Derek K Coe

      I max my pre tax 401k, contribute the difference between the pretax+employer contributions on an after tax basis and do an “in-plan conversion” to a roth 401K on a paycheck by paycheck basis to convert those contributions to roth contributions and then contribute 6K to a roth ira through the back door.

      I’m a big believer in tax free growth as well, but there is also a place for pretax contributions in trying to build tax efficient retirement planning, as well as HSA contributions. If you are planning to retire early, you should have enough in pre tax accounts to draw at least 40K (80K for married) per year at the 12% tax rate until you draw on social security (if its there).

      For a married couple, I’m maxing all 133K of tax efficient contributions before I’m looking to brokerage account contributions.

  50. It seems like this is assuming that I’m making a LOT more money than I am. I’m a baker and make only $21/hour–a lot of a baker! But still WAY LESS than these charts assume. What about goal retirement savings as based on income? Or do you just assume all of your readers are what I would call “super rich?” I can’t even imaging making enough money to contribute the max to both my 401k and Roth IRA–that’d be over half my annual income!

    1. There are folks who save/invest more than half their income for five or ten years, then find their lifestyle has created complete financial freedom for them and they don’t have to work ever, again. Our culture ‘makes’ a lot of decisions for us, and people working low-end jobs making less than $50k can still create their own financial solutions if they don’t succumb to what the marketing tells us we must be/have. $42k/yr is completely respectable. Don’t be put off by San Franciscan math. Luckily, most of the rest of the country doesn’t have their expenses and sadly not their income rates. It’s all relative. Sam’s numbers don’t apply for 90+% of the country — but if they make you think about how to improve your lot, he’s done you a favor regardless.

      Depending on what your financial advisor (or your gut and math exercises) tells you, unless your 401k has matching, maybe filling a Roth is your best first play. And an HSA from a HDHP insurance plan? If there’s a 401k that does match, well, that’s free money up to the match. How else you don’t spend, save and invest matters, too. It’s all life balance, right? And what you are earning now — is that what you expect to earn the rest of your work life? Do you want a side hustle? I bet doing any of this is better than what most of your peers do — not a sucky dream to pursue.

    2. I dig this too- I’ve been making $10-20k a year until this year (age 38) and have just started investing. My income is a little more now ($37k) and I expect to most likely make between $35-45k in the future. Could work more if I could find it as many folks here say, but I have an awesome quality of life I don’t want to change.

      One benefit of making not a huge amount of money is that you are ok with lower expenses. Now that my income has about doubled due to a career change, I haven’t let my lifestyle creep much. So I’m aiming for 50% of my savings at least to go into retirement funds. When I calculated the numbers, I learned that I don’t need $5 million or even $1 million- I need 400k to retire, which should be possible if I diligently save by age 50 or so. And that doesn’t include music gigs (probably will keep performing until I can’t buzz my lips anymore) and “side income” like being a park ranger/campsite host which my bf and I hope to do once “retired”. So don’t get freaked out by the large #’s you sometimes see- just keep saving what you can. Somewhere I saw a chart that was more reasonable for amount saved that took % saved of income into account.

      Besides more writing aimed towards people with more middle-class salaries, also would love to see more writing about self-employed individuals as well as those with student loans (particularly on plans like PAYE).

      1. Great comment. I’ve always tried to tell people retirement savings are relative: if you don’t get used to spending a lot, you don’t need a lot of income. So a good savings/ investing pattern scaled down or up should work for different incomes. Less to worry about on taxes at lower levels. (I’ve also pointed out that social security taxes are a bigger deal for lower incomes,as they are below the cap. If people really had 12.4% of their gross to invest every year, instead of it getting sucked into a bankrupt, pay-as-we-go social security system, there would be a lot of wealth.)

  51. Thank you for the article! My question is, as you mentioned at the beginning of the article “Give me a pension that pays 70% of my last year’s salary for the rest of my life over a 401k or IRA any time!”. Would the principles of this article (Maxing out on 401k, saving 50% after tax dollars etc.) for someone who finds themselves in a pensionable job providing 60% of last years salary?

  52. Saw a few comments that seem to really be trying to shame people. “Why didn’t you just save more?” Well duh, don’t you think they would, if they could?

    How about we direct some of the blame towards employers, who expect a college degree and a million years of experience, then don’t want to pay a living wage? Or at property developers, who only want to build $500k McMansions, that you have to wreck yourself with debt to afford, instead of building more affordable starter homes?

    Cost of living is insane in many areas of the county. Can’t really blame people for not being able to save more.

    1. Do you really think I’m trying to shame people? This article is a guide to help people stay on track to eventually have enough money to feel financially independent.

      Is it possible you feel shame and are just looking for things that support the way you feel about your 401(k) savings? If so, you’ve got a focus on what you can control and just take positive steps forward. You must save yourself because there is no rewind button in life.

    2. Ajx11, of course you can blame people for not saving more. Your life is in your own hands. If you’re in an expensive part of the country, move. And like Sam just said, focus on what YOU can control and take positive steps forward. Nothing will change (ie. get better) without YOU taking action. No political party or change is going to make your life better.

    3. AJX11 – watch the Playing with Fire documentary for the mindset of people who do and don’t save. It’s often about their willingness to not buy into keeping up with the Joneses. It can be done!

  53. From reading the comments and stats on how people are behind, it sounds like their are a lot of people that want to catch up. Is there any study or support for understanding the true root cause why people are not investing in a 401K? Besides planning tools such as Personal Capital and Wealthfront, are there other tools that help people hold themselves accountable?

    Common sense can add the factor of human nature- with most things that’s a given. Also, like many in this community, there are people who invest 12% or max out year after year. I wonder if people view building trust as a skill. I imagine if an individual worked on building trust with themselves similar to programming or tying your shoe if that helps build the muscle to sock away in the 401k consistently. There was a pretty good article talking about it here -https://www.myretirefire.com/post/3-ways-to-build-more-trust-with-yourself-and-others

    1. No study to support this, but my opinion is it starts at home. How many of us were taught financial planning as kids? My daughter’s high school offers a one semester personal finance class, but I don’t think that’s enough. So many people were just never taught the details and importance of investing and saving early. I think it’s too late to start learning about this when you start your first job and you’re enamored with that first pay check. Make personal finance and planning part of regular teaching moments like you talk about the importance of investing in good health so you can live a long life. You bet my 13 and 16 year olds have a basic understanding of a mortgage, loans and even 401Ks. I’ll be damned if they don’t “save til it hurts” the moment they get their first 401K.

  54. NATHAN A JONES

    Thank you for the report. I found this because my employer said in a information website that I should have 200k and save 12%. I didn’t believe this…. found your article.

    FML…

    I am 43 with 30k in 401k.

    I have resolved myself to work until 70 anyways.

    1. ThisIsTheList

      I’m 64, I have $300,000 in my 401K and it’s clear to me I *can’t* retire at 70. I’m figuring I might as well plan on working until I die.

      1. Well, maybe. The 4%ers would say you have about a grand a month out of that 401k to live on. Add in any SS, and that’s pretty much it. This assumes you have no debt, no side gigs, and no additions to the 401k for the next six years, no savings or investments elsewhere. Or you can discover a different lifestyle and change all of the equations. Naturally, it assumes you even want to retire. Many of us expect to do ‘something’ the rest of our lives. That ‘retirement’ thing is so individual, it’s hard to quantify (or rely on one website calculation to determine what is YOUR future. Good luck, friend.

  55. Great article. The chart with the 401k savings targets is really useful in assessing where one’s savings should relatively be at any given age range.

    I agree with your comment about why employees shouldn’t underestimate the value of work benefits. Healthcare can be really problematic, especially for the fact that doctors can literally charge any amount they deem necessary and there is really no oversight. I’ve even had the experience of a doctor charging me for services that were never performed. I found out when I called my insurance company to review the actual services rendered…

    One thing we do need is an overhaul of our healthcare system.

  56. Buyside Hustle

    Your high end estimates are low depending on where someone works. For those in wall street careers, you can easily surpass those estimates.

    But guess you are really talking about someone’s 401K, not their actual overall savings – then that would make sense.

    Would be great if you did this post for overall savings instead of just 401k!

  57. First of all great site and congrats for the amount of logical/non partisan responses–this is a good community.

    Question. I am 51. Have $400k in target-date fund through Vanguard. I max this out. I have two Roths that I can’t contribute to anymore and two other IRA’s that I can’t contribute to anymore that equal another $200k. I also have a Brighthouse Annuity worth $100k that will be $150k in a year and an HSA worth about $100k as well. I have two kids in college about $300k set aside that will cover both of them with grad school on their own. I also have a SEP worth about $50k that I no longer have the ability to contribute to. My question is no what? My IRA’s are invested in a variety of index funds covering domestic and INTL with a few special sector spdrs (financial and healthcare) but not sure what else I can be doing. I’ve paid off my mortgage and have value of about $350k in there and plan to downsize in the next decade. Thanks for any help all.

    1. Just thinking out loud… what is your target date? Let’s say it is a 2030 or 2035 just for kicks. With so many different resources planted elsewhere, is that Target Date fund doing all it could for you? Or would you be better off shifting it all to a Target Date of 2055, 2060, 0r 2065 to reset the asset allocation decay curve to being fat in equities again?

    2. Sounds like you have two things to think about:

      1) As BadDNA suggested, is your asset allocation optimal?

      2) Your savings in tax protected vehicles is capped.

      With 1, I think it’s smart to figure out what kind of asset allocation you want, then look at all your funds and see where you need to tweak. Tedious exercise, but once you’re comfortable, only tweaking is really needed.

      With 2, I’d start saving outside tax advantaged accounts. Depending on your plan, you could start building up a decent dividend portfolio that’ll kick you passive income that is at long term capital gains rates.

  58. I’m really behind on this. I’m 45 and I started my own 401K 4 years ago-As the company that I work for doesn’t provide one. Retirement account $232K, retirement savings $29K. total $261K. and another trading account with $46K this is for me to swing trade to buy a house in Honolulu or Kauai one day. –Any good stock I should invest in?
    By the end of the year, I should be able to contribute around $36K into 401K, savings, and Roth. Hopefully, by the end of the year, I will be in the $300K in retirement.

  59. Yikes! I believe I am behind. I am 39, single and have the following portfolio: 181k in 401 accounts; 63k in IRA accounts; 40k in after tax mutual funds; $67k in money market (yes, I know I need to move some of this); and appx +100k in home equity. I still have student loan debt of approximately 55k (interest is under 2%). I believe I am behind because of graduate school and a later start..plus I had an almost 3 year unemployment in there. Where should I start to get back on track.

      1. What are the fees on those mutual funds? Can you do the same sectors but use index funds instead? Are you a buy-and-hold kind of investor?

        1. Yes, I am definitely a buy and hold type investor. Also, I am not afraid of taking risks at this point.

          1. Buy and Hold is supposed to be good – I was doing well until Feb of 2018 and the US mkts went all over – I have gone sour on the idea that fund mgrs. will take care of you- I had a great balanced portfolio – however, every tweet sets things back – or takes me back to where I was. I am moving some money $250K, to a rollover IRA so I can have more options that what I have now in 401Ks. The money is moving from a past job 401K. I also have target funds of 2025 (I am age 62) and one for 2035. I am doing much better in the Traditional and Roth IRAs – though I would be doing the backdoor Roth anymore – I wanted more ability to get out of at least some markets when what happened in Dec 2018 happens – and more selections by sector – Technology has a great run and Medical stocks are strong – so again – flexibility to manage risk and return better. Index funds were great for the 1st 6 months of 2019 but in reality they just about offset loss from 4Q 2018. In net – buy and hold may be good for target funds and interest income funds – but I need to make a much better return – avg now is 6.7% last 3 yrs not good enough. And I have not seen a fund manager that did not want 1%+ and put you in 70-100% equities and then go to sleep.

            1. Ryan, if you can accept a little more risk to balance that desire for better returns, have you considered moving your Target funds to 2040 or even further out to reduce the bond fraction? My partner loves to consider the cash/CD portion of holdings as their ‘bond’ allocation. If a chunk of you has gone to cash, maybe that math would allow you to take more risk with the Target portion of your portfolio?

    1. Lost — seems just in the asking you are already well in your way with the self education part. My suggestion is to move an equal amount to your debt of that money market stash into a CD ladder. You can use Ally.com or others options to put 20% in a 5yr CD @ 3%, dump 80% into their high yield 12 mo Cd. When that 12 mo matures, take 25% into the highest yield (likely anoth 60mo CD) and the rest in to another 12 high yield — assuming they keep the same promotions. Repeat to build a high yield rotating ladder. The cost to have to pull any out is only a few months interest — you’ll have very liquid assets earning MORE than your debt and more than your MM. it’s a hedge against a soft market (stock or bond) and if all turns to worms, you can retire the debt anytime you want

      You don’t mention a Roth nor if you have an HSA. Those are not opportunities to pass up. Learn about them.

      The rest of your description are what kind of investments — presumably in sound equity index funds? At your age, having most in equities you like (some folks here are big on VTI and IXUS, among all the other choices).

      As long as you’re reading blogs like this, reading all manner of books (simple guide to wealth – type broad-spectrum material) and you’re diversified, you’ll be on a decent path.

      1. Thank you for the advice. I do have a Roth but can no longer contribute due to income limits. I had not considered a CD, but will definitely look into it!

        1. Have you considered a back door Roth? Perfectly legal unless you can’t contribute to an IRA either?

          1. Great point – I did that for a while works like a charm – Traditional IRA deposit of all post tax dollars – limit of $7K, and back door to the Roth IRA. Here are the things to be careful about – 1. You cant take the money without penalties for 5 yrs – at your age probably not a problem. Of course the big benefit is that the interest you make is tax free. – 2. Careful of the content of the traditional IRA. I had have the funs as taxed, and the other 1/2 was earned interest (profit) on the post tax money. IRS forms were important 8606 ect. I had to move the pretax $ to a 401K and then I could move the post tax dollars to the roth. Then I could use the $7K a year back door without triggering a taxable event. When I have a mix of pre & post tax dollars in the same traditional IRA, and backdoor move would have prorated taxable impacts. – 2.b If you have any other pretax IRA accounts (I have a traditional and a rollover IRS) the government looks at them as one – so if you move any money to the roth, be prepared for the % of money from all pretax IRA accounts to be looked at by the IRA, and you will be taxed at the ration of pre to post tax dollars on their way into the roth.

  60. ERIC D MEYERS

    I would be in range if I didn’t pay off $91k in debt in the last 3 years and 3 months (Making $40K-$64K) and during this period I still managed to stash away about 15k in retirement, but this was also thanks to a company match of 4%. If you’re complaining about making $50k and you can’t get the low end of this chart than you need to seriously evaluate your spending. I had a girlfriend during this time too and still managed to do side hustles. The defeatist attitude is exactly why the median of 50 year olds only has $100k saved. If you include my student loans and savings I did that in 3 about 3 years on a entry level income by living in cheap apartments. If you aren’t seeing this chart as a challenge then I think you need to consider reading some self help books. I’ll be in retired in Hawaii by 2040 at this rate.

  61. Steve Wright

    Quickish questions (just heard your interview on Art of Manliness and signed up). I’m 50. Have $400k in 401k and another $250k in a mix of Roth’s that i can no longer contribute into as a result of my salary and two SEP’s that my wife and I set up via our side hustles. A few pieces of Real Estate too and I carry no debt on my home-valued at about $350k Any other spots I should consider investing? Appreciate any quick thoughts on this admittedly limited info.

    1. Steve, just a quick thought — while it’s been mentioned a time or two, people overlook the power of an HSA account. Yes, you can only $7000/yr as a family (+1000 >55 yrs old), it’s at least something more. Where I work, HSA’s are 60% the cost of the ‘premium’ health plan, they’re tax-free for life, withdrawals for qualified medical expenses fee-free, withdrawals after retirement (65?) for anything incurs only ordinary income tax rates, and all annual contributions are tax-deductible. I’m sure Sam has pages on this stuff I’ve somehow missed here, but just like a Roth — it’s a great closet to sock away cash up to the fed max allowed, without the Roth limits on income levels.

    2. are you contributin to the 401k on after tax basis up to the 57K limit and either doing an in plan conversion to a roth 401k, or rolling those after tax contributions to a roth ira?

      Read your plan docs to determine if this is an option to take advantage of more tax free growth

  62. Majedur Rahman

    I am 29 and still don’t have a 401k. But starting from 2019 I want to invest and and make sure that I can have that projected money after retiring just like someone who started working at 22. In order to do so how much I have to contribute to 401k? Given that I have 35 years to retire.

    1. Majedur, I started my 401k at 28. Remember 2 things. 1 you get a tax reduction because of the income reduction to the 401k. So you don’t loose dollar for dollar from your take home. When I checked in my state doing the 15% from gross only reduced my take home by 9% because of tax differences 2. Just do the max of 15%, it hurts a touch at first, but if you just keep it there you never notice again because any raise or promotion you already assume the 15%. So within a year or two you just don’t think about it anymore.

      I am now 43 and even with a lot of crazy things in life like a job change, a divorce, a new marriage, a kid, two deployments to Iraq/Kuwait for 2 years then 1 year that cut into my civilian 401k saving time and the crazy 2008 market I have still managed to save $400,000 in my civilian 401k and 90,000 in my military TSP with another 12k in a Roth IRA and 7k in a traditional. So just working hard and doing the max with some employer matching with a starting salary of $28,500 and healthy raises you can save ALOT very fast if you goto the max.

      For the numbers above just change 22 to your current age and recompute. But the bottom line is 7 years is a lot of compounding interest so my advice is MAX it out. Because you now need to make up for those years.

    2. Majedur: I didn’t start investing until I was 26. Not exactly sure of Steve’s right-out-of-high-school situation, but I joined the USMC for 4 years immediately after high school, in 1982. (I mention Steve as he indicated he was in Iraq–thank you, Steve!) While in the USMC, I saved up a little money (2700.00) to go to college in 1986. The military education program was called VEAP and was matched each of 2700 dollars 2 to 1, so I had 8100 for college. Not a very great program but it was was it was. I graduated college in 1991 and started my career. I only started contributing to my retirement accounts in 1991–my co-workers/peers at my job were very persuasive in convincing me to contribute to the company’s 401K program to at least get the company match. I can almost still hear my co-workers saying, “Social security will not be around by the time you retire.” They were wrong about social security; I am now 55 and I am thinking that social security will be around by the time I retire. Nonetheless, I started contributing my first day on the job and today I have much appreciation to my co-workers for strongly convincing me to do so. That advice and persuasiveness was probably the most valuable financial advice I have ever received and to a guy like me from a poor family, I am eternally thankful.
      Anyways…today I have about 760,000 in my accounts. I have about 1/2 in my current company’s 401K and about 1/2 in a self directed IRA that is actually the creation of a 401K rollover from a previous company I worked. My current contributions to my 401K are all actually to my Roth 401K. The company match, of course, will be taxed upon withdrawal so I decided to balance things out, I would just make my contributions post-tax to hopefully give me more tax strategies/options in retirement.
      To be certain: I am not advocating that I am a model to follow. But my point is that at 29 years old, you have time on your side, so don’t hesitate to start your financial future plan now.
      PS: I read Financial Samurai often because 1) I like his site and his style and 2) the vast majority of the commenters are not exaggerating BS artists.

  63. TheRichRenter

    At age 37, my 401(k) balance is near $500,000. I’ve only been maxing out the 401(k) since 2006 or about 13 years, so I’d say that I’ve done well and the numbers that Sam mentions in this blog are not unrealistic if you are very disciplined and invest aggressively.

  64. I find your charting to be quite and expectations for growth to be not aligned with the words of the article. For instance: for a young couple, early savers, you expect $3 million in 401k @ age 55. By age 60, you expect to hit $5 million on an annual growth rate of 7%. Let’s say you are contributing the maximum 2018 plus the catch up since you are over age 50. That’s $18,500 per year plus $6,000 for total of $24,500 for 5 years. Still with me? Don’t forget employer match! Let’s say you have the most generous employer and they match you dollar for dollar up to any percentage. That’s now a contribution of $49,000 per year, or $245,000 over 5 years. If you were to not contribute and let the money sit for 5 years, no fees!!! @ 7% ROI. You’re looking at $4.2M by age 60. Now if we add the contribution amount…. guess what, it’s still only $4.4M. For back of the napkin math, this is forgiveable. But for planting the seed that even under the most lofty expectations and being published on a website, should really recheck your numbers. Complete insanity.

    1. Tom – If you choose to follow the high-end column, then you should be consistent with your assumptions of a Blue Sky Scenario:

      * You’re just starting your 401(k) journey and have 38 years or close to 38 years to invest
      * The maximum 401(k) contribution limit will be higher than $18,500, as well the total 401(k) contribution including employer. This right here is huge because the total is currently $55,000 a year. What do you think it will be in 10, 15, 20, 25, 35 years from now? Even higher
      * Use a 10% growth rate, which is the historical annual return from 1926-2016 for a 100% equities portfolio. Why are you using a 7% growth rate if you choose to focus on the highest column?

      Remember, just because you aren’t there doesn’t mean other people aren’t there or insane. Be rational in your thought.

      Sam

      1. Sam I am on the low end of your chart – at 62, $1.25M – and to be fair I was lucky because I had a high 401K match, and a Bull Market for 10 yrs. I now contribute $50K a year and $22K of that is post tax – and that is 11% of salary – I also collect a pension or I would have a hard time maxing the 401K and IRA. to max at $25K and then 20% – that is about $50K is in include salary gross and pension. or $75K a year Not easy cause I want to enjoy some pleasures – sports car, nice house, etc. Work Life balance and all. So I understand your point – but wow 20% post tax is hard. I can tell you any debts I have I am paying off fast – car load is at 2% and I float zero % credit cards before I pay them off. Some purchases – like a new AC unit for my home is a deal at zero % for 2 years. Insurance still kills me – so I feel that the best way out is to get more return on my investments – you mention a 10% growth rate – my hats off to you – I aspire to that – as an average. I am now 16%, -8%, 12-14% this year – avg under 7% . Then I see 32% return on Tech portfolios – but rumors of a recession coming – so I totally agree that I need to save seriously but to me returns are a killer – and equities tend to be avg 7-8% now, with any one yr dropping by 13%

  65. I am 51 and I have a 401a and Deferred Compensation account worth 600,000 in addition to an employer retirement that will give me 70% of my 5 year average highest salaries. I also have regular online-savings in money market accounts worth about one year take home pay. I can retire at 60 but I’d like to be able to stop working sooner (maybe 55) if I can get everything worked out perfectly. I do not save until it hurts or even close so I’ll definitely start there but I am hesitant to put more money in my Deferred Comp because of the volatility of the market. Do you have any other suggests?

  66. “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 75 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!”

    Have to say, I find this way over the top and unrealistic to the point of being unhelpful. Anything is possible, of course, but the reality is that there would be a huge outcry if the government tried to raise 401k withdrawal age by 15+ years. It wouldn’t even make sense – the government is running large deficits, and if anything the temptation will be to shift tax revenues (which the government only gets when you withdraw) closer to the present, as happened with creation of the Roth IRA. (Which is one reason I think the Roth IRA is never going away, contrary to those who say “it’s too good a deal.”) Along the same lines, Social Security will be funded at about 70% even if Congress does nothing (which again is politically inconceivable) when the trust fund is depleted. So there will be some form of Social Security, even if not 100% of today.

    Bottom line, people should absolutely plan for things not going exactly as they are today – pensions going under, inflation going higher, but to say that we should write SS and 401k’s “completely” – your words – would only cause many to throw up their hands, and that’s not a helpful outcome.

      1. I still don’t understand. I do max out my 401k as you suggest. But what is the point if I should plan to never touch it? Other than what is matched, shouldn’t I put it somewhere I can actually use it someday? That’s quite a chunk of my pay to completely write off.

  67. My hubby and I are 38/37 and are not big spenders. We’re sitting on almost 175K cash in a money market and know we need to do something more wisely with that money. No mortgage, no debt, maxing out our 401ks but this year no longer could qualify for a Roth. We recently met with a financial rep who suggested us consolidating our 401Ks into a managed account (we each have several from previous employers).

    He then suggested we take the money out of our 401ks and put them into a converted Roth (I think that’s what they called it) – meaning we shell out a bunch of cash now paying within our current tax bracket and then it grows interest free until we retire.

    I’ve never heard of this nor has anyone else I’ve talked to. Is this legit or should I just consolidate the 401Ks and not convert?

    1. Ali, can we presume your money market account is making well under 2%? What is the actual %? And a CD with Ally bank, or my local credit union, makes 2.4% or better. Seems a lot of safe gains are being left on the table. FS likes his step stool, I like my CD ladder. Either way, maybe that would be a better return (without knowing your current yield).

        1. If one was locked into a CD, sure — you’d be right. But as most banks will let you out of a 60mo CD with three-to-6 months of interest as the penalty, then maxing out FDIC-insured interest rates with whatever liquid vehicle you can get is the smart move. If rates were to go up, run the numbers and determine when breaking the CD for rolling the cash into the higher rate makes sense. If rates go down, then it’s obvious to leave the CD alone.

          And using a CD ladder in this way, one can build a heck of an emergency fund with rotating maturities — all of it a click or teller visit-away from being cash-in-hand. That three month interest loss penalty in a rising rate environment isn’t painful. Leaving $175k in a money market paying 0.75% or whatever when a 60mo CD pays 2.8% isn’t smart or logical.

          I see the philosophy you’re referencing, but from a practical matter, doing nothing is more costly than shepherding a FDIC-insured note ladder periodically.

  68. Hypothetical question:
    Let’s say your employer matches 100% of your 401k contribution, up to 2% of your salary. Then, lets say you ONLY contributed 2% and it was fully matched by your employer (and the employer’s contributions were fully vested). Then, lets say times got tough and you made an early withdrawal from that 401k. 10% withdrawal penalty plus taxes. Let’s say you’re in a very average income bracket and the taxes on your withdrawal are 25%. So you essentially lose 35% of your withdrawal to taxes and penalties.

    Given that half the money in your 401k was contributed by your employer, but less than half of the withdrawal (only 35%) would be garnished for taxes and penalties, wouldn’t you still net a profit on your 401k investment?

    For example, $20k contributed, $20k matched = $40k. $40k x 0.65 (35% loss with taxes/penalties) = $26k. Obviously a bad move in the long run to liquidate investments, but worst case scenario it is still hypothetically $6k more than before, right?

    1. Um, $26k in pocket (now earning 0%) vs $40k earning ~7%/yr over the next decades (if the past 100 years of performance was equaled). I’m not sold on the idea unless you plan on buying a liver (or brain) that will let you live to see those decades. Just not seeing any ‘hardship’ that warrants screwing your retirement. Tough times means getting more work, different work, stop buying, live ultra frugally. Doesn’t mean bailing on a reasonable chunk of change that will grow into your retirement life raft.

  69. I have carried a phobia after investing all my 401k funds in my former employer’s stock (Citigroup), only for it to all fizzle out after the company was bailed out. I currently contribute to my company’s 401k plan, I get the matching funds, and I contribute as much as 20% of my income in most years, but it’s all sitting in cash. Sometimes, I will venture into a stable value fund but the yields are so low it’s next to nothing. I know I am missing out on the time value of money but I am scared about taking another risk with my money in the market.

    1. runningmanOH

      @Pam Norton,

      Forget the past! in your company’s 401k, find the lowest cost ER S&P 500 Index fund or equivalent and get that cash working! Stable value is fine for 10-20%, you want some so you can buy MORE equities when the market tanks.

      Good Luck!

  70. “Depend on nobody but yourself”–bingo! Too often, people want to do whatever they want, and then ask somebody else (usually government) to bail them out once they realize ‘Oops, I’m 60 and have $0 saved for retirement!’

  71. Hi Sam,

    What are your thoughts on where I am. I’m 33, single, earning a little over $100K a year, and my overall net worth is approximately $550K. About $350K of my net worth is in real estate, over 2 condos. About $750K in housing value and about $400K in mortgages.

    About $54K is in a 401K, $89K in Roth IRA, $40K in in random mutual funds/stocks, and about $20K as emergency fund. I’m happy with where I am financially, but not sure if I have the right mix. Am I off-track?

    1. Hmmm. Can an amateur offer an opinion? Personally, I think being that house-rich and cash-poor would be uncomfortable. But then again, if your morts are <4% interest, and the housing market doesn't bubble over on you, you could end up really fine. While you didn't mention your discretionary leftovers, or where you live, let's pretend after-tax monthly paychecks are $5400/mo. You've got $400k with a 4% 30 yr note. That'd be what, $1900/mo? Maybe $2200 with escrow/ins. With no car payment, maybe you run $1600 in other life needs/mo. With $1600/mo to play with, why not reduce your tax liability by sinking a good deal more into your 401k, perhaps after plunking another 15K into the emergency CD ladder for a 6 month cushion? (If you're really just paying 4%, there's little reason to pay down the mortgages early if the market continues to reward you with better-than-4%-after-fees/taxes opportunities.) You didn't mention the mutuals/stocks nor who you trade with — always worth evaluating their fees and compare to a basket of passive domestic and off-shore index funds. We'll never be sure Congress won't muck things up further and decide to raid 401ks with taxes in the future. Well, OK, we ARE SURE they will muck things up further — and your generation is basically holding the bag for my generations' debt, but if they leave the 401ks and Roths alone, that's where I'd bury more of your gold.

  72. Would you still contribute to a 401k if you want to retire by 40 since you won’t be able draw those funds until 60? The basics of my current plan is that I’m trying to amass enough money to be able to live off of half of the interest assuming a 5% annual rate. That way I will still be growing my money with the other half of the interest.

    1. l would always say yes to 401k, because the compounding of pre-tax money with tax-deferred accumulation of earnings is valuable, especially when you are so young and therefore planning for like 50 years of investment.

      And more importantly, what people do not know is that you CAN begin to withdraw money early from 401k funds that are rolled over into an IRA (you won’t be working any more, right, so they won’t still be in that 401k account, they will be rolled over into an IRA somewhere). It’s called a substantially equal periodic payments plan, and it avoids any penalty. It’s permitted under sec 72(t).

      https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-substantially-equal-periodic-payments#2

      https://www.irs.gov/pub/irs-irbs/irb02-42.pdf

      If you follow the rules (your custodian or accountant would have to do the math) and basically start liquidating an IRA gradually so it will last your life expectancy at time of starting, you can do it. Say you’re 40 and have $500,000 in an IRA. You can actually split it into 2 IRAs to make it clean, if you want to just take half, as you say. So use $250,000 of the total, set up an SEP plan and take like 3.6% a year or whatever the SEP tables permit (one calculator says ago 40=3.6% per year, https://www.bankrate.com/calculators/retirement/72-t-distribution-calculator.aspx ), and you get a check for $9,243 a year, or $770.25 per month. (All taxable: disbursements from an IRA are always taxable, as you know.) That will be a base cash flow. Or do it with the whole $500,000 amount, because that very conservative withdrawal percentage means the body of investable money will probably be growing behind the scenes, assuming you can make more than 3.6% rate of return long-term — totally doable. So now that’s $1,500 a month by tapping your IRA, and whatever other money you have is in addition to that.

      I have a $1.8M IRA now and I’m way older than you (53), and I’m planning on letting that grow even when I stop working, spending from the already-taxed accounts first; but it is calming to know that if I ever need cash flow, I can start to draw something like $83,000 a year from the IRA with no penalty, even before I hit 59 1/2.

    1. Don’t worry You have time – I started at age 31 and caught up – life happens but it is never too late to get focused and disciplined. The 401K is a great way to defer taxes. I wish I had taken more risks with more equities. Best of luck –

  73. Sean @ FrugalMoneyMan

    Great article!

    The tax advantages that the average employee gets when contributing to employer sponsored retirement accounts AND their own individual retirement accounts/brokerage accounts, are advantages that simply can’t be passed up. The average American worker’s best shot to securing financial independence in today’s world where pensions are gone and Social Security is drying up, is to MAX out their tax-deferred retirement accounts. You brilliantly state that everyone needs to “DEPEND ON NOBODY BUT YOURSELF.” You couldn’t be more accurate in terms of an individual securing their financial independence. By maxing out these retirement accounts and creating new streams of passive income, you dramatically increase your chances of reaching financial independence.

    Great post!

  74. homeequityPLUS401k

    We stopped investing in our 401K for a few years after our 2011 home purchase. Thankfully it appreciated dramatically and we are sitting on $300K in home equity. We have no plans to move or sell since our mortgage is lower renting in our area. I like to tell myself that the $300K in equity we built makes up for our smaller 401k and the gains I lost not investing for 2 1/2 years.

    So we have $122K in 401Ks + $300K in home equity…. = $422K in retirement savings. Makes me feel better or am I deluding myself. I always say.. we will sell and move to a cheap state in retirement. Pocket the difference in money saved.

    1. You are deluding yourself, because you cannot sell that house when you retire unless you are okay living in a tent.

  75. What’s most interesting to me is that I recently learned what the 401k was actually set up for. It was never meant to be the main way we save for retirement. Only after questioning why that is so recommend did I see some big problems with it.

    Thanks for putting this post together so I can share it with others who think I am crazy for saying the 401k isn’t always the best option for retirement.

  76. We fall somewhere between mid-end and high-end saving spectrum, a total of $425,000 saved between a 401k and Roth IRA at age 37. Am able to max out both a 401k with a 6% company match and max out a Roth IRA. Was a little late to start completely maxing out the company 401k but better late than never.

    There are 10 years left on our home mortgage, we took a 15 year loan out 5 years ago when rates came way down. Once the loan is paid off we plan on using the $$$ that was going into the loan to either diversify into real estate or put it in the stock market.

    Would like to retire by 55 but we’ll see how the economy is doing by then and the biggest unknown . . . health insurance since it will be 10 years (as of now) until Medicare kicks in.

  77. is there any value in using some of these smart phone apps the help you manage you personal finances like Bill karma or money clarity?

  78. Based on your illustration table, I am years behind in savings. I just turned 47 and my wife and I only have a little over $600,000 saved for retirement. I have a pension from work which will pay out a little over $1,000 a month. We have a health savings account with $50,000 in it. We would have more but we used $160,000 to purchase our home in San Francisco 14 years ago. We also spent another $50,000 to pay off my wife’s tuition in full. The house has appreciated in value nicely though. The homes in our neighborhood sell for $500,000 more than we paid for it back in 2003. We also sent our two children to pre-school and private school K-8. That cost us another $200,000. We also have $50,000 in each of their 529 plans. We are currently about $200,000 behind in savings. we no longer have to pay for private school as the kids are now attending public high school. We will try to divert the funds towards retirement now. We live frugally and rarely eat out. It is expensive living in the Bay Area where everybody around us seems to be wealthy millionaires. We are just struggling to get by.

  79. Paper Tiger

    OK, over parts of the last 3 days I have read 843 comments spanning 5 years on this thread. My takeaways are as follows:

    – The charts are guides, meant to be aspirational and something to shoot for if you want to be financially independent at a reasonably young to middle age. They are not absolutes and cannot determine utter success or failure but will get you where you want to be if you get to work on it and stay committed AND be willing to make changes along the way that support your end goals
    – You have to ask yourself a couple of hard questions. #1 Do you want to be financially independent at some point in your life? Most people say, “yes.” #2 Are you willing to do whatever it takes to achieve FI? “Hmm, let me get back to you on that.”
    – I’m 60, financially independent and pretty much seen it all. I think becoming FI requires a lot of things but I will give you my “Top 10” of the big ones from my experiences. To achieve FI:

    #1 You need to make hard decisions that will have you doing things you don’t want to do
    #2 You need to take risks that you don’t really want to take
    #3 You need to do jobs that you don’t really want to do
    #4 You need to move to locations where you really don’t want to live
    #5 Regarding #2, you need to plan to lose a lot of money from things that go wrong because nobody bats a thousand
    #6 You better have a thick skin because everyone is going to be a critic about your plans
    #7 You better get used to sucking up to people you can’t stand to be around
    #8 You better plan to work harder than you ever planned to work
    #9 You better be ready to give up things for today in order to afford things for tomorrow
    #10. You better wait to find the right partner who shares your values, dreams, goals, and plans for the future and once you find them, never let them go!

    And, you better keep reading sites like this that offer great insights from someone else who made it as well. Don’t get so hung up on the numbers and the final destination. Focus on the journey and the steps successful people have taken to get there. Try and emulate what you can and keep striving to get to the ones that seem out of reach. You are going to have to be adaptable, courageous, creative, resilient, less judgmental, more accommodating, tenacious, resourceful, refuse to lose and never give in to fear or let anyone else steal your joy. You really can do whatever you set your mind to do if you really want it bad enough.

    So I ask again, “Are you really willing to do whatever it takes to achieve FI?”

    1. When many older folk started, 401K contributions were nowhere near $18K. Assuming no matching, taking the maximum allowed contribution for every year back to 1986, the year I started working as an engineer, and apply the S&P 500’s returns you would have about $1.9M. This is about the same as a 10% compounded return.

      For example, in 1986 the maximum contribution was $7000, my starting salary was $27,300. The company placed limits on 401K contributions at the time to 15% of salary.

      All youngsters just starting should strive to save while finding an appropriate life balance and become financially independent as quickly as possible. These are good examples of where a savings minded individual can endup. The numbers are, unfortunately, not as good of a representation for the already retired as to what they should/could have in 401Ks if they maxed out and saved.

  80. What do you have to say for people that either do not have access to a 401(k) through their employer or have gone through periods of unemployment?
    I have the target savings overall suggested for my age when I include savings in the bank and other investments such as IRAs, but not in my 401(k).
    I lost my job at the beginning of the year, and worked temp jobs for 3 months (no 401(k) opportunity), in my present job I had to wait 3 months to be able to participate. What did I do? I put money in the bank and utilized other investment sources such as maxing out my IRA contributions. I think that should count. Particularly if you don’t have access to a 401(k) to contribute.

  81. Any chance you can share a bit more about the assumptions used for the “High End” table? I’m struggling to understand how you can get from $18,000 in Y1 to $50,000 in Y2 and $100,000 in Y3 when the maximum contribution an individual can make is $18,000. This either assumes a very high rate of return, or a very high company match absolute amount (driven by a high salary assumption or high % match assumption).

    1. The assumptions are aggressive. Every year you can contribute $55,000 in total 401K contributions if you include $18,500 for employee + $36,500 from employer starting in 2018. Given we are also in a bull market of 10-20% returns, that’s how you can get there.

      A lot depends on your own contribution, but also the generosity of your employer and its profitability as well.

      I would use the middle column as a more realistic and achievable guide.

      1. There are a handful of employers that allow you to contribute pre-tax up to $18.5k and then post-tax up to the $55k (total combined contributions, employee/employer).

        I benefited from a program like that before retiring at age 55.

      2. Times are changing – I was at an employer that did a 6% match, then they limited the pension (about 30% of my last year gross salary), and jumped it to 10% match. They later told new hires – 3% match and no pension. I changed employers and first yr – no match – now 4 yrs of 1.5% match, then it will go to 4%. A very small pension which will end up being a lump sum for me. My point is that pensions are going away, and unless you are landing excellent jobs (which Agile teams in IT will not even have), become a contractor? … you will not find a lot of 6% + matches unless you are in a very high paying Job. Maybe this is in reference to the perks of executives – once you get to Dir/VP – then yes, lots of perks $250K plus jobs etc – but those are not obtained by a high percent of people – maybe the top 5-10%? And of course life happens – if the family needs you – you help to a reasonable extent, without hurting your self too much. Maybe they even pay you back. So I am still on the point of – how to I maximize returns on what I have? Please feel free to comment. I can’t do it on 4% per year – even at 7% I want more – yes if you hear greed and fear in my writing – yes I feel both. I want to figure out how to get the right info at the right time to capitalize on much more than CD rates.

  82. I’m glad I read this. Unfortunately I’m doing horrible in this area but plan on changing all this. Are you ever available for consultation? or can you recommend a place that can help advise on how to maximize investments?

  83. Jack the Investor

    This proves to me that I am WAY behind the average, however, I have a few deals going on which I believe will put me in the fast lane once they ‘click’ and come good.

    Thanks for this post. It really lit a fire under my butt and reminded me I am behind the curve and need to work harder.

  84. johnnybgood

    Well, it’s been a few months since I wrote my long post up top. I’ve since put 25% of my 401K into the brokerage firm linked to my 401K (Charles Schwab). I used to trade stocks, so I’m pretty confident with my skills. I can read stock charts within seconds and tell you what exactly the stock price will do. It’s been 2 months since I’ve been trading stocks and I’m up 90% (i.e. almost doubled my money). In other words, the 25% of my 401K I moved to the trading account is now almost half my 401K. With discipline I plan on doing 1,000%+ returns a year.

    Again, this requires knowledge, skills, balls, heart, no fear, no stupidity, experience, and superb chart reading skills. I’ll be able to make a million in my 401K soon at this rate.

    In fact, I’ve gotten so good I lowered my 401K from 18% back to 7% to get all the match. I’ll be switching over to the Roth 401K method so I can make a shitload of money from trading it and never ever have to pay taxes again. Life is great when you know what you’re doing.

    1. Well I hope you are right.

      I have found it is not wise to mix up “intelligence” and “bull market”.
      Good luck to you.

      1. Please look at the chart of WMT today and tell me how you could have through technical analysis predicted a 12% drop in 2 days

    2. This is a joke right, jonny? You said your approach requires “no stupidity, experience” except your post was dripping with tons of the first and none of the second.

      How are those 1000% returns working out for you?

  85. Mike the manager

    I spoke to my auto/life insurance agent two days ago. He was astonished that I have $250,000 in my 401k at 36 years old. My net worth isn’t much higher, maybe $310,000. Anyway, he tells me that many of his clients are in their 40s and 50s and have far less saved and are rather clueless . They drive expensive cars they have no business owning. This was in Scottsdale, AZ , of all places, a generally wealthy city. I am finding it very difficult to be sanguine about the misbegotten myopic lifestyle most of the population in this country lives. I see it all the time at the grocery store, people paying $2 for a soda when they have $87 in their checking account, or another example, openly admitting to exploiting taxpayer funded programs such as WIC and EBT. The financial Samurai is right in most of what he writes but the advice is unheeded, unknown by the masses.

    1. I went to college in East Phoenix. I didn’t know anybody when I arrived. I remember standing in front of the ‘housing’ bulletin board, randomly connecting with two other guys and we explored getting a place together. One of them said, “I don’t care about the details as long as it’s a Scottsdale address.” I realized I needed to cut them loose and go out on my own. That little nugget convinced me that while there is certainly real wealth in Scottsdale, there’s also a lot of posers, just barely treading water.

  86. The Finance Doc

    Pretty interesting article throughout. Have you considered recalculating the table with real amounts, as opposed to nominal amounts? This would be useful for individuals since it would compensate for the increased costs of living. Also, do you really believe 7%+ nominal growth in your 401k portfolio is attainable over the next 10 years? If you asked me in 2010-2011, I would have agreed completely–these days, not so much.

  87. Hmm. I find the numbers a bit interesting for someone who is say, 44. And someone who is say, 47.

    For a 44 year old (under 45 – mid-end), must have saved around $800K

    But for a 47 year old (over 45 – low-end), must have saved around $500K.

    The Math is not that simple.

    Someone over 45 certainly went through the 2000, and 2008 cycles.

    But its not making sense for borderline ages, like ours :-)

  88. This article concerns me. Write off 401ks like you do social security? SS is confiscated – exorted, and unless you are a religious worker there’s really no getting out of it. 401ks is entirely voluntary (now at least). If you think it will be confiscated, why are you telling people to max it out? This seems irresponsible. I fully expect this as well – government will a large chunk of it either directly via taxation and fees or indirectly by mandating US bond purchase with the funds. I’m only contributing enough to get my employer match, not a dime more. Even if it is taken, almost half of it was funded by my employer so I may still come out ahead. Take as much of your paycheck as you can now, I say. Tax rates are historically low. I’d rather take a 28% hit on that money now than who knows…40% or more later.

    Just my .02

    1. Mike the manager

      I think the government will indirectly confiscate 401k accounts for the , quote, “greater good” as well. I just do the match as well. But I also feel that if the government ever does make private 401k accounts public, then all bets are off.

  89. Hello
    I am trying to figure out when enough is enough so to speak. I am 53 and hate my career. I work for the government and this is something else to be brief and blunt. I don’t want to “run-out” when I am 70 and need to go back to work…so to speak. In reading many articles on this, I have come to realize there are many people afraid of not working …

    My stats are as follows:

    I have a retirement/pension/annuity income of 7500 monthly after taxes. My healthcare is part of the pension package as well. My 401k has rough 70K from my second career and I have around 650K in a brokerage account as well. My home is paid off; I have very little debt and I have something like 50K in savings.

    I still save and my government paycheck is in automatic mode to the 401K or the brokerage account. I realize and am grateful for everything. At what point to say that is enough-time to chill. I can easily blow money with dream type events of travel or whatnot…and do not want to have to resort to frugal. Some of the graphs I have seen state the saving quotient should be at 6 or 7 digits when quitting working. No graph accounts for a defined benefit plans value insert-able into the logic.

    1. Sounds like you’re doing pretty well. Is that $7,500 in pension “now”, at 53, or do you have to wait till 55? If your monthly expenses now are below $7,500, I’d say you’ve arrived. Your $700K plus in your other accounts is your cushion.

  90. I’m 53 and only have $192,000 in my 401K. I do have a pension that will pay about 1500 a month, and my SS will pay about 1500 a month. I want to retire at 62 and won’t have any debt. My house will be paid off, so I feel like I have enough for retirement.

        1. It will cost you about $550 – $700/month per person for a gold to platinum plan. I’ve done tons of research on it because I’ve had to get my own as an early retiree since 2012.

  91. johnnybgood

    “Meanwhile, you have to make less than $133,000 a year as a single or $196,000 as a married couple in 2017 for the privilege of contributing $5,500 in after- tax dollars to a Roth IRA, which I do not recommend before maxing out your 401k.”

    I disagree with this. Again, I created a super duper tool that confirms 100% that if you max out your 401K (assuming it’s a traditional 401K, max rate at 30% with 50% company matching up to 7% or so), when you turn 70 1/2+, the IRS will eat your heart out. If you have a large 401K balance (we’re talking millions, which IS how you become a millionaire by contributing this much), you will be forced to withdraw hundreds of thousands and even a million dollars plus!!! That’s a REALLY big tax bill! Trust me, I’ve done the math and have a tool that tells me exact amounts.

    For example:

    Joe Schmoe is 25 years old and makes $15 an hour. He gets a 3% annual salary raise each year. He contributes 20% into his 401K at age 25, with company matching 50% up to 7% of his wage. At 8% rate of return, at age 62 when he retires (yes he can retire much earlier too BTW, which is one of the beauties of contributing more, earlier), he’ll have:

    62 years old: $2.39 million
    65 years old: $2.77 million
    70 years old: $3.63 million
    80 years old: $5.12 million

    This is all while distributing about 70% of his pre-retirement earnings + social security. Since Joe no longer needs to save for retirement, he can live on less than what experts recommend (75-85%).

    However, at age 71 1/2+, he gets hit. Instead of taking out $80K, he is forced to withdraw $136K. This number only goes up. At 90, he has a balance of $5.64 million, and is forced to withdraw $498,311! And it only goes higher…

    All the while, Joe Schmoe also saved the max into a Roth IRA. At 90, his Roth IRA (8% returns so far), it’s worth $2.85 million.

    If Joe Schmoe has been smart and put a little more than half into a Roth 401K (just to get his company match on the traditional 401K), he would have transferred $1.25 million at age 62 to his Roth IRA, leaving only $1.02 million left in his traditional 401K. This continues to be drawn in retirement, and never triggers the IRS Required Minimum Distributions, and last him until age 98.

    All the while, the transferred money to his Roth IRA now grows to $14.5 million at age 90, tax free (8%), and $25.31 million at age 98!!!!!!!!!!!!!!!!!!!!!!111!!!!11!!!!!!!!!!!!!!!!!!!!!1 This can then be transferred to his kids/family/whomever as a trust.

    A lot of peeps think (and rightly so since they don’t have a big nest egg) they need to move their retirement funds into bonds as they approach retirement age. Not me. I’m prepared, so I’m going to keep it on Vanguard’s index fund that costs only 0.04% !!!! Heck yeah baby.

    You’re all welcome. And if anyone is interested, I can share my tool. Donations are welcome.

    Here are other examples I calculated:

    Example #1: You start working at age 24, making $13.90/hr ($29K) and retire at age 67, making $100K. You contributed 15% to 401K and $3K a year into a Roth IRA. At retirement, experts suggest 75-85% of your pre-retirement income to retain your financial lifestyle. However, you can live on 63% + SS ($79K total, equivalent to $100K with 15% into 401K and $3K into a Roth IRA) because you no longer need to save for retirement. At a 6% rate of return (RoR) before age 55 (3% after age 55), at retirement, your balance grows to $1.62 million. The funds last until age 95, all while receiving a comfortable income at or above the Median Household Income level.

    If you invest in higher risk/above return funds after age 55 and see 8% RoR, you’d have $2.76 million at retirement, $3.5 million at age 70, $5.6 million at 80 etc. In fact, the 401K balance would grow so large that IRS Required Minimum Distributions (RMDs) triggers! You’d be forced to withdraw an extra $6 million+ over four decades, on top of any income you normally would be receiving. But that’s a not entirely a bad thing because that’s extra cash on top of the millions already in the Roth IRA! And, until age 113 (at 8% RoR) all income comes from 401K funds, leaving the tax-free Roth IRA to grow (for inheritance)!

    Example #2: Same scenario, except you only contributed 3% to 401K. At retirement, your 401K balance grows to $290,818. Additionally, because you never saved a lot, to retain your financial lifestyle, you need 81% (instead of 63%) of pre-retirement earnings + SS to make $97K total. Not doing so, you’d experience an “income shock” if you lost $14,000 income a year. To add insult, your 401K only lasts until age 70! If you live past this age, you have nothing but SS. When you die, your children inherits nothing. Even at 63% pre-retirement earnings, all your 401K runs out at age 71!

    Even at an 8% RoR (after age 55), funds run out at age 74 (81% = $97K income) or age 77 (63% = $79K income)!

    Example #3: Same scenario, except you contribute ZERO into retirement accounts. Anyone want to guess what happens? (And yes, I know people in their 50s who are in this same boat and all they can say is “I can’t afford to put it into 401K”. You see the problem?)

    So… after those short examples, what I would be doing is this below. My only regret is no one told me this when I was younger!!!! I’m almost 40 and have very little in my accounts. However, if I max out everything, I should have about $2.6 million at age 62.

    1. Max out 401K until company matching has fully been realized.
    2. Max out a Roth IRA.
    3. If your employer offers a Roth 401K as well, max this one out. This one can convert to a Roth IRA with minimal complications or tax consequences. This one is subject to required minimum distributions too, however, it is tax free. Yet, you do NOT want to have to withdraw from it since it grows tax free!!!!
    4. Once company matching, Roth IRA, and Roth 401K are maxed, then max out regular 401K, in that order.

    The Roth 401K can be transferred to your children TAX FREE!!!!!!!!!!!!!!!!!!!! There’s no probate when you die. The other retirement tools, not so much.

    Good luck all!

    1. Whew! That’s a lot of info!

      One thing I didn’t see in there: if a traditional 401k allows post-tax contributions (a fair number of larger companies did this before “Roth 401k” became a thing), then those post-tax contributions can be rolled to a Roth IRA. This is what I have done.

      1. Inverseparanoid

        This is great. I just found you…

        I am 50, earn about $125k… My wife passed away just over a year ago (cancer) and I am just beginnig to get my legs back under me. We had some serious financial challenges about 10 years ago – business partner embezzled everything…, and between that and the cancer here is where I am at… $180k in a taxable brokerage account. I am very aggressive with it an up over 30% ytd. I have only 60k in my 401k, and add about $1500 monthly – again aggressive with that as well. I am also looking for additional income streams and will certainly make that happen. I have 3 teenage daughters as well and am teaching them all that I wish I knew back then… I have a great job which I love at a major airline, so I have the ability to travel essentially for free. I also lifetime benefits on another major airline, where I “retired” at 39 – and a small pension of about $1k monthly that I will draw after 70 more than likely. I have a great mortgage, 2.8% locked for 15 years, and about $150k in equity currently.

        I purchased a 30 year term $1M life insurance policy at 40 that costs me $100 per month. That is in addition to a another $1.5M in employer based life insurance, so the girls are covered.

        I agree with then need to have the abundance mentality. I am convinced that the entire world is out to help me. I clearly have a lot of work to do, based on some of your numbers above… Lol.

  92. I have come back to this post multiple times as a “check” on where my family is. It is inspiring and a little daunting. After four years active duty, I matriculated to law school, graduated and started working (hard) at a small law firm. I was 26. I am now 37. My wife is 5 years older and has out earned me year-over-year. For 11 years, I have maxed out every retirement vehicle available, prepared four our two kids college, and disciplined myself to contribute additional funds to a taxable investment account. Here is the result for us:

    1. Retirement Account – $691,787;
    2. Taxable Account – $362,000;
    3. Kids 529 (ages 5 and 3) – $60,000.

      1. Sure, outstanding, but the problem is we all can’t be lawyers. Some of us are lowly scientists who don’t make that much. Not everyone makes 6 figures to make these unrealistic goals set forth by the author.. I can’t live with my parents or I would have been jobless, as they live in a rural area, so guess what no jobs for me. All this forum is is a bragging ground for a bunch of over paid CS majors anyway. Most of the info here is completely useless to the average person who worked their own way through college and life.

        1. All I would say is that the attitudes and methods encouraged by this site apply to everybody. If you make 50K and live within your means, your expectations and expense needs are smaller in retirement. So you don’t have to save $5 million to retire, but you have to save. If you save just $5,000 a year on a $50,000 salary from ages 25 to 35, then manage $7,500 on a $75,000 salary from age 35 to 65, your 401k at 6% rate of return will be $971,455. A 4% draw from that will be $38,858. (You could probably take 5% out and make it $48,572. Or use a 7% rate of return and you’ll have $1,234,328, of which 4% every year is $49,373 — and that probably leaves $1.2M to your patient wife when you succumb!) Given that you have been living modestly, that $40,000 or $50,000 in income would be awesome. This example assumes you did no other savings and your income /savings never increased in the last thirty years of work, which it normally would. The point is that these methods are all scalable. Cut it in half, and the halved figures would be just as big in relation to the spending and income expectations of the saver.

          The examples are more fun if you add a zero at the end, but

          1. Scalable, really. Of course it is, except that the title says what you SHOULD have, not what you can scale up to. Problem is you are not even counting cost of living. Do you think scientific researchers work in low cost of living areas in the boonies? Wake up.

            1. My point was that the low end of savings in his charts is achievable even if income never hits “six figures.” I don’t know where you live, but assuming you are living in a high cost of living area on that salary, then you’re probably good at living frugally. Your spending in retirement will be consistent with your past — again, all scaled to your experience and income/expense patterns from your working years. Meaning not that you need find a way to scale up to gigantic absolute savings, but that the methods here are equally valid if you divide everything by 2 or 4 or 10.

              I would also say that when you retire, you can leave the high cost of living and move to the “boonies.” That’s what I want to do. It will make my savings go all the farther, especially on housing costs.

              We should all be pessimistic about retirement scenarios, but it’s no reason to be negative! I find it calming to run through scenarios and planning options in my mind: it gives me the illusion of some control over a process with lots of randomness and unpredictability in it!

  93. Timeless post! Shared multiple times with more junior folks I mentor. Although I’d add that what one ultimately have saved up for retirement should be dictate not only by age, years worked or income level but a combination of all three. I use the below to estimate where I want mine to be at the minimum and make appropriate changes to contributions when I go under.

    retirement savings = [1/10]*[years worked]*[log(age)]*[annual income]

    1. Is that net or gross for annual income?
      1 / 10 * 13 * 31 * 90000 = 3,627,000 needed for retirement?

  94. What are your thoughts on a Roth 401k?

    My company offers both a pre-tax 401k plan and roth 401k plan. Company match of 4% on 5% contribution ($1 for $1 on first 3%, $0.50 for $1 on next 2%). Both cap at $18,000. I’m 26 and make $65K. Should I still go pre-tax?

    1. I think it makes sense to always go Roth 401k and Roth IRA — If you even consider the tables above, by the time you are 65 a lot of what is in your 401K and Roth IRA is going to be growth as opposed to your contributions. You could be in a higher tax bracket in retirement, or taxes could be even higher in general. Would you want to pay taxes on all that money?? I hope not. :)
      Cheers.

  95. Found you listed at Rock Star Finance as one of the best personal finance blogs. I needed this info and know my readers will appreciate it too, great job!

  96. Hello Sam,

    I want to let you know that i follow a lot of your blogs and that you sound like a very successful investor. I am 34 years old and follow your graph very closely. It gives me a great understanding where i need to be at in my age group. It looks like i fall under the “Middle Age Savers Or Mid End” column and it looks like I’m doing okay but, i can always do better.

    I live in the Midwest and always finding ways to improve my nest egg. I currently max out my 401k every year and I don’t like to invest in CD’s (Short Term Investments) or any low ROI investments as it does make sense for me. I looked at Crowdfunding as a side investment but, I haven’t heard too reviews around it and haven’t tried it as of yet. Also, i looked into Flipping houses on the side but, where I can live it is very high risk. what else can i invest in that will help me overall? Let me know your thoughts. Looking to be Financial Free here. Thanks.

    1. Instead of flipping houses, I’d be much more surgical and invest smaller amounts of capital is properly vetted deals via real estate crowdsourcing. RealtyShares is my favorite real estate crowdsourcing platform after meeting with senior management and spending over 20 hours researching their company and investing $35,000 so far in two deals (Conshi PA commercial property and Austin, TX multi-residential property). Check out their platform for free and peruse around. Doesn’t hurt to look.

      Also, please read my latest investment trend post: Why I’m Investing In The Heartland Of America

  97. End of year mess up!heeeeeeeelp :(

    Situation:
    Me: W2 gig=91k salary Contributed 6% to 401K
    Wife: $30,000 salary NO 401k
    New Scorp started 2016: Net 70K no salary taken….

    What should I do? I tried to max out my w2 jobs 401k but didnt realize you need to be doing it only through payroll the company we have 401k through wont accept a check….

    I met with financial advisor and they recomend paying wife on scorp and starting a 401k but they want $900 setup and $1,200 annual “analysis” fee.

    Are there any websites I can manage my own or start my own? Should I do a separate 401k for wife through biz?

    1. Smart Money MD

      I would imagine that both E-Trade and Vanguard has lower 401k setup fees than what the advisor will offer. Does your wife work in the S-corp?

        1. Smart Money MD

          Do both you and your wife have two jobs?

          You: W2 job; S-corp but no salary in 2016
          Wife: S-corp with no salary but a $30k distribution?

  98. Sam, do you have any recommendations if my employer does not offer a 401k at all? I’ve been squirreling money away in taxable accounts and maxing out Roth IRA the last 3 years. I’m 30 years old and make about 80k a year up from 45k when I started working at 25. I have about 17k in Roth and 100k in taxable accounts.

  99. I can see where some readers are coming from about not being able to save up to the 18k limits each year. I just recently graduated and started fulltime and will only be sending 6% of my 62k salary for these first few years. Why? Due to my first real estate purchase at age 19 I am paying 1k each month for a mortgage, another 2k for utilities and other items (believe me I have looking at trying to cut costs but there is not much wiggle room). I currently rent out a room in my home to ease my expenses by $500. I see myself at age 22 ahead of what some of my peers are. Of course it seems like many have had an easier route as I did not receive any funds from my parents to pay off student loans or have any assistance buying any of the property I know own. Now dont get me wrong having the assistance of your parents is wonderful. I just dont believe that they should spend their hard earned money due to my life decisions such as going college and needing a vehicle and place to live 2+ hours away from any family, they have paid enough of my expenses when I was growing up. So I can see how it can be difficult to save the max contribution to a 401k. I have been attempting to find some ways to earn a few extra side hustling but that is still a work in progress. Maybe once I establish myself a bit more I will be able to adjust that % of contribution, currently I have it rising each year by 2%. However with the current employer they match 6% and offer a pension (which is getting incredibly hard to find these days). So again, paying for a house, purchasing my own vehicle, and paying my way through college I feel like I am still in solid standing to retire fairly well in some odd 40 some years away. But if I were to save like you suggest I would be put in a difficult situation as Maslow’s hierarchy would beg to differ where my money should go. Just my two cents. Enjoy the blog long time reader first time poster!

  100. I’m 36 and have about $275K in my 401K. I live in San Diego. I own a condo that I reside in and a condo I rent out. I went to an inexpensive school and worked full time. When I graduated college, my starting salary was $29K/year. I worked very hard throughout the years and currently make a salary of $160K/year. I obtained an MBA (again at an inexpensive state school), got my CPA license, became a real estate agent, and am certified in contract management. I did not contribute the max amount to my 401K in the first couple years of working, but contributed the max for the next 8 years. The last 4 years I have only contributed $10K to my 401K because I am considered a highly compensated employee, and not enough other employees at my company contribute. I also contribute the max to an IRA each year (I started this 2 years ago). I have lived on my own for much of my life, only recently to have moved in with my long term boyfriend. I have purchased 2 cars since I was 20 years old; both Honda Civics. I save about 35% of my after tax income. I take vacations twice a year on average, I eat out a few times a week (I am definite a foodie…I am actually starting a blog on this), and I enjoy my life thoroughly. In about 2 years I will have saved enough to purchase another rental property (its CA, it takes a while to save for 25% down), and 2-4 years after that, another. Yes I have lived frugally, and could probably have taken more extravagant vacations and owned tons of expensive “stuff”, but I also plan to retire at 50-55. I am not missing out on life at all, its all about balance. I think these goals are very attainable, it just takes discipline.

    1. Great job Danielle! I look forward to checking out your blog too.

      Good luck with living with your BF! Make sure you helps out equally around the house. If not, kick his ass.

      One of the best ways to build passive income is to simply buy your home, ENJOY IT, and then rent it out after you’ve saved up enough to buy another awesome home. In your lifetime, you can do this 2-3 times if disciplined and be set for life.

      Related:

      Buy Property For Lifestyle First, Income Second, Capital Appreciation Third

      How To Start A Profitable Blog To Make All Your Dreams Come True

      Best,

      Sam

  101. I posted in early 2014 (age 42) with a balance of near 300k. As of today I’m nearing $355k +/- 5k and that includes my after tax. Maxing out is best thing you can do. Consider the tax break. Not being taxed on that extra $16k-$18k really makes a difference.

  102. I always come back to this page to read the comments.

    Sorry, but the OP is living in a fantasy land. These numbers are unrealistic for the vast majority of Americans, and seem to be based on the inflated salaries of the Pacific Northwest/California/Northeast. I live in Florida, and let me tell you– no recent college graduate is going to be able to afford to deposit $8,000 into their 401k the first year unless they’re living at home and having their parents pay their expenses. Hell, I’m 31 with an economics degree and I only have a little south of $17,000 in my 401k. Why? Because I had to pay for things like student loans, rent, food, gas, utilities, a car loan, etc.– you know, things that I need to survive on a daily basis. This is not just poor financial advice; it’s dangerous advice, because it leads people to believe they’re “doing something wrong” and/or would lead them to live like paupers in order to meet some ridiculous goal.

    Oh, and I’m calling BS on some of these people with their inflated 401k amounts. $150k in your 401k account at 25? Yeah, right LOL.

    1. Brandon,

      Always good to have readers coming back. Let me ask you:

      * Are you working over time? If not, have you found a side gig to make extra money? Read: Spoiled Or Clueless? Try Working A Minimum Wage Job As An Adult and What’s It Like Driving For Uber?

      * Have you considered starting something online, where there are 3 billion+ people to potentially connect with? Companies have leveraged the internet to boost profits, why don’t individuals do the same thing given it’s so cheap and easy to start nowadays thanks to technology? Check out: How Much Can You Really Make Blogging? and How To Start A Profitable Blog Today

      * Have you tried getting up a couple hours before your colleagues and peers to get some extra hustle in? If you work an extra 1-2 hours a day on your side project, you will have committed 365 – 740 hours of time to your project. I am sure you can create something meaningful that throws off extra income if you stick to it.

      * Have you worked on developing an abundance mentality instead of a scarcity mentality? For the longest time, I had a scarcity mentality about leveraging Facebook to promote this site. I finally realized how foolish I was six years later and finally started my own FB page.

      * Have you spent some time reading other posts on Financial Samurai from people who were able to make more money at a young age? Here’s one: How To Earn Six Figures By Age 21

      * Did you read up on the various investment strategies for retirement based on modern portfolio theory? Understanding these concepts should help motivate you to contribute more to your 401k and invest in after tax vehicles like Wealthfront where you can just investment automatically.

      The final article you should check out is this: The Inflation Interest Rate Paradox: Why You Must Continuously Invest. Because although having $17,000 in your 401K at 31 is not that great, it’s really going to be bad if you’re 41, getting tired of work, want to take things down a notch, and have to take care of your family and friends, and still don’t have anywhere close to what I recommend for a 41 yo.

      This is when life becomes miserable and you start really hating everyone and the world because there is so much angst and fear about your finances. It is worth the “sacrifice” to save more aggressively and to work extra hours when you are younger, so you can have OPTIONS and more freedom when you are older. Don’t wait until it’s too late because there is no reverse button in life.

      Sam

    2. Even if you are under the amount of 8k a year in a 401k, anything helps and gets the advantage of compound interest. That’s the part that most people don’t get. Take $2000 a year and keep investing it over 35 years, you wind up with 250k at 6% interest. That’s $5 a day, which is still a lot when money is tight..but not insurmountable. If you earn more, you put in more. Pretty soon you have a 500k+ nest egg that at least puts a buffer between you and the social security minimum. If you did 8k a year and had 6% growth, over 35 years you have a million dollar balance. The money you put up front is the most important. It’s what has time to earn the interest. waiting till you are 40 to 50 and then putting loads of cash into it, doesn’t give you nearly the growth as modest initial investments.

      1. Where does pension contributions factor in? For example, if a married couple is contributing 2K per month to a pension, wouldn’t 18K X 2 to a 401K be a little overkill (5K per month)? I mean, shouldn’t the pension contribution be viewed the same as contributing to a 401K?

        1. Arnie fickle

          I am looking at :
          9,000-SS a year at 63
          66,000 pension a year (80 percent ) projected in 4 years
          wife will still be working
          when we both are retired we are looking at :
          SS-24,000
          80,000 pension
          4 percent of 401 K’s 28,000 projected
          Total-132,000 about 85 percent of projected salaries
          DINK’s plan on traveling and donating to charities and people.
          I wished I started saving earlier but life got in way, don’t make much in the military , we should be Ok, I know how to stretch a buck, best thing I ever did at 50 was join AARP savings for members are outstanding well worth it. From, travel, to shopping, to groceries, tech items, gift cards, and dining…Goos Luck everyone, we are all in this together…..

            1. Arnie fickle

              Yes state pension I am grateful but work hard, Also I pay into that pension It is lost on a lot of anti pension people that the first couple of years receiving the pension is money I contributed…

  103. 42 yo. Have 20k in 401k. Company matches 50% up to $2,500pa. That is all the savings I have. Guess I am too way behind to go anywhere close to where everyone is.

    One thing though…instead of struggling and scrimping and saving I have lived my life. Drove fancy cars, taken expensive vacations…done everything that tickles my fancy. Consider this, if you pass away at 50, all you have done is save and never enjoyed life! After 65 you can still no longer anyway enjoy life (both in terms of health and also for an item that is $100 today you will be needing to pay $1000 then). People investing in 401k and retirement will never live…save till you get older so that you can live happily and when you are older you just have enough to go by and too old to enjoy. Saddest part of humanity and the way we have setup things for ourselves and our future generations.

    1. I love how you’re living on the edge with only $20K in your 401k at 42! What other savings and after-tax investments do you have if any? How about owning your own house etc?

      I’m 39 now and have been gradually spending more of my money to live it up. I agree. Life is short! Check out:

      Enjoy The House’s Money: Practice Taking Profits To Pay For A Better Life – I don’t have the courage to spend like you. But I have found it easier to spend my profits on investments I made years ago.
      Why Start A Business? To Live It Up! – Here’s another strategy where one can start a lifestyle business to help pay for all the fun things you like to do. In my case, I love to travel, so I’m starting a Travel business on Financial Samurai.

    2. counter-points:
      – consider this: living way past 50. How much working do you plan to do?
      – easy to spot people enjoying life at 65, and way beyond
      – in your example, that $100 item would become $200, not $1,000
      – saving in 401k has not prevented me from ‘living happily’

  104. Married. Just hit 33 years old. 2 kids (5 and 3). Wife is stay at home mom. $100K in 401K. IRAs totaling $25Kish. Salary is $100K pre tax. Paying mortgage on the house. $20K credit card debt. Student loan free. Lease a car $350/mo. Own a car out right. Contributing 14% + 6% match.

    This would suggest I’m behind according to the chart. Not sure if I agree considering all other circumstances. Thoughts?

  105. Hi FS,
    Just started reading your blog and I imagine that I will read all posts within a month or 2. Started on Mr MM, JL Collins & Jacob EER a few years ago and it really got me on track, after making a bunch of big mistakes. I would like your opinion on something. Quick background 1st – I am 59, have about 130k saved in 457b. I was saving the $24k max, but just switched to the special catchup which will enable me to save $36k/year. I only make 70k gross so it will be tough, but I have a side gig which enables me to do it. I plan to retire at 62. I am lucky enough to have a pension which will pay me about 2k/mo at age 62, which should cover my bills. I figure my side gig will easily cover everything else, but….if I scale back my side gig, I would either start drawing SS or draw from 457. At 62, I would draw about 1300/mo SS. I figure my 457 would be maybe 200k at 62 yrs, x 4% WD = about $650/mo possibly. My question is about whether it would be better to delay SS or better to take SS early and leave 457 money invested (I would roll over to an IRA and maybe start Roth conversion). It would seem that delaying SS would be better, as I gain about $250 per month each year I delay, so $250 x 12 mos = $3000 per year. $3000/ 4% WD rate = $75,000 saved equivalent, which is pretty unlikely with my 457/IRA. How do these figures look? Thanks.

  106. I came to the US about 6 years ago when I was 35′ and brought roughly $130k over from my home country. I worked for 2 years making about $130k a year. Bought an apartment in NYC in 2010 then lost my Job. Rented out my apt on Airbnb and lived with a friend, then got a job later in 2012 paying $190k. I’ve lived frugally deferring most of my income, and saving as much of what’s left over. I’ve now got $130k in 401k, $170k in brokerage accounts, $100k cash and about $400k equity in my apartment. My deferred income account is now $188k but of course I will have to pay tax on that. I’ve got about $1.5m in assets in my home country. All I did was buy properties, live frugally and invest semi wisely. I’ve never had an amazing job, I’m just a computer engineer.

  107. Sam,
    I sent this chart to my friend because she is 38 and only has $20k in her 401(k)…i have been telling her for years that she needs to increase her contribution and it has gone on deaf ears…

    hopefully this scares her a bit to save more…

    1. I know people like that and it scares me to think what will happen to them when they get to 55 and no one wants to employ them. I’m making the assumption that someone who is 38 and has only saved 20k isn’t a nigh flyer. I’m certainly not and I’m very confident I will be unemployable at 55. Who wants an old computer engineer?

      Young people always assume they will move upwards in an organisation and continue to make money as fast as they experience it now. In reality corporate structure is a pyramid and it gets harder and harder to get into more senior positions. The initial fast wage growth and promotions soon lose momentum. I used to get promoted every year, now it’s not happened for 6.

  108. Quick question: If we should write-off our 401ks completely from our mind and not expect them to be there for us when we retire, should we consider other vehicles instead of maxing out? I’m 29 years old and currently maxing out, but if someone told me the withdrawal age would be 80 or higher in the future, wouldn’t that be cause to rethink things? Potentially scale back and only contribute enough to receive my company 401k match? All feedback welcome! Thank you!

    1. You should always diversify… All savings spread out over tax free and Roth IRA and your own brokerage account, cash, etc. heck even buy a lottery ticket sometimes.

      I don’t think 401k’s will disappear and retirement age will be pushed much past what it is – that just won’t happen. I don’t think social security will be gone either – modified, but not gone.

      If all that happens and the cash we placed into 401k’s is penalized for being taken out before age 80 or some crazy number much past 70 – I would take it all out ( delay paying taxes on it) and move to a third world country with decent cost of living and free health care and just live there and forget paying the taxes. Just take it out and go. I’ve spent a lot of time reading ex pat logs and forums and it’s the new retirement plan for many…. Live where you would vacation anyway. Thinking Southeast Asia, parts of Africa and central and South America. These people get together in communities and share expenses for food and housing. Like college living in paradise.

      Think outside the box because at some point the US is just not a favorable place to live anymore if that starts happening.

      1. Thank you, Christy! Very appreciative of your perspective. You are, of course, absolutely right about diversification. I am fortunate enough to have a nice career and am able to save ~50% after tax. Still, if I somehow manage to save $3M plus in a 401k but then cannot access it until some ridiculous age (e.g. 80), I will be extremely upset with Uncle Sam!! :)

    2. I would always focus on maxing out your 401k to the max, even if it is beyond the company match. You will be incredibly pleased 10+ years from now when you’ve accumulated most likely a $200,000+ nut without much pain.

      For your after tax money, I like the idea of contributing to a low cost digital wealth manager like Wealthfront. Make it automatic, like 401k contribution. Wealthfront automatically rebalances a portfolio tailored to your risk tolerance. The first 15K managed is free too with my link.

      Finally, stay on top of all your money with Personal Capital, a free financial tool to track your net worth, x-ray your investments for excess fees, and help you plan for retirement w/ their excellent retirement calculator. I’ve used them since 2012 and it’s been awesome. In order to optimize your net worth, you must first know how all your money is allocated!

      1. Thanks, Sam. Similar to what I mentioned to Christi above, I have been fortunate in my career and finances thus far. It simply made me wonder about things when you mentioned the 401k may not be reliable as a retirement investment, when many consider it to be the holy grail in that regard. Like I mentioned above, if I manage to save $3M+ in a 401k but then cannot access it until a very old age, I will be quite displeased!! :)

      2. Sam –

        I don’t know why you would sow FUD about the government raising 401k withdrawal age to 80.

        What benefit would that be to the government? They’re licking their lips now, wanting their fair share of all those deferred taxes (i.e. RMDs at 70.5).

        I’m all for diversification, but that particular scenario seems awfully unlikely.

  109. Severely Independent

    Financial Samurai, does the $735K to $3.5K net worth goals take into consideration pensions (still available to about 30% of the populace) and social security? For a 65 year old retiring today those two streams of payment could add $1K – $5K per month to most retirees’ cash flow.

  110. Hi Sam,

    I’ve slowly taught myself how to be fiscally responsible over the last six years, and I’m in the process of ramping up my financial literacy in general (how to invest, what to invest my money in, etc.). I managed to pay off 42K in student loan debt at a public university in the last three years since I graduated. Last year, without doing any research at all, I started a life insurance policy with Midland National based on a friend’s recommendation, and have contributed $1000/mo to the policy for the last 12 months (my online account currently shows $11,200.80 as the “accumulation value”).

    Based on your recommendation, it appears I should be maxing out my 401K instead of focusing on this life insurance policy. What do you advise I do here? Should I take a hit on fees, withdraw all my money from the insurance policy, and jump-start maxing my 401K? Or should I dramatically cut back on what I contribute to the insurance policy (from $1000 to $200 or something for instance), that way I can focus on contributing to both life insurance and a 401K? Please advise.

    Thanks,

    H.

      1. My original (mis)understanding of long-term savings (again, having not researched a lick of anything previously) was incorrect, and I was led to believe that life insurance was the safest bet for guaranteed income. Guaranteed interest rate is 3% and currently sits at 4%. I’m meeting with my agent tonight in order to discuss cutting back on my premiums, and then reallocating most of these towards maxing out 401K. Thank you for the input!

    1. Your insurance should reflect the amount of risk your spouse & dependents would have, if your income were to go away.

      Price out term insurance for 20 or 30 years, and get that in place first. After establishing the right amount of term coverage for your situation, you would then have the option to cancel the existing policy.

  111. I think this article is great… assuming you make at least $50K per year. My first couple years out of college, I only made $19K per year and I bought a house to save money from rent (it was actually cheaper to own than rent in that city). Then, I would have totally laughed at this article. How do you save $18k per year when you only make $19k LOL.

    In all seriousness, save more—everyone save more. You will learn to live with less disposable income.

  112. I’m 29, working since out of college at 22, not married, I have about $260K liquid net worth. Right now I’ve got $50K cash, $50K in my 401K, $10K in an IRA and $150K equity in my home. I own my car outright. I’m about to get aggressive with my 401K and start maxing it out, I just got a job at a company that matches 8% a year.

    1. I wouldn’t count the equity in your house as liquid since you have to convince someone to buy it for the price you think it is worth.

  113. Blastomycosis

    Am I uh missing something?

    Lets say you have 20,000 in an ica roth at 30. If you contribute 100 per month into only this fund with reinvestment it would be worth 600,000 when you are 70, assuming an 8% return.

    Are you trying to adjust for inflation by cutting out ROI?

  114. My husband got laid off two years ago at the age of 55. He was a senior computer engineer making about 120,000 per year. We started with nothing, he did not even speak English when he came to this country. I worked while he went to school and then he got a paid internship and worked in the day and went to school at night. In 1996 we moved to a low cost of living state and he started at a job making about 50,000 with two small children and a wife to support. He played offense by being good at his job so he advanced. I played defense, learning about all things financial, being frugal, etc. As a result, the lay off was a blessing in disguise as his job had gotten mega stressful and they paid us a decent severance. It is possible to retire early but you have to educate yourself and see money as a means to buy your freedom not as a means to buy more things.

    1. Brilliant. I disagree with, also, maximum 401K contributions—Financial Samurai is VERY WRONG ON THIS ADVICE. it is not freedom inducing; it is fooling yourself in to more long term servitude until a magical day in the future when you can access it at low tax cost — when you’re too old.

      1. A 401k should be but a SMALL portion of one’s wealth. Build multiple passive income streams for now. I am free because I have done this.

        I also continue to contribute to a Solo 401k and get SEP IRA contributions as well in early retirement. I see ALL pre-tax retirement money as BONUS / INSURANCE money, just like my Social SEcurity. Max your 401k, make it automatic, and if you’ve got hundreds of thousands or millions of dollars at your disposal at age 59.5, then wonderful. If not, it matters less bc you never counted on it.

        Related:

        Why Everybody Should Start Their Own Website And Be Their Own Boss Today

        Disadvantages Of A Roth IRA: Not All Is What It Seems

        I am writing all this to you from 100% experience as a free man. What is your background?

      2. Too old?

        I maxed out my 401k and retired at 55. Living the dream, man.

        Sam, you can tap a 401k at 55, provided you are ‘retired’ from that company. IRA is 59.5; it’s a key difference between the two.

        1. It is important to note, when contemplating early retirement (as people on this site do), that you CAN withdraw 401(k) and IRA funds before the age of 59 1/2 or 55 or whatever WITHOUT a tax penalty, but only if you do it properly. This is under section 72(t)(2) of the tax code, I believe.

          As I understand it, you just need a “substantially equal periodic payments” (SEPP) plan that spreads the payments out for your actuarial lifespan, seen from the day you start this plan. (The payouts must be set for the longer of five years or the day you turn 59 1/2.) So you can’t just raid it willy nillly, but you can start to live off it.

          So if you have $1M in an IRA at age 50 and want to retire, you set up the plan with your custodian. There are several different ways to calculate it, but I think the simplest just looks at your lifespan remaining and splits it equally. At age 50 your remaining lifespan is 29.58 years, so you can take $1M divided by 29.58, or $33,806 per year. Maybe that’s your “safety net” base of $3K a month to live off, while you pursue other jobs.

          So, that may seem complicated, BUT when people say 401(k) and IRA lock your money up forever, as one of these posters did, it isn’t true, and you can avoid the penalties. If you’re disciplined enough to retire before 59 1/2, you’re disciplined enough to do some calculations and set up this SEPP deal.

          Sam, maybe you should write about this. It isn’t for everybody, but I can say that in my late 40s, it was comforting to know that my growing IRA balances could actually be a safety net if my professional income dropped. (It hasn’t dropped yet, at 53, but it might soon. Still comforting to know the SEPP option is there.) I don’t like when people forego the 401(k)/ IRA benefits on the basis of misinformation.

  115. Hi Sam,

    Great article. It is scary to look at the future of retirement if taking in consideration inflation, however, low inflation will be the new norm thanks to the cheap Chinese products and a slow in consumerism from develop country.

    I notice you preach about Personal Capital, sound like a great product but available only in US.

    Do you have any other solution for international investors?

  116. MacDaddyHoots

    This is kinda ridiculous. I have only been offered a few jobs since graduating 3 years ago, and none offered benefits or contribution of any kind. The income I brought it in barely allowed me to cover anything after accounting for rent, utilities, insurance, food, random bills. And before you say, “Just spend less”, or “get a roommate”, I already did that. I’ve now had to work as a freelancer because the market is so hard. But I get taxed higher there. I’m lucky to walk out with $50 at the end of the month, and it’s not smart to invest when you have literally nothing.

    This is great if you have a great job, but like the majority of Americans, I’ll be working till I die.

    1. Check out: Income Profiles OF Financially Free People. Are you working 80 hours a week to try and get ahead? Have you started your own website to leverage a platform that could rich out to millions to brand yourself and sell your products and services?

      If not, don’t worry. You’ve got so much upside. Once I started Financial Samurai in 2009, a whole new avenue of making money came to me, even though making more money was not my main gaol for starting this site.

      1. MacDaddyHoots

        Yes actually,

        I work around 80 hours a week (actual work, education, and business building), as well as run a monetized travel blog. I also have a website offering my animation and commercial services.

  117. Carey Allen

    There are income limits on Roth IRAs. For traditional IRAs there are income limits with regards to whether you can deduct it from your taxes. Those income limits only apply if you have a plan at work such as a 401(k) or a pension plan. Below is the site to find the income limits as to whether a traditional IRA is tax deductible for you.

    1. Why would you contribute to an Traditional IRA and pay taxes on post tax money (since you cannot deduct the contribution at some point due to income limits) and not put in a taxable account and be able to pay only capital gains? Taxes in retirement is a real thing and people do not pay enough attention to it. There is a real possibility you can pay more in taxes in retirement than when working due to a loss of deductions like college loans and mortgage interests, as well as if you have a healthy nest egg due to minimum required distributions and social security combined. Taxable accounts are definitely a necessity as part of the game because its fixed capital gains as opposed to possible earned income.

  118. I am in the middle of the chart at 29 years old and 150K in my 401k but admittedly that is a little bit skewed because I have a 7% company match and 2013 was a crazy year. I only began maxing out my 401k at 25 so I am behind where I should be. I do not qualify for an IRA, are there any other pretax retirement strategies I can use Sam?

      1. Some people equate “no tax benefit” as “not qualifying”. If you make too much, you don’t get to deduct the IRA contribution. But say “hello” to back door Roth conversion.

  119. no money...

    Sooo I graduated from collage 3 years ago. It took me 3 years to get a job in my degree. Base income is 32,000 a year.
    24,000 after taxes.
    Rent/ utlities is 1000/month
    Student loan payment is 400/month for 10 years
    Groceries/gas/phone is about 400/month
    Leaving me 200 a month and that’s never going out or spending anything. If I need new clothes, good luck. Car breaks down or need an oil change, good luck. Break my leg, can’t go to a doctor. Just gotta walk it off.
    So say I can save that extra money, that’s 2400 a year. After 30 years I’ll have 72,000.
    Don’t kid yourself, the average American can not save or invest… I’ll be working til I die. That’s the truth about retirement.

      1. Smart Money MD

        Do you have kids, Sam? I remember that you’ve written posts regarding cost of kids and impact on potential savings. I’d imagine that you’d have to be more creative with your time on the side hustles if you have to take the kids to activities during the week/weekends.

    1. Wealth, Not Retirement - Dad

      Your $1000/month living expense is too high for your income. That’s what is killing your budget. And before you say “I can’t get anything cheaper”…. get a roommate. Live as cheaply as possible.

      And “side hustle” like FS recommends.

    2. If you were to work for 40 years, investing (Roth/IRA) $2400 each year and earned 9.8%, then you would have over $1 million in retirement. This is not unrealistic.

        1. I have the same question. I haven’t found a Roth/IRA paying more than 1-2%/year. Combine this with the economic constant of inflation at ~3%/year, and you’re essentially putting money in an account to lose value to the tune of 1%/year on average.

            1. The example used 9.8% and 40 years to counter the point about “no hope”

              The original poster stated that there’s no hope of retirement when saving $2400 a year, calculated with 0.0% investment returns.

              What has been the historical average return of the S&P500?

          1. last year was not great for returns, but one has to examine the longer term results (from 3, 5, 10, 15 years). That’s no guarantee of the future, but it needs to be considered in the context of long-term investing.

    3. You will be working ’till you die. Retirement is a false premise created in order to phase out the older generation of the workforce. It has never been a standard until the last century, and soon will need to be phased out due to the lack of resources that are required to sustain it. Also, retirement isn’t necessarily a good thing; look up the health effects of retiring. It is painted as a pretty picture of free time and vacations. What people don’t talk about are the health problems associated with the abrupt end of 45+ year mental and physical routine.
      If you hate work, then working ’till you die sounds like hell. If you find a place where you actually enjoy your work, then working ’till you die sounds great.

      1. Oh crap!

        I literally retired today after 30 years in aerospace.

        I followed the guidelines here (though I was doing this before I ever found this site). I just turned 55 a few weeks ago.

        I guess I’m hosed now!

  120. I’m going to ask a very dumb question. How does a high income couple save more for retirement after 401K and IRA contributions are maxed? I max out my 401K at $18K, but he can’t because his company restricts his contributions due to being a high income employee. He can only contribute about 5%. We both contribute $5,500 to our IRAs, but we have more to save, and we are playing a bit of catch up here at 45 years old. I make 100K, he makes 200K.

    1. For you, have you checked whether your company offers additional post-tax contributions? Mine does, up to the federal max of $53k.

      For your husband, does the company offer any deferred compensation plan? A caution there, those are generally not covered by ERISA, so if the company goes under, you could lose your money

      Failing those, most people just open brokerage accounts and save that way. If you’ve got the money, it’s nice to have some diversity in the way it’s structured.

  121. EL @ Moneywatch101

    Hey Sam this is a great post even though some of the figures do seem high for the average person, it is something to shoot for. I am a bit under in the figure you posted for my age, but that doesn’t stop from continuing on to invest more every year. Hopefully I can reinvest more and compound more every year to help me retire by 50.

  122. I am just wondering why these figures are all so high. The median household income in the US is around 50K (that’s two 25k salaries). The idea that your average 22 year old can put 18K in the bank seems completely out of touch.

    Myself I am 41 years old. In my earlier years I was living the blue collar American reality, which has nothing to do with whatever planet has the average 22 year old running around with a 70k salary. I never made more than 40K in one year, before taxes, until I got deep into a technical field. The bare minimum cost of living in america being at least 20K per year for a person with a car and a rent payment (yeah, most college grads don’t own 2 or 3 houses either).

    When you make your chart to show much savings a person “should have” by age X, you should preface that the person in question “should” be an exceedingly privileged and fortunate individual who can come out of the gate making FAR more money than average American.

    The -average- income for a 22 year old is nowhere near 70K in America. Not even in the ballpark. It is probably closer to 20K. Just a reality check. I think all you guys with the millions of dollars definitely have something to smile about, but don’t kid yourself and think this is the average reality in America.

    Even among college graduates, you don’t see any 70k average salary. Average salary for college grads in 2014 was 45K… nowhere near 70k. And only 60% of college students EVER graduate.

    Just saying, it is not very helpful to put forward a totally inaccurate model of what savings a person should expect. I mean, your numbers should all be cut in half based on the reality of what college grads make, and even then you should change this article title to reference what can be expected for those few fortunate people who A attend college, B actually graduate, and C actually get a job in their field of study… you’re going to down to about 30% of graduates there, I’m guessing.

    More reality please. Step outside of your super fortunate sphere and use your legit $ knowledge to help the REAL average people, the ones who make 25K per year.

    I just really hope you guys don’t believe that the average person is going to retire on a mil or two…. just wow.

    1. Let me introduce you to Reality 101. In case you did not notice, you already belong to a super fortunate sphere by virtue of birth. You are the 1% for the rest of the world. Lets not even talk about the definition of a “tough” life, because I assure you, you will lose the argument. I grew up in India in one of the largest slums in the world. It took me 15 years (yes that is how long you have to typically wait if you are from India or China and want to immigrate LEGALLY) to become a citizen of this great nation which in my case was at the age of 35! Till then I had to renew my visa every couple of years. So you had a 35 years head start over me. I am also 41 years old with net worth over $1.5 M. Every penny of that net worth starting from zero has been made in this country. And no, I am not exceptionally talented or a genius who went to an ivy league school. I went to a pretty average state university.
      Long story short, what I lacked in talent, I made it up in hard work. And no other country in the world comes even close to appreciation of hard work and work ethic like America. And I am very thankful to the people of this great nation for giving me the opportunity. Hence I am surprised and shocked when I hear negative responses like yours that complaint about your “tough” life. I find Sam’s postings very motivating and inspirational. I am still not quite up there when it comes to my 401k balance (even though I am up there when it comes to overall net worth). But I am determined to be in his “high end” column by age 50. So instead of complaining that its impossible to achieve the numbers that he has presented, get motivated and try to change your situation to get there!!

      1. Congratulations on becoming a citizen. Please share how much your annual income is that you have more than 1 million net worth at 41 years old. You certainly make more than the average American household. Americans are privileged compared to other parts of the world, but to say that we should all have 1 million put away by 40 is out of touch.

    2. I’m late to this party, but I think Sunil is more right than wrong here. Warren, you may be correct that many people won’t make Sam’s goal savings amounts, but adjusting them downwards just so that they’re achievable to those in poverty…feels like cheating. People need $1m-$2m whether they actually get there or not. Most won’t, you’re right, but that just means they’ll run out of money.

      If you’re making $25k a year, and are not going to move up in the world, then there are government assistance programs that you need to investigate right now.

    3. 24 yr old working professional

      Hi Warren,

      I know I am late to the party in terms of commenting but I wanted to add my $.02. I am currently 24 years old. I graduated undergrad in 2014 with business administration degree. Where each summer I did have paid internships from my sophomore- senior year. My starting salary was $54K and a one time $2.5K relocation signing bonus. That same job also had a great tuition reimbursement program, where I received my Masters degree (completed in May 2015, 1 year early).

      I have to agree with Sam’s article and research here with my 2ish years of saving. As of 9/13/2016 here is what I have managed to save.

      Credit Card Debt = $0 paid off monthly now ( I purchase everything on my credit card, so I can travel for free – I went on 16 different trips during 2015) (recently I paid off balance before 0% APR period expired)
      Student Loans = $0 (Received a scholarship for my undergrad from athletics and academics) as well as took advantage of great tuition reimbursement at company and an academic scholarship to receive free Masters degree
      Traditional 401K = $25.3K (2016 will be my first year maxing at 18k)
      Roth = $7.1K (2016 will be my first year maxing at 5.5k)
      Emergency Fund = $1K (reduced after paying off balance of credit card)
      Car Lease = -$18K ( I do no recommend leasing however, I will purchase the car at the end of its term and drive it until it has at least 200K miles or is no longer safe to drive.

    4. Warren, thanks for keeping it real.

      I don’t deny what the other three respondents to your comment believe. I’m sure they worked hard, saved up a lot, and seem to be on their ways to comfortable retirements.

      But I still believe they’re the exceptions.

      It’s not that most people who haven’t achieved what they’ve achieved by the time they wrote their posts are lazy or incompetent. A big factor is the cost of living. Forty years ago, a single high school graduate working a decent blue collar job could accumulate enough to buy a home and start a family. Try doing that today when even a graduate degree doesn’t guarantee anything and may put its holder in five or six-figure debt. Already that’s a hole that’s painstaking to climb out from.

      So, yeah, FS’s recommendations are something to strive for. But the Plan B is closer to your assessment.

    5. Warren,
      I think you overlooked the fact that this is for ABOVE AVERAGE people, NOT average. I personally went to a public state university for a bachelors degree, got a sales job out of college, started at $40k, $70k the NEXT YEAR, $100k the 3rd year, and 2016 I made $142k. I had no leg up or anything, just hard work. There is zero pity from me for anyone who is stuck in some 40k or less job. If I were lazy with the same job, I would still be making $40k like my co-workers. This website exists to provide people with information to better themselves. I suggest looking for a different job that doesn’t stifle you.

    6. Wow, I’m not sure why you got attacked, because I agree with you. I worked for years as a massage therapist, and there were only one or two companies in my city who actually offered 401K contributions to therapists. I found it difficult to save, and would sometimes eat cereal or not eat if I didn’t have money for groceries. If you’re focused on survival, the last thing you’re worried about is saving for retirement 40 years in the future. Only recently received a job with a 401K and made $40,000 for the first time in my life at the age of 31. The people getting on your case are some of those out of touch Americans. Not everyone is in the IT or Engineering fields; I’m in sales, the same as one commenter mentioned, but it’s draining my soul and I don’t know how much longer I’ll be able to last with it.

      1. Yeah I was a little harsh there, but I get irritated when people complain about how hard it is to get ahead in America. Your response above is a perfect example. If you had known what it REALLY means to go hungry you would not even think about quitting your well paying sales job because it was “draining your soul”. Seriously??!! If you are not getting paid well as a massage therapist, you either need to change your profession or get a side hustle. These days it is so easy to get side hustles going. You can start blogging, make you tube videos, drive Uber… there are so many options. But then it would “drain your soul” so you will not do it. If you want to become a well paid IT professional, you can do that very easily. You don’t even need to pay any money to get trained. For example search for “Ruby on Rails tutorial” on youtube and you will come across thousands of tutorials, that will teach you Ruby. You will have the option to learn it from some of the top Ruby developers in the world. Heck they will even answer your queries if you ask them. Is it hard? Absolutely? Can it be done? Absolutely. You will need to dedicate few hours every day and most of your weekends for few months. Most people in this country can be Millioanires before turning 40. You just need to want it bad enough. I personally do not like particularly like either of my 2 jobs, but I prefer our yearly vacations to Europe or Caribbean. In the meantime, our net worth has doubled to close to 3 Million since I last replied in 2015. I plan to retire in another 5 years with a solid income and freedom to do (or not do) whatever I want.
        I think Sam does an excellent job of motivating people by raising the bar higher. Really, why would you want to be average when you have the option to be far above average! Just my $0.02! :)

        1. Thanks, Sunil. To Warren, I would say this advice can all be read “to scale:” if you make half or a quarter of others, for whatever reason (career choices, inability to find your ideal chosen job for now), you should find a way to get your expenses and expectations down to half or a quarter of others. If you make 40K instead of 100K, Sam is just urging you to live waaay within your means and save. If you live within your 40K means while working, and save at the rates he talks about, you will still be able to retire early (if you keep that same low expense profile). Be modest in expenses and take monthly pride in how much cash you put away, and you will see it grow. If a guy making 100K can be excited about saving his first million, it is no less an accomplishment for a guy making 40K to save his first 400,000. At 5% rate of return, each of them is capable of replacing/ supplementing half his salary with investment income already. And when the 40K turns to 50K or 60K over the years and you save the extra instead of spending it, you’re on just the same path to independence as the people with an extra zero after the number.

          So don’t get angry or feel excluded; figure out your expenses and start living below your means, so you can eventually feel the calm that comes over you when you start picturing not needing the next paycheck.

  123. I have been contributing to a IRA for about 27 years and a 401K 24 years to the max. I would like to make a historical comment. When I began to contribute to an IRA in the early 1980’s ,there was only the Traditional IRA and the max that you could contribute was $2,000. The $2,000 was deductible from your gross income. This went on for years until the government decided the $2K was not deductible if your income was too high. I have never qualified for a Roth IRA because of income. When I started contributing to the 401K the max that you could contribute was $9,500. Through the years I have taken out $134,000. Investments have been mostly in mutual funds. I am glad that I did save the money. I would like to say however I am not a multimillionaire.

  124. Hey,

    I’ve been struggling with my approach to my finances, though I know any path I take will be a positive outcome which is good.

    Currently I have:
    ~10k in a 3% apy dividend checking account (emergency fund)
    9k loan at 11.74%
    4.3k student loan at 6.55%
    5.4k student loan at 3.61%
    2.6k student loan at 3.15%
    2k student loan at 3.61%
    1k student loan at 3.15%
    1.1k credit card debt at 0% for 12 months (gotta love Amazon)

    Currently I make 80k/mo in income and have about $2.2k after all expenses each month that right now I sock into the highest interest debt I have.

    I’ve been running off of the mentality that paying off debt before investing is a much better strategy, especially given my 401k option does not match at all. I’d also like to buy a co-op/condo. The tricky part is that I currently live in NYC and would like to stay, so these goals are very ambitious and I also feel dumping my money into a 401k where my money won’t be fluid delays ownership and have contemplated non retirement investment accounts after I get out of debt.

    I estimate I would be out of debt by this time next year given I don’t impact my emergency fund. I’ve been laid off before and if I hadn’t had the emergency fund mentality, I’d be in dire straits. My only issue is that I’m not invest -now- and the compounding effects look much better than the negative effects of contributing in full to the 401k and using the left over money to pay off the loans. The non-liquidity of the 401k is troubling, but also at the same rate, contributing to a pre-tax account would be financially good since I’m taxed at about 35.2% total rate (graduated though).

    I’m also only 23 turning 24 next month. I feel somewhat late, but the past is the past and I had other obligations then. I worked hard to get where I am living on my own in Manhattan over the last 5 years with no help haha.

    What would you recommend?

    1. Elena Staggers

      WOW! I will make about $84,000 A YEAR on years when my work (Desktop Publishing for production of proposals being submitted to Gov’t clients) is steady, with few vacations, averaging working 30 hours a week. I am considered Temporary/part-time/on-call, so some weeks I might only get 15 hours if that’s all the work there is for me…other weeks I might put in upwards of 50 hours. I don’t earn when I don’t work. Last year, according to my W-2, I made about $147,000…for the YEAR…but it was an INSANELY BUSY YEAR, and I had ALMOST NOT TIME OFF. I can’t even IMAGINE making $80K A MONTH! And, I am supporting a family 6 (4 kids and a LOSER HUSBAND WHO REFUSES TO WORK!). I am always beating myself up over not saving enough (I sometimes spend a little in Thrift stores and on clearance stuff…never buy at full price…my kids and I all wear stuff mostly from Thrift stores). I am planning on separating and divorcing between this summer (separation) and next summer (divorce). I have not been happy in 19.5 years of marriage, and I am NOT ABOUT TO SUPPORT THE LOSER I AM MARRIED TO until I drop dead. I still have to figure out how to help my kids pay for college (they’re all smart and talented at different sports, so I am hoping they can get merit and/or sports scholarships). I feel like I will have to work until I die…

  125. I look at some of these people’s comments and I just think… must be nice! There’s no way for the “average joe” as someone above called him or her, to save this amount. Unless you’re some spoiled rich trust fund baby, there’s no way someone 23 and “just out of college” (like most people can even afford college, these days?) can save $18,000 a year. They’ll be lucky to have a minimum wage job and living in their parent’s basement. Gaaah! This article just makes me so mad!

    At age 39 I work three jobs to make $60k and live frugally (think “I eat ramen for dinner five nights a week and drive a 10 year old Chevy” not “I bought a last-year’s-model BMW”). I’ve got about $20k saved up that I hope to use for a down payment on a house someday and get out of the trap of paying rent forever. And I feel like I’m still doing better than the average American!

    So come down off your high horse with the unrealistic expectations. By your estimate, we all fall flat no matter how hard we work. :(

    1. Mike,

      I’m sorry to hear that you’re having a rough go of it, but happy to hear that you are still working hard and not choosing to be a welcher who lives off of the system.

      However, FinSam is NOT on a high horse, and what he is espousing can absolutely be achieved by people who aren’t “trust fund babies”. There are tens of thousands of college graduates who enter high paying fields after graduation that pay $70K and above (possibly including our author), and they also need to hear that message that they should get started early on saving.

      My firm is one of those employers, and my wife and I have both embraced the mentality of maximum savings in our early years.

      1. Underappreciated

        Can you refer me to one of those jobs? I am a recent graduate who is intelligent and hard-working. I believe I am in a job where I am overworked and not compensated fairly. Please shoot me an e-mail if you want to take a chance. imonly292929overpar@yahoo.com. Thanks.

    2. Mike, a question, if you are making $60K, eating Ramen noodles five nights a week, and are driving a 10 year old car then where is your money going? I don’t know your situation but I would expect you could easily save $5K-$10K a year, and if you were frugal you could save more than that. Can you help me understand why this is not true?

  126. Hmm, it seems like I have about $100,000 less in my 401k portfolio than I should have, according to your chart. Well, so much for that then.

    Actually, it’s not like the rest is going to fancy cars and trivial expenditures. I don’t even consider my 401k to be my main investment portfolio. My dividend stock portfolio is that for me; I plan to live off the dividends it spits out for the rest of my life, hopefully retiring really early in the process. I’ve been living as frugally as I could, sending every penny I could towards that. With the (laughably small) pay increase from my recent promotion, I will be increasing my 401k contributions and taxable dividend portfolio contributions at the same time. I hope, at least.

    Sincerely,
    ARB–Angry Retail Banker

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  132. LA Kid in NYC

    Sam,

    Great post. Quick question, what if my company is only offering a mediocre match at 33% of 3%. So I am assuming that is more like 1%. How should I maximize my 401K? Should I just look for another company?

    I am 24, I have been here for about 17 months and I only have 2400 in my 401K, 540 employer contribution and 150 vested….

    thanks!

  133. 36 years old married, one child
    $327k in retirement savings (401k, IRA, index funds)
    Husband (38) has around $220k in 401k/IRA
    $around 35k in cash
    We max out 401k and try to max ROTH IRA
    Only debt is mortgage around $260k remaining on a 30 year, we’re paying extra.
    Combined Income around ~$240k, not including bonuses.
    We live pretty simply, do you think we’re tracking for our early retirement?

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  135. 30 yrs old, married (wife is 28)
    $180k combined income. I’m an engineer and she’s an artist…she outearns me
    My 401k balance $133k, total retirement acct balance for the both of us $223k
    Net wealth $830K using a conservative estimate for our house

    We bought in 2009 near the low and have benefited as the housing market has started to rebound. $106k left on a 30yr $325k mortgage. I max out my 401k and max out Roth IRA for both of us (wife’s job does not offer a 401k).

    How do you see applying the chart above to married couples? Would the high end be $400k and low end $216k, in which case we are behind looking strictly at the retirement accounts?

    I still struggle with the Roth vs traditional. I feel that now I have more deductions pulling down AGI than I will in retirement. Both of us are very active and like to travel, and I can see making larger withdrawals earlier in retirement while both of us are still (hopefully) healthy and able-bodied. I know what the tax rates are now, but I don’t know what they will be in the future. I don’t see government spending changing for the better in the next 30-40 years, and I feel it is much more likely taxes (for the income range I am in) will increase before they decrease.

    My company just began offering a Roth 401K, and I am tempted to change my contributions to after tax. I can see pulling out more money annually than we are earning now in the first 5 or so years of retirement, and I don’t think tax rates will be more favorable in the future for someone in my income bracket. Thoughts?

  136. $8,000 after your first year worked? That made me laugh. I would have loved to have been able to save 8k my first year, but then I wouldn’t have been able to…I don’t know…eat. And now, eight years later, still laughable to assume people can afford to contribute 18k/year to a 401k. This article was a bummer and not plausible for the average person at all.

      1. Rob prescott

        You are obviously very knowledgable about finance but I feel woefully naive about what the average American is able to make and save. Yes sure the elite percentage of workers can achieve these goals, but not everyone can make 6 figures. Are the rest of us then losers in life, according to your lofty standards? I feel like you should also create charts, for “the rest of us”, i.e. The other 90 percent.

        1. I think that is a cop out. I am 28 my wife is 32, I make 35k she makes 45k for a total of 80k/year which sounds like a lot until you factor in the fact that we live in San Francisco which has now passed NYC for most expensive city in the country. When we got married 2.5 years ago my wife had 50k in student loans. We chose to live with my mom for about a year and put almost all of our disposable income towards her loans and paid them off in ~18 months. We now live on our own and still manage to save 20k a year. You can say that we can only do that because we are duel income, but if i was not married I would have continued to live with family which would have allowed me to save about the same amount each year just on my 30k salary. I think that the chart is a bit idealistic because most people of that age are not educated enough in personal finances to do what is best, but it is by no means a matter of inability. Control your finances, do not let them control you. Look at your spending and I guarantee that you will find things that you spend money on unnecessarily. I have a lot of people who ask me how I can save so much and still buy expensive toys and it all comes down to only spending money on the things that you really want. Do you eat out/order in more than once a week? Do you go drinking/partying and spend 100+ every weekend? Dave Ramsey says it perfectly by saying that if you live like no one else now(spend less, save more, avoid the mistakes of your peers), you will be able to live like no one else later(retire early, retire comfortably, ect.)

          1. @Shdw338 –

            Get off your high horse, not everyone has the option of living with their parents into their late 20’s. Most of us here in the real world have to pay rent.

            1. Living with family is only one method to cut your costs. It probably has the greatest effect but even if you cant do that there are a lot of other things that you can do to cut costs. Some of these were also mentioned in my post. Saving is a choice, one that most people, regardless of income, dont choose to make. Look at the stats on retirement savings, people who earn more are not really in that much of a better situation. With exception of the top quintile (>115k/year) the average retirement savings is less than 100k for Households Age 55-64. https://www.gao.gov/assets/680/670153.pdf

      2. brian kaiser

        With all do respect to you Financial samurai & all other so called financial advisors is that you look at things as 40 years ago & not what life is really like now. Wages are low for 80% of people let alone those just starting out. Most wages continue to be flat or barely keep up with cost of living & inflation let alone actually amount to growth. Most people pay high rent even with roommates people aren’t able to save $8k a year let alone 18k even if their debt free with no kids.

        1. Move to cheaper larger city like Charlotte, Nashville, Atlanta, Raleigh, etc. Pay is not much different for entry level jobs and the cost of living is 50% lower, especially if you live in the suburbs and it’s still a fairly short commute (20m each way for me).

          Most people can save $8k/year (especially since out of pocket, with company match and after adjusting for taxes it only costs $4-5k/year), they just choose not to – they get the latest iPhone, huge pay packages, spend more on food away from home than at home, go to bars, take nice vacations, buy handbags (ladies), buy guns/cars (men), etc.

          And if you have a good work ethic, good attitude and are reasonably intelligent, you can make decent money and will get above average pay raises – especially if you are willing to relocate for a new job. After I dropped out of college after one year, I started at $7/hr as a cashier. 5 years later I was making $50k/year in retail management without a degree. 10 years plus a BS + MBA later, I now make 6x that amount at the age of 35. Not too bad for a guy whose dad never went to college and no financial help since I turned 18, eh?

          Large box retail managers make over $100k/year – average store manager pay at Publix, for example, is $130k/year.

          1. Ahahahahaha. Yeah just so simple. Just move. I have a great work ethic, lots of accomplishments in science, and still find it near impossible to get job offers. People don’t think that you can do anything else once you have been doing a certain job for too long. The failing is with HR and the hiring managers and most of them are idiots.

    1. Don’t get discouraged. I started late, no degree, didn’t take it seriously, sold low in ’08 crash and took several 401k loans. Even with these blunders, at 35 y.o. I’m still nearing the low end of “above average” projections. This is while only making 60-85 annually. Iv’e only been maxing for about 5-6 years and before that I had maybe 30k.

      The projections are accurate. Just max it and you will catch up as some point. That’s all that matters here. I put nothing in front of my retirement now. Not housing, not vacations, not vehicles. Stand up to the peer pressure and live frugally. Max it.

    2. You can do it. I have 3 kids, two houses in NY/NJ and still have managed to save in 401k. Take it out of your paycheck directly. Don’t even give yourself a chance to think. You will learn to eat on the revised net income after 401k…if your company doesn’t match, ten leave them and find a better place to work…don’t even think about not saving for retirement. It is a close second to eating :)

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  138. I turned 30 about six months ago. I’ve worked at the same company since out of college, just over nine years, started at 60k, now I’m just over 105k including bonuses. My parents were nice enough to pay off my college loans so I had a great debt-free start. I didn’t max out my 401k contributions until my second year and have tried to max it each year since.

    I agree for most people this is not an easily obtainable goal. Most of my friends whom started at similar time as me have no where near what I’ve got accumulated. Buying a nice car, a big house on a high interest loan, getting married early and having kids can set you back.

    Two years ago I began an MBA program which will cost just north of $100k when it’s said and done. I wanted to finish it in two years but quickly ran out of money. Work only covers $5.25k per year so I’m responsible for the vast majority. Paying $10k a semester really drains your savings. At this point I’m targeting 3.5 years, taking one class each semester with no loans. BTW, graduate loans really suck, mine was about 5.5% interest that starts accumulating as soon as you receive the funds, not when you graduate. I initially took a small loan and paid it off within a year after realizing the awful terms.

    What saving for retirement has taught me is an enormous need for discipline. Although I feel like I’m ahead of the game at this point, I’ll still hold off on buying a new car (Audi A7!) or taking an expensive vacation in order to ensure I max out my 401k each year. I know many think that trade off is stupid, that I’m giving up living while I’m still young but watching my 401k grow gives me a little hope that my best days are still ahead of me. In some ways I like having less than $10k in my checking account at any given time. It prevents me from having succumbing to spending urges and splurging on something I’ll eventually regret.

    As of today I have 254k in my 401k and 44k in my cash pension for a combined total of $298k. Three years ago my employer opened up a brokerage option in my 401k plan, allowing us to transfer upto 50% of our funds into it. It does have some nasty fees, 20 bucks each quarter, $20-50 per mutual fund purchase, no ETF or individual stock purchase capability. Even with all of its limitations I knew it was a better choice than my index funds. I spent evenings studying about mutual fund classes and ended up buying a fairly aggressive mix of mutual funds which included about 25% biotech. This has paid off handsomely and the brokerage portion of my 401k has grown much faster than the other half.

    I know currently I’m still ahead of Financial Samuari’s savings guideline. I’ve worked hard to get there and hope to continue to beat it. Unfortunately I don’t expect any big raises or promotions at work anytime soon so I’ll let my investing be a way of supplementing my income. I believe the stock market is a rising tide that floats all boats even through the occasional crash and each dollar saved today can be worth so much more in the future.

    1. Did you live with friends or family the first couple years working? Or did you rent/own your own place?

    2. Sounds like the guy decided to “live to work” versus “work to live.” If he’s not careful, he’ll wind up dying before enjoying his remaining youth.

      I have $41k in debt (low, fixed interest); $90K salary; age 31. I currently put $1500-$2000/mon away in a cash savings account. 401K contributions are taken out as well. Married with 1 child.

  139. I love these comments “Lets say a couple at 65 was making $250K when they retired” WTF??? That’s like the old joke “How do you make $2MM? First, get $1MM, then….” If you make enough to be in the top 5% income range in the USA, I would hope for sure, you have enough brains to know how to save, live below your means, and be set for retirement at 65!!! The main uselessness of this particular article is it does not at all indicate WHEN you are retiring. Obviously the numbers can’t be the same for someone retiring at 45 vs 65! It’s just some more info to add to your data points of what you need when considering. A single chart is only the authors opinion, it can not cover individual scenarios. The authors standard reply of “by making the numbers higher, it will inspire you to save more” is not very helpful. It only depresses and angers those that are nowhere near those numbers. The reality is you have to use Retirement Calculators that force you to estimate your current and future expenses, current and future savings & assets, birthdates and retirement ages and then plot your future income from retirement to death. These are available all over the internet, most for free. You absolutely positively cannot ask a question of “I’m this old, make this much, what should I do?” How naive type, and expect any meaningful answer from Sam other than “Save 50% of you income”. Which for most people is plain unrealistic.

    Also saying “Assume there will be no SS” to someone that is 58, for instance, is plain wrong and does a disservice, rather than provide a service. AARP is the strongest political lobby in the US. SS will never go away, but it will have to change some.

    Delaying SS to increase your COLA adjusted payments and reduce your AGI helps diffuse the Tax Torpedoe, by using your taxable IRA/401k to replace SS in the meantime, is a far more important point to make for the normal person that will work until they are 60ish.

      1. Patrick Ross

        Assuming current tax rates remain as they are, when I retire in 15 years, I will be in at least the same tax bracket when I retire, and I might be in a higher tax bracket. Why? Because I’ve invested so much in my 401k for so long and my investments performed so well that my income in retirement is expected to be higher than my expected income from working at retirement. At 70 1/2, I’ll have to abide by the Minimum Required Distribution. Since my MRD is expected to be higher than my salary at the time of retirement, I want to have some amount of retirement income that I can withdraw that is tax free (i.e. Roth IRA). Maybe I want to do a lot of travel, so I need to withdraw more than my MRD. If all of my retirement funds are in my 401k, the years of large retirement withdrawals will cause me to go into a higher tax bracket. THAT is where I see the value in investing into a Roth IRA now on top of maxing out my 401k amount each year.

        1. Keep in mind tax brackets will creep higher by around 2% a year, so you’ll need to make ~35% more to be in the same tax bracket as you are today.

          If you have that in your 401k where you’ll actually make more than what you are working, you may want to put just enough 401k money in to get company match and then put investments elsewhere for a while (or Do a Roth 401k if you have that option).

  140. The Maths is simplistic. For someone (22+15=37 or older) who went through 2000, and 2008 – and given the fact that 401K basically invests in stocks, its not a linear calculation (compounding aside). For example, the point being – someone at 22 who invested $8K in 401K in 2000, just before it nose-dived will NOT have a low-end-high-end of $8K-$18K after 1 year as your table predicts. A realistic approach would be to follow some index over the last 30 years to make such a table, or at least add such a table in the analysis.

    I hate articles all over msn.money or finance.yahoo which explain the concept of compounding as if written to 8th grade Math students. The catch – “assume” a return of 6% or 8%, as if!

    Hedge funds and luck aside, one has to be realistic, in what markets return – even negatively, let alone “assuming 8% return, a $10K invested annually will result in $3M over 40 years, kind of stupid articles”.

  141. Dontlikebeinganeng

    29 year old
    Oil and Gas Engineer
    Been stashing full ROTH 401k and ROTH IRA backdoor contribution since 26 (started working at 22).

    Currently at 150k in 401k and 23k in ROTH IRA.

    Income is $~160k/yr

  142. You all work with far more income than we had even before all the lay offs when my husband and I both worked. my 401K is in limbo with my last job. I have no new job to transfer it to and no steady income to invest into it. I am considering a roth. So I actually have a question you may be able to answer. When it comes to my husbands 401K. Is there a sweet spot we can find when deciding on a investment amount. I am thinking we may be able to find how much we can invest that will lower his tax bracket? So maybe we can invest more and still have more income. Or at least more invested in us and our future instead of other peoples abilities to make bad decisions.

    1. 401k and traditional IRA are great for tax deductions. If your marginal tax rate is 10-15% you might want to do a Roth IRA but otherwise just do 401k or traditional IRA for the tax deduction. 401ks shouldn’t be in limbo unless the 401k is in company stock only in which case that is a big red flag as those are hosted by a third party (deferred comp plans for HCEs are not protected, however)

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  145. I’m 40, coming from a military career and never had a 401k. Currently making $40k a year, though the company does not do a match, but will when the company is profitable contribute a percentage of your income into the 401k. I currently own a couple house, one of which will be paid off in 4 years and a double that I live in which is being refinanced into a 15 year mortgage. Our total mortgages & taxes are about $2750 and they earn $2400 per month. I’m currently saving about 55% of my income. Now that I’m eligible to contribute to a 401k I was originally thinking of contributing $300 a month or 10%, but I’m not sure. Which would allow me to save about $15k per year cash.

    Being that I have income property, which was my plan to be a large part of my retirement. My issue is I have a kindergartener, who I may send to private school, plus updating the house and I simply like to have cash on hand or at least readily available for emergencies, etc.

    Is there a good amount to contribute or being nothing is being matched?

    Thanks

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  147. I thought I knew what I was doing but I think I’m confused now on where I should be saving…

    I’M 26 and make 70k a year. I put away 8% into my 401k and my employer will match 50% up to 6%.

    I also put away 6% into a employee stock purchase plan and they contribute $.33 cents on a on going basis.

    the last 2 years I have been maxing out my wife’s ROTH IRA which is $5,500 a year.

    I put $170 a month in one mutual fund and $120 into another mutual fund once a month.

    My question is.. should I be putting more money into a certain account rather than the other?
    Should I contribute less into my wife’s ROTH IRA and put more into my 401k?

    Any advice would be great and extremely helpful. Knowledge is power!

    If needed my wife makes around 42-45k a year.

    Thank you.

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  149. What are we supposed to do in the meantime? Eat grass and live in cardboard boxes?

    All I hear is “Save for retirement!” Life in retirement is not that great. Yeah, sure, you’ll have money to travel, but have you seen how retired people travel? They get herded around like sheep, eat at restaurants that cater to bland, and end the night at 8pm. Is that the life?

    And yeah, you’ll have money for medical bills, but is that what it’s about? Work your ass off and save all your money only to be greeted with sickness and misery? If you’re sick, there’s nothing money can buy that will make you feel better.

    You definitely need money in retirement but let’s take it down a notch. We don’t need millions…we can survive on a lot less. All those millions you saved up by busting your ass will just go to your kids, anyway!

    I’ve been good and bad with money. I’m addicted to traveling and having life experiences. I spent most of my life driving beat up cars and living in affordable places, but I have spent a TON of money traveling. I’ve taken two six-month trips to backpack across Asia, Europe, Egypt, New Zealand…in total I’ve been to 46 countries. I cashed out my first 401K to travel – it was only $10,000. I know how much it would have been over blah blah blah years compounded interest blah blah blah average return blah blah blah.

    But here’s the thing: I’m 39 years old and I have $250,000 in my 401K. I’m not entirely happy with it, and I haven’t contributed anything to it in 5 years, but I think it’s okay considering my frivolity. In 2010, I quit a well-paying job ($110K) with great benefits with a large corporation to work for a small company with four employees, half the pay ($60K), and no benefits. But I loved the new job and I was married at the time so it was great.

    Then I quit my low-paying job after two years to travel for six months (that damn bug). When I came back my wife left me, which was a total surprise! I struggled to get on my feet and got in credit card debt ($14K). I’m now working as an independent consultant for the same small company as before. But since I work for myself I pay for everything myself: medical insurance, taxes, expenses, mortgage, condo fees, everything! And I have no benefits or vacations. Snow day? Sick? Hung over? No pay.

    I make about $75K a year now but I pay $800 a month toward my credit card, and live on a pretty tight budget. I’ve had to turn down trips with friends, weddings, bachelor parties and that has sucked a little. But my travel bug is hibernating and I feel like I’ve experienced so much that I’m not really missing out on anything. Once I pay off my credit card (hopefully, mid-2016) I plan to start my own 401K. Meanwhile, life’s moving along…at a much slower rate and with a lot less pizzazz, but it’s cool.

    My point of all this is: life happens. It’s not easy to follow a chart. Life is stressful as it is. We all succumb to the desires of just being human and we need a break from it all. We want to travel and see the world; eat at nice places; go to shows; and spend time with friends and the ones we love. We want to look good, feel good and be good. It’s hard to do everything.

    So contribute what you can. Don’t be a penny-pinching miser who misses out on life because he’s too worried about retiring, just be smart about it. Read good books on investing and learn what it all means. Pick your funds carefully. Index funds with low management fees are good. Rebalance your portfolio every 6 months. Get that company match. And put all your performance and holiday bonuses in your 401K.

    Lastly, don’t worry so much…even the homeless get to eat!

    1. Life does happen indeed. Thanks for sharing your story.

      Did you travel for six months WITHOUT your wife? If so, do you think she would have left you if you took her along?

  150. This is a joke, there is no need for this kind of money to retire. Broad based equity diversification has historically (and will continue) to provide yields equal to the growth of the world economy. this means the person putting only 10 K a year into a 401K tax deferred will have 800 K in inflation adjusted dollars in only 30 years (age 52). Without ever touching the principle of his investment this person will make 40 K a year (inflation adjusted) for infinity(you may actually die someday, so you can always spend some of the principle too). Debt free this is an excellent income. I’m all for savings! but no one needs millions to retire unless the want to live like a millionaire, and most self made millions to NOT live like millionaires.

    1. I agree with your statement whole heartedly. I feel like these numbers are unattainable to 99% of the population as well.

      I’ve been contributing to my 401k since age 18 with very little time off in between and the contribution amount fluctuating around 7-15%. I can tell you I have nowhere near the $218k “lowend” this chart says I should have.

      Again, These numbers seem very unattainable to the ‘average joe’.

  151. WOW!!! $8,000 contribution per year at the age of 23?! $40,000 job straight out of college? A *JOB* straight out of college?? That is one extremely lucky kid…

    Okay, here is a word problem you guys might like…

    Suppose you have a client in his late 30’s, making about 50k as a Systems Analyst in the financial industry as primary income earner for family of four (HH income of ~65k in midwest, lower cost of living). Client has $30K in a managed 401k with Vanguard, adding $2,500 per month, soon to be $5,000/mo (woopie!!).

    Client budgets every month to the dime, so he knows the family is running as streamlined as possible with regard to income. Basically living paycheck to paycheck (minus savings, his family ends up spending entire monthly budget). Oh and many things fall apart routinely or family gets bored, so there is a general $100-$200 ish monthly drain for car repairs / home maintenance / swimming lessons / gifts / holiday of the month / you name it miscellaneous costs.

    So with zero to spare what would you and your readers recommend to someone in this person’s situation with a goal of maintaining their standard of living into retirement? And I swear to all that is holy, if somebody says, “stop eating out” I’m going to shake my fist at the imaginary internet gods. Assume client always uses BOGO coupons when eating out (ie, only on weekends), and regular coupons whenever possible for practically everything else.

    Does the wife need to be kicked in that ass to get a better job? $65k HH income is pretty much the minimum for a family of four in midwest, from what I have read. Should the client kick himself? I don’t know if $50k is a fair salary for a Systems Analyst w 10 years experience around here.

    Should the client say, “Screw it, I have less than 300k in the bank right now, so I’m going to be broke, so I might as well enjoy living in the now, and stop saving at all!” What would YOU do, NOW?

  152. I’m 45 yrs old and just got divorced(not my choice), my wife never worked in our 11 year marriage and half my 401k went to her. I’ve got $70k at age 45. Not to mention I’m paying $3500 month in child support and alimony, although aliminy for only 2 years. I make good money. I just bought a $85,000 house(it’s actually quite nice and totally remodeled). I’m saving every dime I can for the next 6 years which should be about $70,000/year in my 401k and IRA and Motif funds. The $70k includes about $8k of company match a year.

    In 6 years I predict to have about $700,000 in retirment at an interest rate of 8% avg. I agree that 401ks suck generally other than the free match which isn’t enough. Personally I put 60% of my 401k funds into a target retirment fund becuase I know no matter what happens that I’ll avg around 5-6% return over time. I’m tired of investing in all these aggressive funds that do nothing but tank every 7-8 years and u lose 40% and start all over only time is against you now. My other investments I do invest a little more aggressively with Motiff which is a pretty cool way of investing btw with lowest fees around.

    Ok now my main point, lol sorry, I’m not buying that I’ll beed 75-80% of my last years income during retirment every year. I know it depends on how u want to live in retirment, travel etc.. But I’m thinking 60% is more realistic. Sure inflation goes up on all things but I won’t have a mortgage or car payment or credit card debt. One thing I would recommend is to use one of those retirment spend calculators to give u an estimate of what u might spend monthly. It helped me as it pointed out spend I didn’t think of, like supplemental health insurance, property tax, other insurance etc.. I make $155k a year but as a single guy in retirment(likely) my monthly bills will be around $3500 month, hardly 80% of my income, not to mention if I take SS at 67 I’ll collect a $2900 mo SS check.

  153. I have about 50,000 in my 401K currently. I have been working for 4.5 years at my company putting away 6% which they match away a year. I will be turning 30 this November 2015. It sounds like this is not enough. Wondering if you have any suggestions.

    1. At a $350,000 income, you’re in the 33% marginal tax bracket. I would say no, the Roth 401k does not make sense.

      Here is more info from wikipedia:

      The Roth 401(k) combines some of the most advantageous aspects of both the 401(k) and the Roth IRA. Under the Roth 401(k), employees may contribute funds on a post-tax elective deferral basis, in addition to, or instead of, pre-tax elective deferrals under their traditional 401(k) plans. An employee’s combined elective deferrals — whether to a traditional 401(k), a Roth 401(k), or to both — cannot exceed the IRS limits for deferral of the traditional 401(k). Employers’ matching funds are not included in the elective deferral cap, but are considered for the maximum section 415 limit, which is $53,000 for 2015.

      Employers are permitted to make matching contributions on employees’ designated Roth contributions. However, employers’ contributions cannot receive the Roth tax treatment. The matching contributions made on account of designated Roth contributions must be allocated to a pre-tax account, just as matching contributions are on traditional, pre-tax elective contributions. (Pub 4530)

      In general, the difference between a Roth 401(k) and a traditional 401(k) is that income contributed to the Roth version is taxable in the year it is earned, while income contributed to the traditional version is taxable in the year it is distributed from the account. Furthermore, earnings on the traditional version are taxable income in the year they are distributed, while earnings on the Roth version are not taxable ever.

      There are restrictions on the nontaxability of Roth earnings: typically, the distribution must be made at least 5 years after the first Roth contribution and after the recipient is age 59½.

      A Roth 401(k) plan will probably be most advantageous to those who might otherwise choose a Roth IRA, for example, younger workers who are currently taxed in a lower tax bracket, but expect to be taxed in a higher bracket upon reaching retirement age. Higher-income workers may prefer a traditional 401(k) plan because they are currently taxed in a higher tax bracket, but would expect to be taxed at a lower rate in retirement; also, those near the Roth IRA income limits may prefer a traditional 401(k), since its pre-tax contributions lowers Modified Adjusted Gross Income (MAGI) and thus increases eligibility for Roth IRA contributions. Another consideration for those currently in higher tax brackets is the future of income tax rates in the U.S. (if income tax rates increase, current taxation would be desirable for a wider group). The Roth 401(k) offers the advantage of tax free distribution, but is not constrained by the same income limitations. For example, in tax year 2013, normal Roth IRA contributions are limited to $5,500 ($6,500 if age 50 or older); whereas, up to $17,500 could be contributed to a Roth 401(k) account, provided no other elective deferrals were taken for the tax year (no traditional 401(k) deferrals taken).

      Adoption of Roth 401(k) plans has been relatively slow, and stated reasons for this include the fact that they require additional administrative recordkeeping and payroll processing.[5] However some larger firms have now adopted Roth 401(k) plans, and this is expected to spur their adoption by other firms including smaller ones.[6]

      Here are my thoughts on the only reasons to consider contributing to a Roth IRA, which has similar lines of thinking to a Roth 401k.

    2. Joe,
      I elected for the Roth 401k for a couple reasons…
      1.) You effectively increase your contribution limit by 28% that you would get taxed on and lose at the end. I can afford the 18500/yr after tax now, so why not?
      2.) Looking at the state of government debt, its fair to assume that tax rates MUST go up over the next 50 years to keep the government solvent.
      3.) I don’t buy the BS math that people use about beating the system by moving up and down tax brackets, it all works out to be about the same.

      Background: I’m 25, single, no kids, making about $75k. I get 4% match on my Roth 401k and I’m also maxing out a Roth IRA as well. For people that say I need a tax deferred savings, employer match is always tax deferred.

  154. Your savings guidelines are BS. It doesn’t take into account if you have a government pension and the amounts shown are unrealistic. I am a Gen X’er and started saving in the late 90s. I was in 2 CRASHES. (!) The one after Tech boom/9/11 and then the one in 2008.

    1. Crashes don’t matter much with your timeline. Of more importance is how you responded. If your portfolio went down 30% and you got out and didn’t get back in until the market recovered, then you screwed yourself. I lived through those same crashes ( young boomer here) and did just fine.

      1. I am a Gen Xer who started saving into my 401(k) in the mid 90s, started working out of school in mid-92 in the Silicon Valley making about $11/hr. I wish I had been frugal enough to start contributing more earlier. I saw my first account go from $49K at the height of the tech bubble, go down to almost $15K by 2001 because I was a deer in the headlights. I left that account and went to another company. I let the first account sit, and when we got through the 2008 crash, and it had gone back up to ~$48K (keeping in mind that I had not contributed to it since Dec of 1999), I rolled it over into my new company’s 401(k). I probably lost a few tens of thousands by waiting an extra year. My combined account is now around $440K, about in the mid-range of the chart for my age. I only actually maxed it out two years ago, though I was riding the high end of maxing it out for a few years. I went through a separation last year and had legal issues (child custody and support), so I dropped it way down last year to minimize my CS. I think this year, with the legal things settled for now, I can max it out again, even paying child support. I also managed to buy a house at pretty much the bottom of the bubble in 2010. I also contribute to my children’s 529 accounts (a little, I’m not going to over-fund them). The house isn’t in the best part of town, though not the worst, but my equity is now half its worth. I also drive a $24K 5 year old car (still violating FS’s 1/10th rule, but I don’t splurge in other areas), and I put 10% after-tax into my company’s ESPP, which I think of as 1-2 year short term investing, as well as my near-liquid assets. Live below your means and you can do it.

        1. David – not a government one, but I do have a fine pension.

          My company is electing to cease contributing at the end of this year, and that fixed my decision to retire now at 55.

          Not complaining. It’s always been my goal to be able to go out at 55, I just left the possibility of working longer open in case I was having fun.

  155. I’m assuming this isn’t counting Social Security. I like the information, but realistically SS will be around in one form or another to supplement retirement income.

    1. No, I don’t include Social Security to be conservative. At the current rate, Social Security will pay out about 70% of what they say they will pay out. I encourage people to write off Social Security to zero so they can get more motivated to save and invest for their future.

  156. Sam, What advice to do have for the following scenario:

    You’re identified by your employer as a HCE, (highly compensated employee). Your base is 55k, and your bonus is near the 150k per year. Since the new company rules were instituted, in 2014, you are allowed to contribute up to 15% of your Base, and up to 100% of your bonus, (not in a retirement plan, but) in a deferred savings plan. This deferral plan allows you to tap this income four years following your separation from the company.
    My questions:
    How can one actually work to fund a qualified retirement plan with this set of rules?
    What other vehicles are available to work with in order to fund a retirement account?
    Is this actually legal?
    Thanks in advance for any help.
    T

  157. Pingback: How To Save More Than $100,000 A Year Pre-Tax: Open A SEP-IRA Or Solo 401k | Financial Samurai

  158. Thanks for providing us with this great information. I am 36yrs old and have been contributing to my 401k for approx 8yrs. I make ok money (275k annual) and am providing for my 3 kids and wife. My 401k balance is currently 195k plus I own two properties that are mortgaged for the next 25 yrs. No cc or school debt.

    I am trying to estimate when and where I can retire. Specifically, I would love to see a view on options for retirement at the 500k, 1m range. Every calculator I use says that I should be saving more money, even though I am maxing my 401k and spending like scrooge. I am struggling to understand how I can measure the true amount of income I will need at retirement since I do not know where I will retire. How do you take into consideration retirement lifestyle when calculating retirement income needs? e.g., If I choose to retire in Thailand, can I retire at 45yrs old instead of 65? Just trying to make sense of the “when” and “how much” question.

    1. Great income, Tony.

      A few questions to consider:
      – Do you intend to pay for college for the kids?
      – How much equity do you have in the properties, and are they expected to have better returns than the market over the next 25 years?
      – If you had no debt, how much income would you need for basics, insurance, travel, entertainment, and property taxes?

      1. – College: My kids are 11yrs, 8yrs and 4 yrs old. I plan to assist all three with college; either 100% or partial. I do not currently have a 529 plan. My thinking is that I will redirect all savings to college during those years.

        – My primary residence has equity (100k) and will climb since it is in a good market (North NJ). My secondary property has zero equity and is currently being rented to pay the mortgage; I am not cash-f blow positive on that home, but I am holding to sell until there is some equity. I do not expect the next 25 yrs to beat the market,

        – With zero debt and grown children, I expect my wife and I would need $5k/month.

      2. – I plan to pay for college, but I do not have a 529 plan or anything specific set aside. I am relying on my annual income to cover the additional expense. My children are 11yrs, 9yrs and 4yrs old, so college fees will be big for me.

        – My primary residence has equity (100k) and will be profitable when I sell it. My secondary property has 30k equity and is being rented out for the next 3 yrs. The rent pays the mortgage, tax and insurance, but I am not cashflow positive on that house.

        – With the children grown and zero debt, I would estimate that my wife and I can live on 5k monthly

        1. Tony,
          some thoughts and ideas-

          – Property: if property 2 is not on track for appreciation and cash generation, consider selling it and investing that $30k somewhere with positive returns. Even applying the $30K to your mortgage on property 1 would be better than breaking even.

          – College: In a few years, the kids can help by doing part-time work, getting scholarships, or going to community college for two years and transferring.

          – Income: Apply future income increases and bonuses to savings and debt reduction. As the kids get older, your spouse could also consider work outside the home for an accelerated path to retirement.

          Bottom line: Save more and reduce debt. The good news is you are young, and your income is strong with years of upside potential.

      1. thanks for the formula. What does the 3% represent?

        “With a 275K annual income, I hope you have more savings BEYOND the 195K in your 401k.” – I wish I can say that I have a secret stash of cash, but I do not. All my savings have been in 401k or pumped into the two properties that I own. Short of canceling cable tv and getting rid of some low cost bills, I cannot figure out how to save more money when supporting my family.

        I forgot to mention that I live in North NJ so my cost of living is extraordinarily high.

        Should I be focusing on increasing income or do you really think I should be saving more?

        1. 3% represents a very conservative (IMO) withdrawal rate that will allow your money to never run out. The “consensus opinion” had been 4% for some time.

          Stated very simply (using 4%), if you have a $1M portfolio, you can withdraw $40K a year and never run out of money. This assumes you have moderate risk in your investments, something like 50% in equities and 50% in bonds. (Lots of disagreements on ‘where’ that split should be drawn, but the important bit is you can’t stash it all in ‘safe’ CD’s – it has to have growth potential.)

          The pull back to 3% is driven by increased uncertainty in the markets in the last 20 years. On the other hand, I’m a ‘glass half full’ sorta guy. The last 20 years has been wonderful for the ‘do it yourself’ index investor. I can create a well-diversified portfolio of 12 index funds at Schwab with a weighted expense ratio of under 0.25%. Could be done at Vanguard and others easily, I just ended up at Schwab. I figure if you’re not paying Edward Jones 1.75% to ‘manage’ your money (my returns easily match theirs) then the withdrawal rate can be higher. I don’t think 5% is ridiculous if you have low costs.

  159. Hey Sam!

    I’ve been reading many of your posts on here since I started taking saving for retirement seriously and they are very informative and helpful. Here’s my situation:

    I just turned 23 and I make $40,000 a year and been working the same job since I turned 18. From 18 to 20 years old I only contributed 1% to my 401k and employer matched some of it. Around 21 years old I started to contribute 6%. My employer also matched 70% on the first 6% I contribute or so I was told.

    Anyway… about 6 months ago I started taking saving for retirement seriously and began contributing 10% to my 401k. Little did I know that my employer then contributed a full 9% match to my 401k. THAT’S RIGHT A FULL 9%!!

    At the same time I began contributing to a Roth IRA and maxed it out $5500 for 2014. Currently contributing $200 per month to my Roth.

    So my employers 401k match and my contributions total 19% plus contributing $200 per month in Roth. I don’t have a TON saved at the moment but I have apprx $12,500 in 401k and $5,600ish in Roth. But 401k is going to grow rapidly as long as employer keeps contributing 9%!

    Additionally I want to add that since I didn’t move out of home until I was 20, and I was never a big spender, I have been able to save $30,000 liquid. Now I’m trying to decide whether it is a better decision to use it for a down payment on a $100,000 or less house (since I live in Nebraska houses are cheaper) or put some of it towards retirement and rent a house or apartment. I have done my fair share of research over the last couple months on home ownership and all expenses and everything as well. Either way is better than it just letting $30k sit in a checking/saving account earning 0.001% interest haha.

    Am I doing okay for retirement? Should I be looking to buy a house in the near future or is the money better put somewhere else?

    Again thanks for all the articles you post on here and keep them coming!

    1. Also I was wondering if it’s better to stop contributing to a Roth IRA and instead contribute that money to my 401k. This might save me money in the event that I move and live my retirement in a state that has no state income tax. Since I won’t have to pay state income taxes in that state vs already paying state income taxes when contributing to a Roth IRA. Is this a good idea?

  160. Two things financial consultants don’t mention when talking about 401K and retirement:
    1. 401K won’t be the only income for retirement. People who worked 30-40 years will have a social security. Some people may have investment properties that generate rental income as well.
    2. After people retire, they spend less than when they were working.

    As result, let’s use today’s cost to estimate, say a couple of 65+ age who made $250K combined annual income before retirement, each day they spend $100 on food (very good meals) + $20 car insurance and gas, + $20 property tax + $10 utilities + $50 misc = $200 per day or $6000 a month. This is high estimate. That’s $72K a year. Plus annual car expense (leased a good car with tax insurance for $750/month or $8K a year), travel $20K a year (which is good for two people, 4 trips a year each cost $5K), plus another $10K a year for other expenses. That’s total $110K after tax a year for a couple or $150K pretax.

    Source of income:
    1. Each of two has $1.0M-$1.5M 401K balance at 65 which is normal for $250K combined income couple, taking $100K out a year shouldn’t reduce much of the total portfolio if it has 5% annual gain.
    2. Social security will bring in ~$60k combined annually.
    3. Rental income. Some $250K+ couples have investment properties. But most of them can sell the primary house at huge gain and move into nice apartment at 1/3 of their original house’s cost. The extra 2/3 profit can range from a few hundred Ks to $1M in large cities like NYC, LA, SF, San Diego, etc.

    So over all, it’s not as scary as it says. You don’t need to make 100% of your job income to sustain your life style when retire.

    1. Those are good points. Let’s hope social security is around, inflation is tame, and people have built rental property assets.

      You definitely don’t need 100% of your job income to sustain,especially since when you are retired, you are NO LONGER saving for retirement.

      But I’ll tell you this as someone who experienced two full years of early retirement with no income from 2012-2013: It’s better to have more and be safe than have less and sorry.

  161. Hey Sam,

    I have been reading on your site for a few weeks now and I have learned so much. I am 20 years old make 35-40k a year right now. I opened a Roth because I make less than 60k. I will be eligible to contribute to a 401k soon but do you think it will be wise for me to contribute to both based on my income?

    1. If your 401K has any ‘company match’, capturing that is a big priority. My company matches 75% of the first 8% of contribution, so contributing at least 8% is a ‘no brainer’. It’s free money.

  162. So I am 30 years old just got out of the military and have nothing saved up due to some bad choices when I was younger. I racked up debt and am now paying the price. I now have a solid paying job that offers a 401k that matches 1/2 of my contributions the first year and then full contributions after 2 years. I would say I have about close to a 6 figure debt between a house, credit cards and just other things. I feel like I can make a 5-8% contribution for a while but is this worth doing or should I pay off my debt first?

  163. Great article and wonderful discussion. Not sure if anyone asked – there’s a lot of comments to ready thru :)

    But we were wanting to retire early (before 60) and were wondering if it’s better to just max out our 401K contribution and pay the 10% early withdrawl feee (or whatever the fee is when we do return)

    vs

    putting less in the 401K and using that money to build a larger “non-retirement” account that won’t have the penalty but doesn’t have the tax deferment?

    I know tax bracket would factor into the equation – but our tax bracket doesn’t seem all that high when we use turbo tax and it says you’re paying X%

    1. A lot of folks don’t realize that there’s no “additional penalty” to withdrawals from a 401k at age 55 if you are ‘retired’ from that company. That’s a key difference between a 401k and an IRA.

      1. Guess I should be more precise. I can’t tell exactly when but we were targeting more in the mid to late 40’s, so i’m guessing that’s early enough that there would still be a penalty.

        We have a large chunk in 401k’s etc but not much outside of retirement type accts that have early withdrawal penalties.

        So the question is whether it makes any sense to put a little less in the 401k and more in a regular Mutual Fund/Index type account so we have $ avail for when we retire early. Or because of the tax deferment (and faster growth) is it better to just pay the 10% penalty

        1. I don’t know which is smarter, but the wife and I ended up with different strategies. She never worked anywhere that allowed post-tax contributions to a 401k, so her excess funds went to brokerage.

          Since my 401k allows post tax contributions, I’ve been maxing that out (max the pre-tax, max the ‘over 50’+up, max the post-tax).

          I like that a lot of our wealth is in retirement accounts, it puts them out of reach of most ‘judgements’.

          We’ve used some of her brokerage funds on ‘lifestyle’ things, so the flexibility is nice.

    2. There’s no “right” way to do it. But there are ways to receive money from your retirement accounts before 59.5 without penalty. Specifically, IRAs and Roth IRAs. taking “equally substantial” payments, etc. You can also rollover your 401k to an IRA when you retire.

  164. Nlf,
    what a great start. Congratulations.
    If you have any debt, pay it off. Otherwise, yes – continue saving.
    When I was your age, I maxed out pretax savings and have been doing so ever since.

  165. Just graduated and started working (in finance). I’m 21 going on 22. Currently, I’m contributing 6% of my paycheck to the 401k–just enough to the get the max. employer match. 6% is a ways off from the max contribution, though. Should I be contributing more? I already have about 12k in savings and 10k in a brokerage account. I don’t have many expenses (still live at home with my parents) besides gas and other sundries (i.e. food, entertainment)–usually around 500-600 per month.

    1. I know many people tend to think of “free money” as only relating to their employer match. However, consider that you are still saving plenty of money in taxes by maxing out your 401k and IRA (assuming that you can afford to do so).

    2. Awesome, keep in mind, when you max out your 401k and IRA you are still saving plenty of money in taxes. I think there is a tendency for people to think of “free money” in terms of only the portion that the employer matches. Don’t forget tax savings people!

      1. Its not tax savings, your deferring your taxes. If you plan on entering retirement at a low tax rate then maybe its a tax savings, as long as you believe that our current tax rate won’t go higher (even though its at a historical low now). 401k tax savings is a myth. A 20 something year old, starting his career at a low tax rate is encouraged to defer that tax rate 30 plus years, and pay when they are earning the most?????

  166. Wallstreet26

    If you don’t know what you are doing. Juss put it in a standard index with low cost. Which is basically vanguard or fidelity. If I was uninformed and in your position, I’d juss put in a target date fund. I haven’t looked intently at robo advisors, but they look similarly cheap too with decent allocation for aggressive portfolios. And my advice to you is to screw bonds, don’t touch them until the 10 year treasuries touch 7 percent or you are in your 60s.
    You are prolly in the 28 percent tax bracket. So you should max out the 401k and trad Ira if tax deductible. Why is it a good idea? Because that is money you would have juss paid in taxes. Go aggressive too because market downturns are typically about what you would pay in taxes anyway.
    It’s not all inaccecissble either, you can borrow max of 50k in a balance of 100k in your 401k. Also you can access without penalty if you buying a first home, if you have future school expenses or medical need. Lastly real estate does not grow faster than the stock market. Maybe in the past 30 years but rates have been dropping which fueled housing prices and the beauty of housing is you borrow 4 times what you put down.
    Lastly Roth IRA is a good idea only if trad Ira is not tax deductible. Anyways good luck young cubby.

  167. Young and Ambitious

    Hey Sam!

    I’m so glad I stumbled across your website. I’ve been trying to find financial advice online for a while. So I’m 22 and just graduated and am making $77,500 pre-tax with no financial debt.

    I’ve been really struggling with where to allocate my money. I’m saving roughly 40% of my income taxes. I was thinking that it would be better to put more money in my accessible American Funds portfolio and max out my Roth IRA before maxing my 401k.

    Here’s my thinking:
    By maxing my Roth IRA, I’ll be able to pull out the $10k when I decided to by a house. I’ll also be able to pull out of my AF portfolio and add that towards my down payment, therefore reducing my mortgage rates and such. If I were to put it in 401k, it will grow but will be unaccessible for 38 more years. I could instead be putting it into property which would grow faster than my 401k.

    I know you think max out by my second year but I guess I’m just not sure why you’d want to put that much into an inaccessible account?

    I’d really appreciate the guidance!

      1. AmericanFool

        Agreed, 40% is great and American Funds have very high fees. They claim long term outperformance, but I once calculated that even if they outperformed for two decades by 1% per year, it still would be better to invest using low-cost funds like Vanguard. There were special considerations in that analysis, so do your own work, but it gives you an idea how much extra you may be paying. I agree with Financial Samurai – I would go the 30 year mortgage for the flexibility, but pay it off in 15 if I really wanted security, or if my job was not very secure (as is true for many of us these days.) If your job is very secure, then I think it would make sense to take risk elsewhere and invest the difference between the 30 yr payment and 15 yr payment, rather than pay down the mortgage early. Long term, your investments should garner around 8% with a 60/40 split stocks and bonds (and more aggressive at your age is ok), but the long-term return of paying off the mortgage early is your interest rate, let’s say 3%. The difference (8% vs 3%) goes directly to your bottom line (and net worth) if you get average returns over the long run (any given year will tend to vary significantly, but it’s rare to get much less than 3% in any single year in a balanced portfolio, and rarer for extended periods. This bet has a high chance of working out for you). You are sacrificing current cash flow to create future cash flow, so keep a safety net in a savings account, and then keep dropping the balance of the 40% savings into investments. The benefit of this approach is you don’t need to be a stock picking expert or spend your every extra waking moment thinking about it. Automate everything you can. Set it and you only have to revisit every few months for a few minutes… then go live your life!

        1. Depending on how you buy them, I believe AF can have some pretty high front-end loads too.

          1. I think the key phrase is “depending on how you buy them”. If they’re inside a 401K, you don’t pay the sales load. American Funds have varying share classes ranging from very cheap to rip off territory. If you can get the cheaper share classes in your 401K, most of their funds are good.

      2. RothWorkedForMe

        Young and Ambitious,

        I also used Roth IRA as a vehicle to save the downpayment for my first two houses. I was in my mid-late twenties. I couldn’t quite comfortably max out on my yearly 401K, I wanted flexibilities, and yet don’t want to miss out on the potential tax benefits therefore I chose to max out on my Roth with my tax return a few years straight. I ended up unloading all of them (my wife’s as well) to buy our dream home. Personally, I think it is worth it. Sure, there was opportunity cost when I unloaded my Roth, but I set them up for that exact purpose. The 10% penalty on income, in my option, was fair for the flexibility it offers.

      3. Mysticaltyger

        I think it’s unfair to write off American Funds right off the bat. If you can get them in your 401K, you don’t have to pay the sales load. Then it becomes a game of “which share class”? American Funds has an alphabet soup of share classes. The “A”, R4, R5, and R6 share classes range from reasonable (A & R4 shares) to downright cheap (R5 and R6 shares).

    1. Since you are in the market to buy a home during what is low interest season… think about getting a 15 yr fixed rate morgage over the normal 30 yr. This will save you so much in interest payments and allow you to buid your wealth/positive value on your home, much faster. We refied and went from a 26yr remaining to a 15 yr and will ultimately save over $140K on interest of our home. Yes you pay more, but for the interest savings, it is well worth it in a very short period of time. And, in your case it sounds like you can have net cash flow to pay the higher mortgage amount. This is my new philosophy for my kids when they are of buying age.

        1. I maxed out my mortgage term in order to pay off student loans. Professional loans for me (with automatic debit discount) were at 6.55%. And 6.55% is no joke at the tuition rates most professional schools charge. I think my interest portion alone my first year out was around 11 grand.

      1. Interest savings isn’t the only thing to consider. Don’t forget about the opportunity cost of the extra money going towards the 15-year mortgage. The payment difference between a 15-year and 30-year mortgage could be invested at a possibly higher rate of return and in the long run could build more wealth.

        Just thinking about interest savings isn’t looking at the big picture.

        1. Smart Money MD

          I’ve seen people opt for 15-year mortgages on the home they live in and 30-year mortgages on rental properties to maximize cash flow. Is there any advantage or disadvantage of this logic?

          I suppose that keeping everything at a 30-year mortgage will maximize cash flow and give you the flexibility of paying down faster if you choose.

  168. Great article and very insightful! I have a question about the savings- in this strategy is it acceptable to put those savings into the market in say a mutual fund or stock (and is this preferred) in lieu of a low yielding money market fund? Thanks

  169. People read crap like “you need to have 305,000 in your 401k by age 40” and it’s no wonder people just give up. If you spend most of your life single (with or without kids) making a decent living but not much extras you should be happy to have less than half that amount!

    1. What’s wrong with having $300k though? This is just a guideline for folks who plan to gain financial security.

      If you’re happy with half, then great. Not sure why you think me having $300k is crap.

      1. Agreed. Essentially, only each person knows what they need for retirement or to live comfortably. Saying you need ” one million” is subjective and varies.

  170. First of all props for one of the better articles out there with a nice table.

    The issue I have is the general lack of focus on living debt free. If I get an unsure 4% return in the market and only 1-2% in liquid savings account why should I spend 4% with the bank in my mortgage? Sure it is tax deductible so net interest rate is about 2.75%.

    I manage my economy w a nice chunk to 401k and focus on debt free. I have no car loans, way ahead on mortgage and spend extra money paying down mortgage. Sure over the past 2 years the money would have been better in stock market but I have lived through two recent market collapses and believes in not having all my money in the market.

    Why save in savings over paying down on house? If I need the money I can easily borrow against my own assets

  171. My CPA is suggesting my husband and I (self-employed business owners) a product called “Indy-401K”, which allows us to contribute each up to about $51,000 a year ($17,500 plus our company would put the added ~$33,000 as contribution to the salary we pay ourselves) in a diversified portfolio of investments. It doesn’t have an age penalty and it is all tax-deferred until we just simply terminate the product and withdraw the money. I haven’t seen anyone discuss it here. Is it just too new or too uncommon?

    We are considering it since we are having a very high income year (no complaints, but we are worried about taxes) and the whole contributions would be fully deductible from our gross income.

    Looks like a great idea, especially for the type of jobs my husband and I both have, which are very unpredictable income-wise year to year.

    Any thoughts or comments?

    1. Hi Jamie,

      It’s a no brainer and I’m doing that right now. Double check the age penalty limit though.

      If your income is much greater than $51,000, then I would max it out. But if it is unpredictable, then it’s a judgement call.

      Thx

      1. Hi. Thanks for answering. Sounds like a no-brainer for us too. We tripled-checked the age penalty. None. You just pay taxes whenever you withdraw the money, be it in a year or 30.

        Apparently it is a product ideal for business owners with no employees aside from themselves (our case. We don’t have a payroll and pay people that work for us on a work-for-hire basis).

        Two added benefits are that you can borrow against the money and pay it back with interest (which you would be paying to yourself!, up to 50K per person per year as long as you have the money in the account), and that you only contribute on the years that you want to (or can. helps with the ups and downs in our incomes).

        It has a very strict set of rules to qualify, but according to our CPA, we will have no problem.

        Our only wonder, though is if this is better than, say, purchasing real estate?

        1. wallstreet26

          i’ve heard of this and its absolutely a no brainer if you make more than your basic needs. Saving on taxes is the fastest way to get rich. defer your tax. invest it. get rich. Now people will say that what if tax rises in the future blah blah blah. its a good point. but who really knows tax policy 10, 20, or 40 years down the road. it could easily go down too. historically speaking though, tax rates are pretty low in the us. But the idea that the govt will tax people’s retirement a lot is a lil funny, since old ppl are the ones that vote (we cant even take ss from them). To people who wonder why its best to max out even after company match, here are 3 simple reasons.

          1. You save on taxes. You are putting pre tax dollars and assuming you are in top percent, every dollar you put saves you 35%. thats a 35% return in 1 year. (yes you will get taxed in the back end, but odds are since the tax system is step up, you might get lucky and get taxed at a lower rate in the end, and you’ll pocket the difference)

          2. You can take more risks. If you put pre tax dollars, you can afford to invest in risky assets, because they were pre tax. For example you invest in stock abc at 10000. it falls 25% to 7500 and you lose 2500, its all good since thats how much you would have lost in taxes on the 1st year.

          3. Stuff compounds until the very end. you are not taxed annually. had this been in a typical brokerage account, you get taxed annually on dividends, then you get taxed when you sell for capital gains. double neg.

          additionally if you and your family does not have majority control of the company you own, you can reinvest it to the company and spend pre tax dollars as if it was after tax to grow your business. there are a ton of rules that i really dont know so ask your cpa. But a lotta ultra wealthy ppl especially in silicone (valley/city i.e. beverly hills) do this and they do it using roth, which imo is extremely shady but it is what it is eh.

          Real estate is amazing btw. here is the low down. they spend 10m on building so cost basis at 10m. they rent it out for 100k. Eventually price rises and so does rent to 200k. Now they can sell for 20m, but they get taxed on 10m profit. so here is what the bsd does. they appraise it for 20m. they refinance for 20m. and boom. you have cash flow from tenants. interest tax deductible. and you juss took out 10m tax free. So essentially in real estate. you can theoretically never get taxed. juss keep refinancing. leverage ftw.

          1. A no-brainer indeed. The account has to be set before December 1st and the “qualification” process takes 45 days…, so I guess I’m off to see the Wizard (a.k.a. CPA).
            Best to all.
            Jamie.

  172. I don’t quite understand the logic of contributing the max to the 401K and then treating it as if it’s gone.

    Would it not make better sense to just contribute up to the match, or just up to the point where it minimizes your annual taxes?

    Would it not make more sense to then contribute the remainder to your trading account and max out the ROTH because that money would not be considered lost?

    My strategy for generating a passive income is not through investing in real estate like most people do.

    My strategy is to do it through high growth, high yield individual stocks. I know it’s more risky but it’s a risk I’m willing to take and so far this strategy has paid off handsomely.

    ==========

    My Story….

    I am 48 and I hope to retire at 50 by January 2017.

    Let me begin with saying that I only started earning a consistent income at 40. At this point in my life, all I had was the 10K invested in securities I had carefully put aside during my time in school and grad school.

    These days I gross around 77K a year on average because bonuses are highly variable.

    During the first years of my new career, I contributed the max to my 401K and the ROTH and put the rest in my trading account, but I wasn’t actively managing my investments for maximum gains…Then on the 3rd year I was almost axed.

    This dire circumstance prompted me to take a good long look at my finances. At that time, all I had saved was about 110K combined which I guess is not too bad for working only 3 years.

    I signed up for a Rich Dad Poor Dad course on generating passive income through options trading shortly after that scare. They recommended that we take out the 401K and just contribute up to the match for the free money.

    They suggested that we use the funds to contribute to a trading account instead. This account would be used to generate a passive income through options trading.

    Although after attending the course and feeling like I wasted 8K on it, I guess it did provide me with some insight to pay more attention to my retirement savings and how I should go about increasing my net worth.

    Fast forward to today, I now have about 154K in my 401K vs 65K, 145K in my ROTH vs 35K and about 577K vs 10K in my trading account with zero debt.

    My retirement plan is to get my ROTH up to at least 250K in value and generate the bulk of my retirement income through it by investing in high yield dividend income stocks. I figure I only need around $25K a year to live reasonably well. As it is, I barely spend 18K annually.

    I live a very simple lifestyle, but it is one that does not deny myself of certain luxuries like expensive headphones, Apple equipment, audio visual equipment due to my love for movies and music, and a gym membership and supplements as I enjoy looking and feeling good.

    It is a decision I made early on when I started working because I knew I wanted to make sure I will have enough to retire early on and yet not feel deprived.

    I don’t drive because I feel that owning a car is a total waste of money due to ongoing costs associated with owning a car like taxes, and maintenance.

    I use mint.com, learnvest.com and Personal Capital to monitor my financial progress. According to mint, I should attain my target allocation of 1.25 million by Jan of 2017 which is when I hope to call it quits. The HR department has advised me to stay on at half time when the time comes though because they said I can retain my benefits that include a cadillac health plan.

    I subscribe to a few of the Motley Fool’s newsletters which have helped me do well in my investments.

    The plan is to roll my 401K into my ROTH when I retire unless I can carve out chunks of it now and put it in my ROTH because I can do a lot better with individual stocks than the limited choice of mutual funds that we get to choose in the company’s 401K plan.

    I guess the moral of the story is, it’s never too late.

    You can retire in 10 years if you are aggressive but prudent with your investment choices and live a modest lifestyle.

    1. Congrats on your progress! Writing tr 401k off to zero in your mind is just a mental exercise in order to push us to keep on saving and investing after maxing it out.

      Nice job on the trading accout.Id be more conservative now and protect it if you plan to retire in 2 years.

      Did you mean to type $8,000 for spending on Robert’s course? If so, no wonder why he is so rich!

  173. The only problem with this approach is that what of those of us who never made enough money to save much? I ended up as a single parent in my 20’s which was difficult financially as I never got child support. I’ve worked my whole life but never earned much; guess I work in the wrong fields, tending towards non-profit work and such. My IRA holds about what you say someone half my age should have. Pretty dismal. Now that my child is grown, I’m striving to save and opened an IRA as well. But given my salary, I’ll never be able to save what I would need. And being uncomfortable with the stock market, I keep it all in CD’s and that sort of account so interest is almost non-existent. Would definitely do things differently if I had the chance, but that’s not the way it works!

    1. Thank you for sharing. I have a couple friends who are single mothers and I admire their abilities to Multi task and provide.

      The only thing we can really do, is recognize and do better. Best of luck to you and thanks for stopping by!

    2. You can’t build wealth with CDs alone. You need to take an appropriate amount of risk if you want to make some money. At a minimum, find a very cheap “total market” fund at Schwab or Vanguard. To be sure, you will have down months and down years, but by staying the course, you’ll build wealth.

  174. Im 55 yo, a NYC Teacher in a 2nd career. My first pension pays me 2k an month. 24k. I make 80k and Have a part time state job that pays 20k. And other gigs that pay me 10k. I Max out my 403b have 195k earns 7%. I have a 3 family house paid off earn 35k a year. My primary residence is also paid off. No kids, 20k debt from Hurricane Sandy renovations.
    I would like to invest in a fixed 457 account and max that out. Or other account that would provide little risk. Unless you think other wise. I want to maximize savings. Also do you recommend Roth or regular IRA. I plan on working until 62 or 65. Thanks

    1. David, you probably know this, but many don’t know the Onion and that it is a satire newspaper not meant to be taken seriously.

  175. 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.

  176. 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.

  177. 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.

    1. 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.

  178. mysticaltyger

    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).

    1. 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.

      1. 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.

        1. 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.

          1. 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.

            1. 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.

            2. 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.

      2. 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.

  179. 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.”

    1. 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.

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

  180. AmericanDreamer

    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.

  181. 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 ;-)

  182. 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?

  183. Shine Mathew

    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

    1. Hi There,

      It’s a tough question to answer because everyone is different. The tools are fine. I’d read these two posts I wrote to get you started:

      1) https://www.financialsamurai.com/the-proper-asset-allocation-of-stocks-and-bonds-by-age/
      2) https://www.financialsamurai.com/how-to-analyze-investment-portfolio-for-concentration-risk-sector-exposure-style/

      The main thing is to keep saving and investing methodically over time. Start by maxing out your 401k and looking at low cost index funds or funds by Vanguard.

      Best of luck!

      Sam

  184. 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?

    1. 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!)

  185. 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.

    1. 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.

  186. 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.

  187. 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.

    1. 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!

  188. Young Investor

    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?

  189. William Balch

    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!

  190. 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.

    1. 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

  191. 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.

    1. Hi Jason,

      Welcome to my site and I hope you subscribe to my e-mail feed and my private quarterly newsletter.

      I believe income is relative to where you live. If you work in SF or Manhattan you will make commensurately more than if you work and live in Des Moines. I wouldn’t say you are doing “extremely” well with $23,000 in your 401(k) at 25 with 2 years of contribution and market growth. Good, but it’s not extreme.

      Here is a post you will enjoy:

      The Average Net Worth For The Above Average Person

  192. 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”

    1. 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.

  193. 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

  194. Alex McMatthews

    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?

  195. 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.

    1. 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?

  196. 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.

  197. 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.

    1. 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.

  198. 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.

    1. 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.

  199. 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?

  200. Walmart Worker

    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.

  201. deregulate_this

    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.

  202. 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?

  203. 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..

  204. 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.

  205. 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.

    1. 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!

    2. 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.

  206. 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?

    1. 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.

    2. 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.

  207. 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.

  208. 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?

    1. 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.

      1. Its totally possible to retire even if you start at any age.The only problem is time is not on your side as a 22 yr old would have had….the compounding effect.But if you just start out putting 10% of your income and annually increasing it by 1% it would have the same effect of a person starting early.Also to capture the maximum return in a shorter period of time it would be advisable to stay in the equity market till retirement and then slowly shift to the bonds.

  209. 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.

    1. 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??

  210. 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.

  211. 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.

    1. 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.

  212. 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.

  213. 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.

  214. 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.

    1. 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

      1. 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

    2. 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.

      1. Congratulations! I have a question though about Jai’s 401k. If she was 47 how was she generating 200k from the 401k to live off of? Taking money out and paying the penalties ?

        If she’s reading this., what was your job and how much average were you earning that allowed for that kind of savings? Were you single or is this a combined amount ?

        Thank you !

  215. 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 :)

  216. This is not bad advice certainly, but utterly unrealistic for most young people today. We graduate from college with student loans and go to work at jobs where we’re lucky to crack 30K per year. I work for a financial institution and closely with several financial advisors, and here is what you should take from this:

    1.) Nobody in the United States, and especially if you don’t live in NYC, SF, LA, or Chicago, needs 100,000.00 per year to live comfortably. Most young people, even with bachelors degrees and up, won’t make the inflation-adjusted equivalent of that any time soon if ever in their lives, and you don’t need that kind of income when you retire unless you are an obscene over-consumer.

    2.) The key here is to start putting money into a 401k by age 25, even if it’s fifty dollars per month, even if you are barely making ends meet. Always, always, always take advantage of the maximum 401k match if your employer offers it, and contribute to a 401k even if there is no match. The money you have contributed before age 40 matters far more than the money you contribute late in you career when you “can afford it.” Under normal market conditions, a person who contributes 50,000.00 between the ages of 25 and 35 and never adds a penny again will retire with a similar 401k balance to a person who contributes 5,000.00 per year from age 35 to 65 (150,000.00 total). It is THAT important to start early.

  217. I went through a costly divorce almost 10 years ago. All of the early strides and financial success went with it.

    I have since remarried and we have been able to pay off our home. I was looking at your 401k scale and I am a little concerned. I am 43 and only have 150k in my 401k. I am also paying child support (lots) and putting money aside for the kids (3) education.

    I am currently contributing about 12k a year to my 401k, but not sure how to do more than I am doing. Bonuses and big raises are a thing of the past or at least for the time being.

  218. I love the advice I was given similar advice when I first started in banking 22 years ago. My first year out of college I made $28,000 and was able to put 6000 of which my bank matched 2000 for a total of $8000 in my 401(k). I was lucky enough to have a highly leveraged job which paid very high incentive and after 22 years my 401(k) has ballooned to just below $1 million. This was not done by accident I found a very similar path to your advice every year increasing to Nalick 44 years old I put about 20% of my own money and my employer matches 6%. Great advice for those just graduated from college save as much as you can it will pay off later in your career.

  219. Hi,

    Just checked out your site to see where I fall- yikes! I am 30, married, and my husband and I both went to grad school (he went full time after a layoff- so a solid 2.5 years of no job for him, I went part time at night but still have loans) and are paying off a massive amount of loans at a decent clip- but this limits how much we can sock away each month. We pay $2500 each month in loans plus we add about 1/3 of any bonus money towards the loans, and have slowly started the whittle them down over the last 2 years. Since some of my husband’s loans are quite high interest, we feel that those need to be addressed first.

    My husband maxed out his 401K this year and came close last year, while I had been temping and unemployed for about a year. I had a Simple IRA from an old job that I rolled over to a traditional IRA, and I have $26,000 in there. I started a new (awesome!) job a few months ago and have sacked away $2500 in 2 months (to a 401k). We also have $21,000 in savings (I have some health problems and feel more comfortable having easily accessable funds if needed).

    My father has let me know that there is a 403b of his that will be left to me with about $330,000 in it. In my mind, I know this should stay as a retirement plan for me when the time comes, but it is hard to know how to plan with that amount just hanging out there.

    As a background, last year we dumped almost $50,000 into student loans, and about $35,000 rent/utilities. We maxed out our pretax health savings account and used it all. And then some.

    Not sure where else we can cut to increase retirement savings- I aready cook all of our meals- we bring breakfast and lunch to work, and eat dinner at home with a rare meal out here and there.

    But this is terrifying- I should have quadruple what I have at this point. What do you suggest in terms of financial imortance? In my mind, we should address the loans first and put a reasonable amount into our 401ks……thoughts?

    1. Hi Allie,

      Welcome to my site! Always good to have new readers. How did you find me by the way?

      I wouldn’t worry too much about being only 1/4th of the way to where I think you should be for your 401k amounts because:

      1) You are still only 30 years old.
      2) You guys paid down $50,000 in student debt which is HUGE, no matter how much you guys earn combined
      3) You are making an effort to save more and ge a handle on your finances.

      I’d raise your savings rate by 1% every month until it hurts. Once it stops hurting, raise it again another 1% or more until it does and repeat.

      I would also highly recommend you and your husband sign up for Personal Capital, a free wealth management tool that let’s you get a handle on your finances. You can’t optimize your finances if you don’t know where everything is! You can also check out my review here.

      Best,

      Sam

      1. Thanks for the reply. I just did some google searching for a guide regarding how much one should have put away by certain ages. I do think we are on track to catch up.

        I am only putting 9% in my 401K (with a 3% match), husband is putting 10% in his (with a 6% match). We then put another 10% of our monthly take home into savings (emergency fund, future down payment fund), and pay about 28% of our monthly take home to student loans (which mostly go to interest!). About 43% of our take home goes to rent, utilities, groceries, and insurance (other than medical). I am looking at just bumping up my 401K constrobution at this time, but wonder if it is wiser to use some savings and extra percentage in investments instead (and start to build that portfolio).

  220. Fred McMahon

    I am 42 married with three kids all under 4. I just re-financed my house at 2.75%. It was appraised at $1.5M and I owe $500K (I have no other debt). My 401(k) is $415K, my IRA is about $30K, we have about $50K in stocks and I’m contributing $10K per child per year for 529c’s (currently $75K total). I also own a beach condo outright worth $300K. I am very concerned that the stock market is over-valued and about to crash — should I be putting all money towards paying off the remaining $500K mortgage balance before putting any more into the market? Also, how do you suggest balancing my 401(k) between Fixed Income, Large Caps, Small/Mid Caps and Int’l Equity?

  221. Im 35 married 2 kids 8 and 5 and a state employee i make 64000 a year. My pension will cover 66% of my pay @55. I have a option to buy 5 years of service for 40,000 @180 payments of 360.00 and that will boost my pension to 76% @55 or 99% @60. I only have 6500 in my 401k. Do you think i should buy the 5 years or put the extra 360 into the 401k. The option to buy the 5 yrs will expire in 30 days and i will not be able to reapply. Also how much should i be contributing into my 401 based on thees figures.

    1. I generally wouldn’t buy anything or pay more than necessary. Instead, I would gut it out. That said, I have no experience with pensions as I don’t have one. Look at your pension as bonus money and try and save extra.

  222. Mike Affronti

    What are the odds the government will confiscate private retirement funds and redistribute them for the “supposed” greater good of society.

  223. My Husband and I are in our early forties and we have 3 young kids aged 3 -10. I recently quit my job to stay home with kids as one kid has a chronic illness. My husband is self employed and makes approximately $200K per annum. We have $400K in money market savings, $100K in 401K (from my previous employment), $40K in short term investments, Commercial property worth about $65K owned outright bringing in additional $12K per annum. We have 12 years and $350K left on primary mortgage and 8 years and $150K left on another commercial property mortgage. My husband seems to be totally stressed out that we have not saved enough and is bent on saving 50% of income this year and to keep that up for next 10 years. This new budget has meant no vacations, no new house , no extras for the kids. Saving in my mind will make us cash poor in the present. We disagree completely on how much we need to save each year for going forward as I think we should be more than OK saving half that amount $50K and using the rest to enhance our current standard of living. Can you provide guidance on how much you think we should be saving in order to be prepared for college tuition starting in 8 years and retirement at 65.

    1. Hi Dee,

      Welcome to my site. The $400K in money market savings points to a very conservative outlook. Were you guys burned (like myself and so many others) back in the 2008-2009 downturn and never got back in?

      There has to be balance. You guys clearly have a good income stream and nest egg, but the life of an entrepreneur is uncertain, especially now that he has to take care of all four of you. Perhaps there can be some kind of compromise where you take one inexpensive vacation a year, and you work part-time when feasible to help alleviate his stress?

      Where do you guys live and what’s your expenses look like? One suggestion I recommend is to sign up with Personal Capital, a free online wealth management tool that gives you a good snapshot of where all your money is. The stress comes from not having a clear picture among other things. Once you aggregate your accounts, you can see where you’re too conservative and too risky. You can also keep track of your family’s income and expenses. Sit down together to study your finances on the PC dashboard, and make financial decisions together.

      Good luck!

      Regards,

      Sam

  224. 42 year old

    Great article. Really enjoy the comments. I’m 42 yrs old, met my wife 15 years ago, had 4 kids. When we met, I was making 12K a year. My wife hasn’t worked outside the home since we got married. I’ve gone up in income over the years, and have been foolish by contributing, then withdrawing, funds from Employee Stock Pension Plans, 401ks, etc., to pay for lifestyle stuff. I got debt free (paying off all consumer loans) about 10 years ago. My income seemed to shoot up immediately. I got a raise. I started an independent consulting firm (sole proprietership) on the side. My income continued to go up. I started a SEP-IRA, and did a 401k again with a small match. I saw results growing. I don’t touch it.

    When I turned 40, I had a heart-to-heart with my parents, and realized that they are broke, and owe 250k on thier house in their 70s. Eek. I lovingly told them to NOT give me anything in their will, that way I’d be more motivated on my own to succeed. I begun maximizing everything I could – 401k, ESPP, and SEP-IRA, emergency fund. I go out to eat weekly with friends. I take my wife on a date every week. I don’t travel or vacation much at all – if ever – but I have a nice farm, work from home, make a great income, and eventually can retire with dignity on my own without expecting the government to take care of me. We are cash poor, but debt free, and accumulating wealth like mad.

    To anyone younger than me: please oh please start saving when you are young…compounding interest is your friend. I only got serious about saving for retirement a few years ago, and have stockpiled away about 125,000. When you’re debt free and live within your means, this is all possible. Hope is the great motivator. The chart up above says that on the low end, I should be at 300,000 by now. I’m not there. I don’t blame others – only myself. I did feel good when I found out that most people have far less than I now do in their retirement accounts. It also feels good to know that unlike most Americans, I have zero debt. That feels good for about a day. Next step for me was to set a financial goal properly, read informative information offered at sites like this, and to associate with those older and wiser than me about money (not my parents). I have a vision, and plan to meet & exceed my goals.

    I realize that when you’re in the trenches, struggling with debt, have a car, truck, boat, credit card, or house payment over your head, it seems impossible. You need a paradigm shift. I had to grow up financially, and now I’m killing it. Will I be a millionaire someday? You bet. Will it be in the next year? No…but I’m not discouraged. I know I’ll make it. If a guy making 12K a year out of college in 1994 can do it, so can you. Don’t give up. Have faith in yourself. You can do it!

    1. Welcome to my site and I’m glad you have enjoyed the discussion! Let’s pray for the best for your parents.

      I love your attitude of blaming nobody but yourself. Taking ownership of your finances is what counts, which is why I love using Personal Capital, a free online wealth management tool to track my wealth, reduce my portfolio fees, and keep me within budget, especially now that I’ve retired. I just had lunch with one of the product officers here in San Francisco and they are rolling out new helpful features over the next three months.

      I think you will be a millionaire by the time you retire. You’re focused, are taking the time to do your research, aren’t making excuses, and have a GREAT attitude! I hope you subscribe and see you around more. There are lots of articles on retirement here that you will enjoy. Check out the categories on the right side bar for more!

      Best,

      Sam

  225. Finance Naive

    Hi, thanks for your article. I currently have consolidated all of my finance info on mint.com. Do you think that instead that I should work on Personal Capital instead? Also, should I purchase Quicken itself?

    Do you have any personal investment in Personal Capital?

    Thanks for your help!

    p.s. what percentage of your net income should go towards your mortgage?

    1. Nice to have you. I would sign up for Personal Capital because it only takes a minute to do so, and perhaps another 5 minutes to upload all your accounts, depending on how many you have. Personal Capital is better for investors who have accumulated, or are on their way to have accumulating lots of assets. Give it a go through my customized sign up page and let me know your thoughts.

      The best feature about Personal Capital is the 401k fee analyzer imo. I’m saving over $1,000 in fees a YEAR I had no idea I was paying just by running my 401k through the tool.

      For your mortgage question, it depends on how much you make. If you make less than $200,000 gross a year, I’d keep the percentage of net income going towards your mortgage at 35% or less.

      Cheers

      1. Finance Naive

        Hi Financial Samurai, THanks for your quick response. My husband and I make a total of approximately 250K+ per year. In that case, how much should we be paying for our mortgage?…

        Also, do you have any financial disclosures for Personal Capital? If you do, that’s okay. Because if it’s a good fit for us, I would sign up for it regardless. I’m just curious.

        Thanks!

        1. Finance Naive

          Hi Financial Samurai, just went to the page. Just saw that you are a partner. Website looks good. Good job on the site. Thanks again on all your advice!

  226. I am 35, married, with 4 children and my wife is a stay-at-home mom. I have been averaging $40-$45k/year for the past seven years and have $75k in my 401k. I recently started a new job making $64k/year and set my 401k at 10% with company match of 8%. My goal is to pay off the credit card debt we created to stay afloat. I only have one car payment ($200) and my house payment is only $450 for the next 16 years. Once I pay off my non-essential debt I plan on bumping my 401k up to 12%. I don’t know if I am on track or not, but I know I am WAY better off than most people I know.

    1. Hi Rick – Everything is relative, so that’s good you feel like you are ahead of most other people you know. It’s how you frame your scope. Financially discomfort happens when you start comparing yourself to others better off. So in conclusion, keep up what you are doing, be happy and enjoy life! Sam

  227. Does one have to be concerned if they are not on the high end of the table for their 401k? How about if someone who is close to mid 40s (me) has other means that surpasses that amont? I guess the issue is the ROI for the other assets. I’m just looking what folks think about the high end assumptions and if it can be offset by other assets.

    For me, I’ve been very conservative especially after losing quite a bit of my 401k during the tech bust(otherwise i would have been above the highend). So my portfolio has been very diverse, but looking to retire in a few years.

  228. This is all good info and really scary. I’m 31 and I contribute about 8% of my income to 401K. I make less than 60k a year and have 70k in my account, so I’m about half way to where I need to be. I’m also preparing to buy a wedding ring, house, paying off student loans…etc. How is anyone supposed to do this?

    My answer is…enjoy life now, go on vacations, splurge now and then, don’t worry about living off of 20k a year in retirement, because at that point you’ll be glad you had fun when you were in your prime. Also, you could die tomorrow…

    So what’s the point of living off no spendable income for the next 40 years of my life in order to live in a nice retirement village in Florida when I’m 70?

      1. Just because this guy has a different view of how he wants to spend HIS money, you chastise him. Not everyone has the same life concepts as you sir and your whole “living off the government” comment is completely uncalled for.

        If you’d rather work your butt off to live the easy life when you get older, more power to you. I too have worked out all of my expenses in excel and worked out a savings and retirement plan that works for ME and not for the average person. I also don’t plan to stop working, I have a hard time taking a week vacation if I’m not in another city or state… what on earth would I do with years?! I know I could save more if I moved into more modest living quarters and stopped going out so much, but as you said… you only live once.

        Also, perhaps you should be thanking Obama for the great stock market you so avidly praise.

        1. I’m very thankful for Obama. In fact, here’s a post I wrote recently entitled, “Why Work When We Got Obama Said My Rich Friend?

          My 401(k) savings post by age isn’t a one size fits all solution. Everyone is free to do whatever they want. Just don’t complain at the age of 50 when one doesn’t have enough money.

          If you want to know the pros and cons of retiring early, feel free to click this other post I wrote where I don’t mince words either.

  229. And yes, disillusionment is incredibly common among 20-somethings. It’s almost like we’re an entirely different generation with entirely different experiences and outlooks, huh?

    1. It almost is, but things are easier for you guys now with the internet. Too many excuses why you aren’t saving is the mantra du jour. With the internet the world is your oyster.

  230. @Anon
    And no, like all hourly workers, I neither come in early or leave late. Legally, I can’t, as I would have to report the time (legally) and my employer would have to approve overtime hours (which they don’t). Or is your investment advice now to illegally perform unpaid labor?

    Look, my point is, you want to be a financial advisor, but you don’t want to advise all walks of life. Instead of getting mad at people who are average earners, why don’t you either a) market yourself as an advisor for top earners or b) advise people on how to save according to their means? “Earn more money” (without actually mentioning how) is not saving or investment advice. Nor are people average/low earners because they’re lazy. Pretending that they are does not make your advice more effective.

    1. Exactly. Don’t be angry with others that you aren’t saving enough or making enough to live a comfortable life now or a comfortable life in your future. Use your anger and frustration as motivation to improve your well being. I know very few people who got straight A’s in high school and went to great universities who aren’t making decent money and doing well. But I do know plenty of folks who did poorly in school and don’t do anything beyond their job and are upset why they don’t have more.

      The amount of folks who feel entitled are amazing. Seems very prevalent with the 20-something year olds don’t you think? You have nobody to blame but yourself.

      Take a look at these posts to help you do better and not be as upset with others who have more.

      https://www.financialsamurai.com/2010/02/01/do-c-students-deserve-a-lifestyles/
      https://www.financialsamurai.com/2010/10/03/how-to-make-six-figures-income-at-almost-any-age/
      https://www.financialsamurai.com/2011/08/31/are-there-really-people-who-only-work-40-hours-a-week-or-less/

      1. I love how the retirement advice has gone from “be rich” to “work slave labor illegally” to “go back in time and redo high school.” These are all realistic options. You know, maybe I’ll start a financial blog whose sole advice is “win the lottery”. When people point out that it’s not a realistic goal, I’ll respond, “You can choose not to win. How many tickets have you bought today? Have you tried bribing the commissioner this week?” Other lottery winners will chime in, and we’ll all congratulate ourselves on our astute choices to buy those particular ticket at those particular times. After all, everyone had the option to buy those same tickets, right? So the only reason we’re rich and they’re not is that they were too dumb or lazy to make the same ticket choices we did.

  231. I’m curious about your math. Your “About” page claims you worked 13 years in corporate America until 2009. Which would have you starting in 1996. You’re now saying that you started in 1999. Where did those other three years go?

      1. Yes, that explains the four years between 2009 and now. But you said you worked in corporate America for 13 years before 2009. 13 years before 2009 was 1996. Yet here you’re saying that you started saving in 1999. So where did those three years go?

        1. Not sure if English is your second language, but if it is and you can’t understand that three years after 2009 is 2012, and 13 years minus 2012 is 1999 then I think we know why you don’t have much savings and are unhappy with your job.

          I’m 29 years old and have $185,000 in my 401k. What about you?

          1. trilliondollar

            A lot of 401K braggarts here on this vine. Reminds me of the 1999 dot.com bubble when people were bragging about their 401K balances on CNBC.

  232. I agree with everyone else that your advice is not only ridiculous in today’s economy, it is so high-handed and unrealistic as to be detrimental to the morale of those wishing to save. I am a college graduate working in a call center full of other college graduates. It took me two years of odd jobs to even get that. After taxes, I earn about $2,100 a month. In our high cost of living area, I pay $500 in rent and utilities, even with a roommate. So according to your scale, I should put about $1,400 into my 401k. Between that and rent, I would have all of $200 a month to pay for food, gas, and insurance. Does that seem doable to you? And I am by no means an isolated example in today’s world. Instead of giving people unrealistic advice, why not show them how to invest according to their means? Otherwise you may as well say “The best way to invest for retirement is to be a millionaire” and save us all time.

    1. Tell me more about “today’s economy.”
      As far as I can tell, we are recovering nicely and the stock markets are at all time highs.

      I was able to contribute 10k to my 401k when I only made $40k living in NYC. I did share a studio with another fella for two years to save money. Saving and making money is a choice. You need to be offended by your own actions in order to change. Nobody will do it for you.

      1. “Today’s economy” is one in which over half of recent college graduates are un- or underemployed. “Today’s economy” is one in which there are over three unemployed people for every job opening. You know, you keep saying in the comments that you managed to save while making “only” $40,000 a year, but you haven’t mentioned what year that was. It looks from the “About” page that it was probably about 1996. Adjusted for inflation, that means, in today’s dollars, you were making approximately $59,000. The average salary for new grads in 2013 is approximately $44,500, meaning that you were making almost a third more than than the average new grad. Not to mention that 1996 was in the middle of one of the strongest job markets and best economic times the country has seen. So please, explain to us again how ignoring current economic and employment statistics and pretending that we’re still living 17 years ago is a sound retirement strategy.

        1. It was in 1999 in NYC. $40,000 doesn’t go far in NYC, even in 1999. The cost of living in NYC Manhattan is way about the average cost of living in America. Have you never been?

          You can complain about not making more and not saving more, or you can do something about it. Immigrants come to Anerica everyday and work their tails off and do well. What is your excuse? Do you come in before everyone else and leave after everyone else? Are you working a second job or building alternative income streams? Tell me more. The attitude you have is destined to keep you from retiring for a very, very long time.

      2. “Recovering nicely?” Are you serious? Combine the millions of short-term unemployed with the long-term unemployed who are simply dropped from the labor force, the effective unemployment rate is virtually double what the published rate is. There are currently 91,800,000 Americans who are not in the labor force, meaning that the labor participation rate is at 1978 levels. Included those who are ’employed’ but who are actually massively qualified yet are under-employed at minimum wage.

        “Recovery” means a lot more than how well your stocks did last month. Recovery is a measure of the capacity of an economy to produce, GDP, de-valuation of the dollar, and American citizens to earn a wage above the poverty level. What you are seeing in the stock market is nothing more than the Fed continually pumping money into the economy, thereby diluting the value of each and every dollar in your pocket on a daily basis. The stocks are not high because of production – they are up because money is being created out of thin air to keep them from falling down.

        Do you understand what a dollar is created from? It is created from debt. This is called fractional reserve banking. Every dollar that is created is a debt owed to the Federal Reserve, which, despite its name is as Federal as Federal Express and carries as much reserve (zero) as a pocket with a hole in the bottom.

        I have a bachelor’s degree and two masters’ degrees, one of which is entirely composed of finance, economics, accounting and business law. Understanding the economy, however, and what an abominable state it is in does not require any of those degrees – it requires common sense and the ability to read data that is readily available and interpret it. We are far from being in recovery – we are in the midst of collapse, being held up only by the endless dilution of our money by massive creation of fiat currency, the likes of which has not been seen since the Weimar Republic. In December 1923 the exchange rate was 4,200,000,000,000 Marks to 1 US dollar. If hyper-inflating our currency the way the Germans did is your idea of “recovery”, then yes – we are recovering in spectacular fashion.

        1. I’m sorry you are suffering with your two master’s degrees. The fact of the matter is the stock market is at all time highs, corporate profits are at all time highs, and real estate went up 13% in 2013 and is reaching all time highs nationwide and has surpassed all-time highs in places such as Manhattan and San Francisco.

          Why do you think you are doing so poorly? Are you not investing your savings? What about your industry? Thanks for sharing.

          Here’s an article you might enjoy: https://www.financialsamurai.com/suggested-net-worth-growth-targets-by-age/

          Sam

  233. James Smith

    This article only discusses one point of retirement. If I had your low end of 215,000 at 35 I would calculate out the penalties and taxes and use what is left over to pay my house off. That will instantly give me a pay increase of 1500 a month and an asset for future use. Your article only focuses on 401k which is putting all of your eggs in one basket. The real way to retirement is a strategy and owning where you plan to live.

  234. Hello. My wife and I are in our early 40s and we have $750K in retirement investments ($400K in 401K, $150K pension, $200K Roth IRA), $150K in college savings 529 plans, two years pre-paid tuition at an IL state school, $190K non-retirement savings and five years and $100K mortgage remaining on our house. I feel pretty good about our retirement savings, but I’m concerned about the college fund balances. Do you agree that I should continue to max out on the 401K (company matches 8%), or should I begin to move more to the 529 plans? We expect our kids to enter college in 2020 and 2024. Thanks for your insight.

    1. Hi Andy,

      You and your wife are doing great and I recommend both of you to continue maxing out the 401k if possible. The question is, how long do you plan to keep on working? If the answer is another 14 years or more, than you are golden and have nothing to worry about. If the answer is you want to retire early within 10 years, then I’d at least contribute to the 8% match, figure out alternative income streams, and contribute more to the 529 plan.

      You have a lot of financial accounts going on like me, so I also recommend you sign up with the free wealth management online tool, Personal Capital. I’ve aggregated all my accounts so I can get an idea of where my money is going and where I need to adjust my assets. Personal Capital tracks your net worth and gives you a bird’s eye view of your finances to make better decisions. The tool is already saving me over $1,000/year in portfolio fees from my 401k I had no idea I was paying thanks to its “401k Fee Analyzer” tool you can run once you’ve linked your 401k account. My 401k is basically the same size as yours btw! It’s free and easy to sign up.

      Good luck!

      Sam

  235. Sorry to kill the party but you really have no idea what you’re talking about. Your numbers are very questionable, unrealistic, and for the most part, inaccurate. You need a refresher on on econ 101:)

  236. I’m 52 years old and have recently been laid off. I have around $1m in my 401k. I plan on rolling it over into something secure but I have not yet talked to a financial advisor. My question is what would you recommend i do? I have very little debt and but hope I can have some income from my 401k investments to live on. With interest rates where they currently are I wouldn’t think I should expect much rate of return. Any ideas? What kind of rate of return can I get these days?

    1. Nice job amassing the $1 million Clay! Sorry about the layoff. Hopefully there is some good severance?

      You can either leave your 401k in the existing plan or roll it over to an IRA. Do you need to touch the account since you have 7.5 years left until it can be withdrawn penalty fee.

      For income, it’s dividend stocks/funds and municipal bonds. 7 year CDs are at about 2%. Not great, but you won’t lose money most likely.

      I highly encourage you to sign up for Personal Capital and run your 401k through its 401k Fee Analyzer. I discovered over $1,700 in annual portfolio fees and my 401k portfolio is only $420,000! The free tool will also provide some asset allocation advice for someone your age. Signing up is definitely worth it as you need to be all over your money at this juncture in time. Here’s a review I wrote as well.

      Your number one goal should be to not lose money and then make a relatively risk free rate of return.

      Regards,

      Sam

  237. The real reason why your numbers do not make sense is that someone is making enough money to be able to max out their 401k contribution, is already pretty well off.
    So they should be able to invest 17k in a more flexible vehicle rather then locking it away in a 401k.
    While there are benefits from having your money in a 401k on paper, they are outweighed by having the liquidity and flexibility of the funds in a cash account where you can invest more freely.
    Someone who can put away 17k (or more) is also able to withstand loss of that money. Therefore, they can withstand more risk, they can/should put that money to work in a more flexible way. Yes if the person is just stuffing the money into a savings account, they should put it in a 401k instead.
    If they lose a couple of percent here or there due to taxes it doesn’t matter since they’re well off anyway. The ability of other investments to outperform the 401k it more than makes up for paper tax savings way down the road.
    A person with such wealth may also have opportunities to invest which they can’t move on if they are stuffing all their funds in a 401k.

  238. I think that this advice needs a reality check. First off, assuming that an individual is able to find a job in this economy after graduating college, you are saying that I am to contribute $8k to my 401k plan? Really? Not sure what planet you are on, but that would be amazing considering I’ve been in the workforce for 19 years and even I am unable to contribute $8k to my 401k plan. Secondly, you are saying after the first year $17k is too little?!? Again, your outlook is unreal. Even in a healthy economy, where magically every college graduate is able to get a job and have the ability to put ANY money away while paying off a student loan and trying to make ends meet, your advice is nothing less than bogus. Again, reality check. Sorry about that.

    1. Mike, unfortunately, just be size you can’t contribute $8,000 a year to your 401k after 19 years doesn’t mean that others can’t or should follow your path.

      The real reality check might be your own savings habit. Have you calculated how long you can live off your 401k? Do you plan to work forever?

      1. I didn’t contribute to 401K when I was in 20’s but did put 15% or max limit starting at 30. Now I am at 51 and have slightly over $1M on my 401k with active management. Had I start contributing right after graduating college then I’d have more than $2M by now. For Gen Y, don’t make the same mistake that I made.

        Money is like water in desert and if you don’t have it in your hands then you would less likely to spend therefore, have a max payroll deduction and increase half of your raise percentage each year. I think spending money should be harder for saver, in my opinion.

  239. These figures are silly at best. The average American makes under 40k a year. To put away 17k a year means 42% of your salary at 40k a year. Americans should be putting away a percentage that will give them at retirement enough to maintain the lifestyle they live now. Based on your comments here, not only should someone sock away 17k, they should be making minimum 85k per year, have a roommate, and wait til 35 to have kids. Wishful thinking at best. Outright silly.

  240. Well, I have to say this is an aggressive chart at best. I too am retired from the military and I can tell you that there are not that many people out there with great jobs making $40,000 a year in their 20’s here in the south let alone the rest of the states. I can save 20% of my pay but I also have a pension as well to fall back on. I intend to add 5% a year until I hit 55% of my pay in about 7 years. Not many people where I work at can do anything like that. There are single moms, unmarried couples who work part time and the like. Your chart although interesting is not facing reality in today’s world. Too many people cannot find a job let alone one with a 401 k to go with it. This is great advice for those who have all the right checks in the boxes. But for those who cannot fit into this world of yours where everybody has a decent job and can put 20% away in a 401 k is crazy.

    1. Mike,

      You might be the luckiest of all with a pension.

      Take your annual total pension income, divide it by 3% or 4% (0.03 or 0.04) and that is the value of your pension. I’m sure you are killing it.

      Sam

  241. I have a bit of a different question for you, I have about $600,000 in my 401K, my wife passed away about three years ago so my retirement plans have changed to say the least. I will begin to collect a retirement from the Navy in June which includes medical coverage at a very reasonable cost. I also will collect a pention after 37 years with my company baesd upon the best five year average (1.8% per year for the first 20 years and 1.2% for each year after) so I do not expect to need my 401K at all, I also own my home free and clear. So my question is, what is the best way to make sure that my two children get the max from my 401K.

  242. Great info! I am 48 years old, make $100K/year, am single and in my opinion have done a good job at saving $$ but a terrible job at managing. I usuallyt save more than I spend after paying my bills. After losing in early stock guessess and renting for my whole life, maybe not best decisions. I was burned in last stock downfall and put most of my money in a very low cost saving account. I have $315K in my 401K, contributing the max every year. I have $475K in cash basically earning no interest. I live in an expensive area and would need a couple hundred thousand $$ to make a move to purchase a home. My questions are:

    1)how am I doing savings wise if I wish to retire early-while stil working part time at a lower stress job
    2)am i better continuing to rent and investing the bulk of my savings or putting a large chunk into real estate?
    3)How can I find someone to help advise me? I am a scientist who can clone cells, but cannot balance my checkbook. I am not afraid to pay for help, just not sure how to ask or how ot find a qualified person with my best interests at heart.

    I am lucky enough to make a higher income than my friends and family and do not discuss $$ issues with any of them. Please help!!

    1. Hi Kevin,

      Good to hear from you and hope you stick around the site and subscribe. Some thoughts:

      * With ~$315K in 401K and $475K in cash, I say you are doing pretty well. Sounds like you have a stable job and can work for another 10 years. Take a look at this post, “Recommended Net Worth Allocation By Age And Work Experience.” I spent over 10 hours writing this post to help folks try and prosper during good times, and lose less during bad times.

      * I recommend you sign up with the free wealth management online tool I use called Personal Capital. Personal Capital helps track my net worth automatically, cut down portfolio fees I didn’t know I had, and keep track of my spending. For more info you can click here for my review. With your asset base and goals, I really think it’s a no brainer. They even have wealth management advice if you wish.

      * If you’re interested in direct financial consulting, I offer my own services as well. However, I recommend you read my About page and spend time reading a lot of my post in the Real Estate and Investing categories, first before you decide whether you want to work with me. I only work with those who really want to take command of their financial lives and who can comfortable afford the services.

      Best,

      Sam

  243. I contribute to both a roth 401k and a traditional 401k. I contribute 6% to each and my employer matches 50% of both. When I look online my account has 1 balance. So it appears that my roth and regular 401k are combined into one acccount balance. How does this work with taxes when I go to take them out? Or are they kept seperate behind the scenes? Thanks!

  244. Maan, some eye opening stuff here. I turn 33 in a month, my 401k is only at $55k, I feel like I’m definitely behind the eight ball here. My company matches up to 6% so I maxed my contribution at that. Not really living hand to mouth, and not debt free, but nowhere near struggling either. Should I raise my contribution rate??

  245. I started putting in my 401k at 21 and am now 34 with a balance of $147,600. I live in an expensive city (Seattle) and have never made more than $52,000 a year. When I started my 401k, I made around $26k a year I believe. I used to put 15% for the first couple of years, but have dropped it to around 5-10% since then. I’m sure if I had a college degree or if I was married, i’d have a larger nest egg, but I don’t.

    1. That’s a healthy balance, especially given you’ve never made more than $52,000! The average 401K for someone in their 60’s in the US is around $100K. Well done! I suggest you sign up for a free wealth management tool like Personal Capital to keep track of your finances. Run your 401K through its 401k Fee Analyzer and see where you can optimize. I did, and I’m paying $1,000+/year less in 401K fees!

      1. Whoa, Thanks Financial Samurai

        I ran that as well and paying about 1200 a year on 401k fees. After you found out what did you do to reduce this?

        thx in advance

      2. Why are you still in a 401k? Aren’t you living off of passive / web income? Most people I know who aren’t actively employed roll their 401k’s over to an IRA to get access to cheaper / higher quality instruments.

          1. Gotcha!

            I was thinking maybe it was an eye to the 55 vs. 59.5 early withdrawal rules. Got my eye on those, myself.

  246. I am 40 years old and have 200K in my 401K based on a 10% contribution rate. I went a different route and paid off all of my debt including my house, a vacation home, cars, student loans etc. Moving forward I will be able to max out my 401k easily based on these numbers if I so choose. Pay yourself 1st.

  247. Hi Sam,

    Still trying to grasp how this works. I have not dipped into 401k’s yet. Dumb question but when the 401k is set up, the contributions we request to be taking out automatically from our paycheck is considered pre-tax correct?
    My current job uses ADP (unfortunately) for benefits. The 401k is not matched, I should still make use of it right?

    Thanks!

    1. You are better off with an IRA through a brokerage firm like Scottrade than to be contributing to 401k that has no company match. You will have the option of a Traditional IRA or a Roth IRA and many more investment choices elsewhere. No match company match = not worth it (401k).

  248. These figures are absurd and not realistic. Fidelty just realized that the averaeg American has $75k in their 401k. Yet this article says you should have that much by age 25? Please. These numbers are not realistic in today’s economy.

  249. Not sure how you came about with your analysis but there are very few 2 income families let alone individuals that can put away $17,000 a year in their 401k. There is no real analysis done. The media HOUSEHOLD incom (not individual income) is around $51,500. So you’re expecting those households to put away($17,000) 33% of their income and pay their day to day living expenses with what exactly?

    The much better, much more sound advice is to put away a percentage of your income to reach a level that it at least maintains your current standard of living in retirement and for most people it’s not going to be $17,000. That’s why the low end high end chart is a bit silly. Low end high end for who? What type of income? What type of profession? Medical doctors are in school or training through most of their 20s and don’t even start drawing a decent salary until their late 20s or early 30s.

    I noticed you stated you were able to contribute 20% of your salary to your 401k out of college. Most college graduates have huge school loans to pay off on top of every day expenses. Anyone that can put away 10% of their salary at the start of their career and increase it 1% each year their salary increases is doing really good. If you get a huge salary increase put away 2% or 3% more instead of 1. Plan for tomorrow but live for today.

    1. The median salary for a college graduate is around $45,000-$55,000 now. The $17,000 is pre-tax contribution and I’m not accounting for employer match or growth. I put away about $10,000 in my 401K pre-tax w/ a $40,000 base salary living in NYC of all places.

      It’s up to you whether you want to save.

      You can read this post / chart if it makes you feel better. I provide a percentage based on income. https://www.financialsamurai.com/2012/12/03/how-much-savings-should-i-have-accumulated-by-age/

  250. Your numbers are a bit rediculous. Please tell me how a 22 year old who after one year can stash 8k into a 401k let alone 17k on the high end? After one year? Even assuming they made 100k a year that is either an 8% to a 17% savings rate, how many 22 year olds are making 100k? After two years it jumps from 8k to 25k? A 300% growth rate? These numbers are rediculous and lose all credibility from the start.

    1. If you look at the chart again, I assume a 22 year old has 0.

      You can complain, or you can save. It’s up to you. I made $40,000 base salary the first year out of school and saved over $8,000 in my 401K my first full year. I had a roommate and spent my money wisely.

      1. You know even kids coming out of school with degrees are having a hard time finding jobs. You make it seem that just because you get a degree that you automatically will have a great job and make a lot of money right away. You obviously are not that old are you? Try reading the Wall Street Journal or look at the job markets out there. People are struggling out there with or without a degree. Just because you landed a good job does not mean everybody coming into the job market will get one. Instead of telling all of these people that they should have X amount of dollars by a certain age is not really a true goal. Rethink your chart and think about those that are not able to get a degree and have to make the best of it as best they can. Not everyone who starts school finishes either. Also vets coming out of the service with no pensions, are they all going to get a $40,000 a year job with a 401 k to go with it. It is not all that simple. You make it seem like it is a no brainer! Get real dude! Stop giving advice to those who cannot possibly get there without time and of course a good job with 401 k’s.

    2. John From NY

      @ PM

      I am 26 soon to be 27 years old. I have $74,000 in my 401K plus an additional $18,000 in a Roth IRA. I live in an apartment with a roommate and we each pay $1100/month in rent plus another $100 so each a month in utilities. I have a car loan that is $500/month. I have no credit card debt. Between salary, bonus, and other perks I make about $85000/yr, a large bulk of which is bonus. When I was 22 I made $45000/yr. You can save money.

      My biggest suggestion would be to go to your HR department and have then take out whatever % of your paycheck gets you to your 401K max. That is what I do. The biggest challenge is getting used to a lower paycheck every week. Remember, if you get paid every week and you take out $336/wk towards 401k, your paycheck doesn’t go down by $336. That $336 comes out before taxes.

      I’ve decided that I want to purchase an apartment or home in the next 3-5 years. I came up with this savings plan. I sat down with an excel spreadsheet and wrote out what my true monthly expenses are. My monthly bills that I have to pay every month come to approximately $1950. I give myself $100 a week of “spending money” which is basically eating out money, grocery money, and small stuff (video games, etc.). I put aside $2000 a year to buy gifts for people, and $3500 a year for vacations. I max out $17500 into my 401K and save $5500 a year towards my Roth IRA. After all of that I am able to save an additional $5500 in cash which I put into an investment account (which currently has about $15000 in it) plus I will put whatever I get from my bonus (probably another $7000-$9000 after taxes). If nothing horrible happens, I figure between pay raises and such, it will take about 4 years to come up with about a $70k down payment with $30k in cash as an “emergency fund.” At the end of this year, with my current savings rate, I will have that $30k and just be starting to save towards a down payment.

      My advice, be steadfast and make sure you have 17,500 coming out of your paycheck. You will “adjust” to having less money.

      1. BklynGirlNy

        John I agree, I was taught contributing the max for 401k is the way to go. I’m also turning 27 in a few months and have $100k in my 401k, decided to cash out my Roth IRA after having it for a year and focus on 401k. I also have $125k liquid. I have the advantage of living at home right now yet am looking to buy a home preferably one for investment purposes like a two family or more. At times I feel like I am contributing too much to my 401k as my liquid money is still not enough for a down payment for a home ( taking into account that i cannot use my entire savings and still need an emergency fund) in one of the five boroughs of NY and I feel like I am saving but will never reach my end goal. I have also thought about borrowing against my 401k for a down payment yet am not sure if thats the smartest thing right now. I live very comfortably and am not depriving myself of anything yet I need to come up with more of a solid plan. You seem to have a solid plan. I may try using excel and come up with something myself. I have thought about meeting with a financial advisor but not sure if its worth it. This is all money I have earned while working for the last ten years starting with part time jobs and eventually landing full time jobs after college. My current salary is $80k.

        1. John From NY

          I look at it this way with the 401k max…money saved now is worth way more than money saved later. If when I’m 50 and I have a child in college and I’m paying tuition for another one in high school, I may not be able to afford 17,500 (or whatever the max contribution is at that time) a year. But at that point I may not NEED to save as much because I’ll have over $1,000,000 saved…plus whatever my spouse has.

          As far as the Roth, I don’t think there’s anything wrong with putting money into it right now. 1) I can take out my contributions at any time so it might as well be another savings account and 2) If everything goes as planned in a few years I won’t be able to contribute to it anymore anyway as I’ll be making too much money.

          Not sure how much you plan on spending on a condo or apartment, but 125k cash is PLENTY to put a 100k down and finance the rest with a 25k cushion. What I worry about is with an 80k income can you afford a 400k mortgage? With the amount you have saved I would say yes…I wish I was as disciplined as you and had that much… Problem for you is city taxes…they’re miserable. What about living in Jersey? You can get some really nice places in Jersey City/Weehawken/Hoboken for 500k which is more than I am looking to spend on my first place anyway.

        2. BklynGirlNy,

          Don’t take a 401k loan. That’s the biggest No-No in the book. First, if you ever have issues and need to file for bankruptcy, those 401k loans will not be expunged and you’ll still owe that money. Don’t be fooled by the attractive borrowing rate from the 401k.

      2. John,

        You can still contribute to a Roth IRA at ANY age currently. Just make a Non-Deductible IRA contribution, and immediately convert that amount to your Roth IRA. Since it’s non-deductible, it’s already consider After-Tax money, so you won’t be taxed on the conversion. Just make sure to tell your accountant, since there is a special form they’ll fill out for the contribution. Happy Saving.

      3. Dear John-
        What’s your job?
        (Because I want to make $85k a year! I may need a new job for the new year.)

      4. Your numbers don’t add up, sorry dude. Your take home pay cannot support the claims you are making, and your pay starting are you leaving out some details like you lived with your parents until just now and you never go out with friends, are a virgin, wear clothes from goodwill only, and stuff like that? The claims you are making sound like you live off the manager’s special dollar bread and kraft cheese slices. Eating out to you must mean mcdonalds value meal to you. I take it you live in NY or suburb based on the salary and your age. That’s a pricy place to live.

    3. Agree 100 percent! Basically you have to live under a bridge and have no contact with you family or humanity. No kids in the future, maybe read the newspaper if it’s under a car. But it’s possible only when you retire and have no one to enjoy it with. I’m talking about the middle class, not the ones that have had it easy, which might explain the article.

  251. Folks, if you are earning $100k in todays dollars, the $4 million wll be what is required to retire comfortably. And this amount is therotical, by which I mean we are assuming a know inflation from history. As inflation is a risk, so there is no guarenty that $4 mill is enough. So good way to plan for retirement is not just 401k, but other investments alternatives too which are immune to inflation. One thing I can say is thata renatl income is immune to inflation. All my friends in late 30’s have already purchased a rental property for $200K or $300K whihc is generating around $2K of rental income. So folks think of retiremnt planning beyond 401k plan, inflation is “The” biggest enemy.

    1. “Folks, if you are earning $100k in todays dollars, the $4 million wll be what is required to retire comfortably.”

      I would disagree with this statement on a couple of different points:
      1. Using a 4% draw / burn rate, I’d say it’s closer to $2.5M to generate $100K per annum.
      2. If you’re practicing half of what is preached here, you’re not actually *living* on that $100K a year. You’re putting $30K plus into 401k / IRA and maybe some brokerage stuff. Throw in taxes, and…. My take home pay is about 42% of my gross salary. Presumably at retirement, my taxes will be lower (a guy can dream) and I’ll stop obsessing so much about ‘building’ my retirement nest egg.

      I’m actually targeting a retirement income of roughly 2/3 of my final salary. As it happens, if I include Social Security and Pension (some inherent out-year risk for both, for sure), I’ll hit double that.

  252. Like the advice but struggle to see how to implement. I’m making $ 70k annually supporting a family of 3. Modest 2000 sq ft home in a no income tax state. I currently contribute 10% to the 401k and company matches 4.5%. After that though with all the hidden expenses that crop up, I am only saving probably another 5% annually.

    Not sure how I could go all the way to $ 17 K AND do an additional 20% after tax. I would have to live on like less than $ 40 K a year…I could do this no problem if single but married to a stay at home mom with a 3 year old, just not sure how to make that happen…

    1. I think having a child or children is a game changer to some degree in those calculations for many families. Stay upbeat, stay focused, and do your best.

      1. I believe hidden expenses are those that have not been properly planned for. The first thing you need to do is reduce your 401k contributions to the company match. This will free up cash for you to save money on a monthly basis. A different written budget for each month is also vitally important for this to work. My wife and I took Dave Ramsey’s financial peace university, which we found to be extremely helpful. I say check it out.

  253. Love your advice! Anyway, I want to surrender a WRL whole life policy that is worth about $83,000 surrender value, with no surrender penalties since I have had it for 17 years. I am 46, married, no kids and minimal debt. I do have seven more mortagage payments left before I own outright on a home worth about $300,000. I also have served 29 years in the Marine Corp, with one year left. My pension from that is worth about $72,000 a year, and is COLA protected for the most part.
    My wife has about $90,000 in her 401K, and she does max it out.
    What are some good options for that policy? Annuity maybe? I want to roll it somewhere until about age 65. Thanks

    1. Congrats on almost paying off your house! With a $72,000 pension and no mortgage soon, you guys should be GOLDEN!

      I’d just continue to max out your wife’s 401K and asset allocate her age in stable value funds ei if she’s 46, put 46% in a stable value fund, 54% in stocks.

  254. Hello. Thank you for your website. This is great information that most don’t think about. I am 38 years old and would like to have finanical freedom but with approx. $12,000 in
    401(k), a $1000.00 dollars in savings, do you have a catch up plan you would suggest for me? I live In San Francisco in a rent controlled apartment luckily!

    Thanks

  255. While I don’t agree with everything FS has to say, I do agree and applaud this article for getting people excited to save for their future. Its tough to see people disregard and call your assumptions of saving untrue.

    My wife and I are in our early 30’s living in California and have saved 200k +/- since our late 20’s. Once realizing our expenses (50k/yr) and income (90k after taxes), we started saving anything and everything.

    This is my only beef with the 401k program:
    When working for a small business that offers one, it can be very expensive. Mine was charging 3-5%/yr for “managing” my 401k. To put that in perspective, my Roth IRA and other Accts. with a different very respectable company were charging me 0.15 to 0.25%/yr. Over 40 yrs that money compounded can mean the difference of quite a bit of money. And to top it off, my 401k was in a variable annuity!! Talk about wearing two raincoats in a rain storm. I would be very wary and ask many questions when electing to participate in a 401k. If your company pays for the management fees, all the better, but read the fine print.

    Regardless of your income, write a budget and stick with it and your money will do you well.

    Nice job FS!

  256. Nelson garcia

    i am sorry but i completely disagree with your chart.
    for anybody interested in a real savings guideline please google the study called “NATIOAL SAVINGS GUIDELINES”. it is the best thing i could have ever read. it gives you detailed numbers with different probabilities of success at various income levels GOOD LUCK TO ALL

    1. The national savings rate has hovered between -5% to +5%.

      If people are going to follow that guideline, they are going to be DOOMED. Let me know how it goes.

      Do you not see how bad people’s personal finances are in America?

  257. I contributed far less than the maximum from 2005 – 2007, then the maximum from 2008 – 2012. So I contributed much less than the author wanted me to in the first 3 years, then about the same as he recommends for the next 5 years. That’s 8 years of working, and contributing less than he wanted me to, so my low end should be less than 127K and high end less than $182K by his chart. On top of this, the economy has been terrible during this run, so you might expect me to be way behind in my savings. However, I have $181K which is almost identical to his “high end” number where he claims 5% is “aggressive”. The truth is, you can’t just neglect a company’s match or profit sharing contributions. It makes a HUGE difference. The second truth is that 5% is not aggressive. 5% is reasonable and even a bit pessimistic over long 20+ and 40+ year spans. The author makes good points, but he neglects company matches and is too pessimistic about long term returns. That makes his table useless.

      1. This is funny

        I do want to comment that I like your philosophy about saving for retirement, but as someone in their mid-20s, I don’t see much of a point. The Fed is devaluing the dollar so fast that it will be cheaper to buy stuff today than it will be tomorrow. So why not spend? Anything in dollar-denominated assets will be worthless when our lenders realize we cannot pay back our debts. I see our house of cards crumbling down in catastrophic fashion within the next 5-10 years. Social Security and Medicare (which are nothing more than legalized Ponzi schemes) will be wiped out. The bond bubble will burst and we can expect interest rates to skyrocket along with the cost of most consumer goods. I don’t think any one intelligent person who has a basic understanding of economics can disagree that we’re heading for another Great Recession (maybe even a Depression, who knows?). But with the combination of government-backed debt and liabilities, QE by the Fed, and artificial manipulation of interest rates to historically-record lows for so long, I just feel convinced that it pays to spend today and save when our economy finally does collapse. I know that might be hard to believe, but look at Greece. Look at the euro zone in general. The reason it hasn’t happened here yet is because there’s still too much faith in the dollar and, in my opinion, Greece/Euro Zone has been drawing attention away from the real problems in our country.

        1. Have you considered buying real assets in the US and abroad? I’ve built up a real estate portfolio over the past 13 years which is a hedge and play on inflation. I’ve got one property abroad as well. Consider doing the same.

          Or, spend all your money! I think you guys having a saying, You Only Live Once or something like that. Just don’t be a burden on your parents.

  258. Hi! Thanks so much for your time! I am 50 years old and would love to retire by age 60.

    My mortgage is paid off ($300,000 property value). I have no debt. My monthy expenses (not including medical insurance) is about $1000. I have about $400,000 in retirement savings (401k/IRA). I have about $40,000 in a liquid emergency fund. I currently put about 20k annually in my 401k. How much do I need to additionally save per month to be able to retire with a $3500 montly income flow? Any additional insight/ advice? Just cannot wait to hear back from you!!

  259. This article is asinine. You expect new college grads to be contributing $17,000/year? In their early career when they might be making 30-40k, dealing with student loans, probably credit card debt, rent/mortgage buying a car etc? I understand the importance of saving more for retirement young ($1000/year saved from 18-28 gets you more at 65 than $1,000/year from 29-65). However the expectation here is totally illogical. Maybe if a graduate is living at home and Mommy/Daddy took care of all of their loans, put food in their fridge, gave them a car and they still have an allowance. For those of us living in the real world, don’t listen to this guy. Max out your company match for your 401(k). After that, establish an EMERGENCY SAVINGS FUND. That way, if you hit a rough few months you don’t have to take a loan or pay penalties to withdraw from your 401(k)! Finally, work towards paying off any credit cards and personal loans with high interest rates. The rest of that $17,000 will come as you gain financial security.

    Just as important as how much to invest at that age is how to invest. Far too many young investors are overly risk adverse. There are a number of tools and articles available on how to invest a starting 401(k), but remember a few basic rules.

    1) You don’t need to hold cash IN the 401(k) if you aren’t making withdrawals. Get that fully invested! Hold your cash outside in an emergency fund.
    2) Diversification is important – but stick to the basics. Domestic US Equities (especially large cap), International Equities and Emerging Markets Equities should be your staples. A small Bond allocation can be a further diversifier but your portfolio benefits from a heavy allocation to equities with a 30+ year time horizon.
    3) If you are completely investment clueless large companies tend to offer “lifecycle” funds (typically high fees but they diversify for you) or you can find an advisor/do some research.

    Once you company match is maxed out and you have contributed to an emergency fund, if you have additional funds consider a deductible IRA contribution. In addition to a 401(k), a single individual making less than $58,000/year can make a $5,000 fully deductible contribution which also grows tax deferred. In addition, certain withdrawals are penalized by a 401(k) that aren’t by an IRA. The most notable for those in their early career? First time homebuyer expenses up to $10,000 in 2012.

    1. $8,000 the first year, and then $17,000 after that. I saved $15,000 pre-tax in my 401K while living in NYC making only $40,000 my first year by living with a friend in a studio. Surely others can save $8K while living in a much lower cost of living area.

      Spend some time reading this blog. I don’t disagree with you on investing, compounding, and time frame. Just don’t be mad if you aren’t on track with this chart, get even.

  260. I’m still a bit confused why you are so high on 401k…

    It ties up a lot of $$$ with limited investment choices, when you could use those funds for more profitable (hypothetically) endeavors such as real estate, starting a business, going to grad school, etc.

    I agree it’s nice in theory but unless you make $250k+ (with no dependents) and live in a semi-affordable area (not SF) I’m not sure that tying up those funds is the best use of the capital.

    Thoughts?

    1. 401K is a woefully light retirement savings vehicle. It’s only a small portion of my net worth, but it still is an important one.

      I maxed out my 401K when I was making $50,000 living in Manhattan. You don’t need 250K to max out your 401K!

      1. Let me use a personal example then.. I make $80k (plus bonus but I put ALL my bonus into savings and do not account for it during my financial planning). Let’s say I net $60k.. and annual fixed costs are ~$25k. That’s a net net of $35k.

        Tying up $17k/yr does not leave much $ left over to save for other purposes (down payments, stocks, etc).

        Yes.. I “earn” ~20% in year 1 but after that my investment options are limited. Can I do it? Of course.. just still not convinced it’s the best platform for savings. Why am I wrong??

        FYI… right now I’m on track to sink $7k (not including company match) per year into 401k.

        Thoughts?? This is one of my bigger financial decisions throughout the year. I would appreciate your opinion. Particularly since I’ll need to make the change to max out relatively soon. Running out of year…

        1. My opinion is that everyone should max out their 401K if they can. That’s it.

          After 13 years, I have about $405,000 in my 401K, and it was PAINLESS to accumulate. It was automatic and I didn’t do anything but live my life. Too many people don’t save in their 401K, and then wake up 10-20 years later thinking “Where the hell did my money go?” b/c there is something that always comes up.

          Check out this latest post: https://www.financialsamurai.com/2012/09/17/how-often-should-i-rebalance-my-401k/

          And the kicker is, my 401K is only a small fraction of my net worth. MAX IT OUT!

  261. This is scary. I am an immigrant from India who went to grad school in US in the mid 90s. I will be turning 40 soon. Between my wife and I we have a total of around 80k saved in 401k… I think we are way behind the curve. Plus we live in silicon valley where everything including housing is very expensive. We bought a house for 800k with 20% down in 2010… Also bought a rental property for 300k with 25% down which is $300 cash flow positive and have about 100k in checking account paying almost 0 peercent. I am not sure where to put that… besides is 100k too much as emergrncy fund or is it ok? I have a 4 year old and I contribute $400/month for his 529k. I am hoping once he starts going to KG I will be able to save some money from his pre school expenses. I also have this property in india that I bought in 2000 that has appreciated significantly and is now worth about 250k. I had bought it before I became a US citizen. Do you think I should sell that property and re patriate the money here? I dont know what I could invest it in though. So what should be our strategy… We have started contributing the whole 17k to our 401k starting 2012 and company contributes 3k. What should be our strategy?

    1. Sunil, $80K in the 401K at 40 combined is not going to last very long. Be truthful to yourself and calculate a trajectory of how much you’ll have by the time you plan on retiring.

      The 100K in checking seems way too much, as there are so many investment opportunities out there. I’m looking into Prosper.com myself for 10% returns hopefully starting 11/1/2012. You can check out my post.

  262. @Brian

    Hi Brian, we’re in a similar situation as you. Married, two kids, live in Wisconsin, make roughly $150k gross between my wife and I in stable industries that should continue to increase with semi-regular bonuses adding another 10% annual income. We’re closing in on $250k saved in retirement accounts, and are only recently working towards an emergency fund. Only debt is mortgage (though just bought a new house this year in much better school district, closer commute which substantially improved our quality of life) and some student loans still. We’ve got regular withdrawal’s into our two kids’ 529 plans, but unless we bump that up, it will be drastically underfunded. Based on Financial Samurai’s advice, we’re behind some but hope to make it up in the future. Next year should be the first we max out our 401k’s, as well as bump up 529s. We should be saving more but some things we are unwilling to give up that are primarily health related to begin with (high quality diet, gym fees). With no day care fees (were running us over $15k per year for the past five years) we should be able to follow more closely the map I’ve laid out. Not sure if that makes you feel any better, but I’d say we’re in similar boats.

    1. Forgot to add, we’re 36 years young, just paid off the second car this year, and the bonus shown above are something that COULD add that much (or more) each year. We’ve only recently been at that overall gross income in the last year or so due to job changes. After years of poor financial decisions and digging out of debt, we’re fairly financially solvent despite some obvious holes.

  263. The dumbest thing about your chart is that it assumes a constant growth in retirement over the entire span of investment for the low end figures. That is only reasonable if you are saving in pure cash with 0% interest. If you’re making 6-9% interest on your retirement savings, then your retirement assets should experience compound growth, meaning that the difference in target retirement assets between 60 and 65, should be a vastly greater value than the difference in retirement assets between 25 and 30. Or, to put it another way, you could achieve the same low-end final retirement value without investing nearly $17,000 per year, and anyone would be a fool to use this savings guideline. I’m glad you’re trying to encourage retirement savings, but you should learn a little something about compound interest before you attempt to advise people on this topic.

    1. It’s never dumb to have a conservative stance.

      Good luck on inputting 9% returns a year when the risk free rate is only 1.65%. You should start a fund and accumulate $50 billion AUM like Bernie.

      What’s dumb is assuming a high return rate, budgeting your life accordingly and ending up short.

  264. Quck Question

    Financial Samurai I read this and was wondering if its true

    “Here’s an example of what a big difference starting young can make. Say you start at age 25, and put aside $3,000 a year in a tax-deferred retirement account for 10 years – and then you stop saving – completely. By the time you reach 65, your $30,000 investment will have grown to more than $472,000, (assuming an 8% annual return), even though you didn’t contribute a dime beyond age 35.”

  265. You don’t need a ton of money in retirement if you’ve paid off your mortgage. Pay it off before you retire and you and your spouse can live comfortably.

  266. Sam,
    I feel like I got a late start but here are the numbers. I am 39, wife 35 and we have no debt whatsoever.

    401k 126,000.00
    variable annuity 58,000.00 5 years into 15 year var ann.
    mutual fund 26,000.00
    529 plan 1 child 50,000.00 child age 7
    403B 30,000.00

    wife teacher pension if she quits in 6 years and then has 20 years of service her penision would begin at age 60 and would recieve 1,800.00 per month for life, of course is she continues to work this increases.

    our House 220,000.00 no mortgage, house paid off
    water front lot owned on the coast 76,000.00 no mortgage, paid off

    considering building second home on the water front lot, probable home cost 250,000.00

    Should I elect to build the second home would you recommend the 30yr vs 15 yr mortage at these low rates?

    Do we have a reasonable chance to retire when I reach 62?

  267. Love the article! It definitely motivates me to save more. Only one thing seemed questionable: how did your tenants’ late payment affect your credit score? Were the utilities not under their names? It seems foolish to leave your name on the utilities if they are the ones living there and responsible for paying it.

    Anyway, I’m 29 years old and make a little over 100k, but manage to save over 50k after taxes. I put 15k in my Roth 401k, but would like to max it out soon. I spend about $2,500/month, including my mortgage. I am frugal, but live comfortably in LA. I enjoy life, but I think the key is having peace of mind knowing I have savings to fall back on. I think I would be more stressed out if I HAD to live on $2,500/month.

    My husband has an average salary, student loans and almost no savings, so I am saving for the both of us. We want to have kids soon, so that is another expense. How am I doing, Suze? Er, I mean Sam!

    1. It was my tenant’s $8 non payment and the utility’s non notification that hurt my score bc bills are attached to property addresses which are attached to owners ultimately!

      I didn’t find out until 2 years later even after my new tenants were paying their bills on time!

      Check your credit score everyone! It costs nothing!

      I think you are doing great, and your husband also needs to save! When you have kids, you might not want to go back to work. I know I wouldn’t, so you never know!

  268. The chart above is way too high. Warren Buffet might be able to maintain those numbers, not your average American? There are very few people that max out their 401 k at $17,000 each year. First, people do not invest a lot to their retirement anyway and now with this horrible economy, it has gotten worse? Shoot, I would estimate about 85% of employee’s that contribute to their 401 K are investing $11,000 – $13,000 a year and that’s being generous. Think about it, no one making under $30,000 a year is contributing over 50% of their income to their 401 K. they would be living on the streets. The only employee’s that might be maxing out their 401 K are employee’s making well over 60,000 so that eliminates a lot of people. I decided to re-do the chart below with more realistic numbers.

    22 0 $0 $0
    23 1 $1,550 $11,750
    24 2 $16,000 $26,200
    25 3 $30,450 $54,250
    30 8 $102,700 $149,450
    35 13 $177,500 $276,100
    40 18 $249,750 $437,600
    45 23 $320,300 $652,650
    50 28 $392,550 $908,500
    55 33 $464,800 $1,244,250
    60 38 $537,050 $1,672,650
    65 43 $609,300 $2,220,050

      1. Choice…what choice, whether or not you want to eat. I grew up blue collar and have been fortunate enough to be blessed with a good job and I max out my 401. But my mother and father never ever ever would have been able to come close to that.

  269. Me & wife just turned 35. We have a little over 500k saved total in our 401k, roth iras, and general stocks. I max out 401k and iras each year starting now. I figure i also contribute on average about 16 or 17 yearly to my 3 kids’ college. I will also have my mortgage paid off by time i am 43 or 44. My concern is that of our 500k only 50k is in nonretirement accounts. To retire early one needs passive income. I want to get into real estate but getting any more cash is tough with everyday expenses. I know there will be more of it when house paid for. It seems the dream of retiring in mid to late 50’s is just that – a dream. One would need at least 3 rentals paid off to supplement income plus money saved up in general brokerage account to accomplish this. If i did not have children this would be way easier.

  270. john sedberry

    i am 40 with 0 debt 410k Individual 401k ROTH savings and an additional 50k in Traditional 401k. Also have another 350k in non retirement stock, bond and cash(30/50/20). I like your chart and although depressing it is realistic. For those that are upset over the chart i would offer choice. You save now(follow the chart) you large windfall latter via inheritance, bonus, lottery(non of these are solid plans) or you work longer probably into your seventies and get by on less. I think what confuses people about your chart is not understanding that is meant for those that want to strive to have a semblance of the income they generated while working and retire young enough 60-70’s to enjoy it.

    Regarding those that dont believe in the stock/bond/reit/metals…. markets i would offer a bit of advice. In the last 100 years the DOW has had 4 secular bear markets (secular=multiple business cycle) The longest of which lasted 20years (the depression) average length of time was 16 Years, we entered a secular bear market in 2000 and have been swinging up and down for 13 years (hence why a lot of under 45 year olds are frustrated) we are over 60-70% Thru this one. The market avg over these cycles is between 0-4% the decade following these cycles averages 17% hence why they say long term market avg is 9-10% it should be viewed in 30 year segments not 10. I think there will be another leg down before it is over but what an opportunity to set yourself up for the next decade.
    Remember the DOW only has average 7.2% over 10 years to double!= DOW 2023 @ 27000

    Chart to reference secular bear market claim

    https://4.bp.blogspot.com/-wkJsE5l_JRI/T8yMtBZdF9I/AAAAAAAAIDw/NEnN0TUfzVk/s1600/Equity+Secular+Bear+Markets.png

    1. John, thanks for sharing your financials and your thoughts. They are very welcome, and realistic. I don’t know why younger folks aren’t willing to just take the advice. Instead, it’s a complaint, or a “live life now”, or whatever other excuse to use as to why they think my chart is sooooo off base.

      It’s not folks. It’s simple math. If you save aggressively over a long enough period of time, get your company match, and have a reasonably diversified portfolio, you will have a good nut accumulated over time.

      By the time I was 35, I managed to save over $400,000 in my 401K b/c of diligent savings for 13 years, NOT b/c I am a market genius, especially after these two downturns in the past 10 years.

      here’s the latest post on 401K rebalancing. https://www.financialsamurai.com/2012/09/17/how-often-should-i-rebalance-my-401k/

  271. I am 54 and want to retire at 56. My wife is 56 and wants to work until she is 60. We currently have a combined total of $430,000 in our 401k. We also have a home after selling it we will realize about $125,000 for us. I also have a pension that will net me $30,0000 a year after taxes and our SS which will combine to be $30,000 at 62. We have a condo in SC with no mortgage and we we plane on retiring. We have no other debt at ALL. We are planning to work part time after our full time retirement for a few years. We live extremely conservative and we are ok with that lifestyle. Can we make this work at those ages and incomes?

    1. I know it doesn’t sound like a lot but I have seen people live so happy on less. Everybody lives over their limit but we don’t that’s why we can afford to do a lot with this amount. So what do you say?

  272. @Math/Finance – Recent Grad

    You can totally save more! Be aware of what you’re spending money on. Write it down. You’ll find you start saving without thinking about it…

    I’m 24 in an expensive city (with some expensive friends), and trust me, you don’t need as much of the kool-aid as everyone says. ;) Just prioritize (spending on stuff that isn’t fulfilling now, or not having to work at 40?) and save and you’ll be fine.

    I loved “Your Money or Your Life”. How’s and Why’s of financial independence. And that’s what it’s all about, right?

  273. I am amazed by the sheer number of excuses people make! Doesn’t matter how much you make, if you adjust your lifestyle, you should be in a good position. I’m 30 years old, have a 6K car debt and have a new worth of around 150k. I want to retire by 60, so have another 30 years to hit the “magic number”. Even though I earn well, I continue to live beyond my means and save before I spend rather than spend before I save. This was one advice my dad gave me when I started college and have worked well for me till now.

  274. 43 YO male. Married. 2 teenage kids. Regular corporate job guy…not a doctor/lawyer/movie star. Goal is to semi-retire at age 50 or 5.0M which ever hits first. Might push on to age 53 to get youngest out of college but 10 years seems like a L-O-N-G time to stay in the rat race.

    Started working on my NUT at age 21 with first paycheck….. here is how we are doing

    0.7M in my 401k/IRA maxed contributions yearly since age 21
    0.2M in wife 401K/IRA
    1.7M in cash accounts
    0.2M value of house which is now fully paid off , no mortgage
    0.2M value of both kids combined college education funds
    ===========
    3.0M total net worth today (debt free)

    Strategy: Save nearly half of income every month for past 22 years. Mostly single income, as wife mostly stayed home raising family. Avoid divorce…that can be very costly. Overall think we are living a good lifestyle with modest spending. Being frugal is not same as being cheap. Accumulating stuff does not indicate wealth.

    I agree that a strategy of 401K’s and IRA’s as only saving vehicle is dangerous in that the rules for things like withdraw penalties, taxes, timing etc at a moment’s notice.

    1. Nice Job ! Stay focused and in another 10 years, your current NUT should just about double. Even if “just” the cash portion were to double in 10 years, at approx 3% tax free return, you would be earning approx $100K after-tax in tomorrow’s dollars. I’d suspect you would be just fine…. presuming of course that health insurance premiums consume no more than 25% of your total after tax income.

      If you retired today, your cash NUT would toss of approx $50K after-tax (muni’s for example) which is probably a bit tight to fully retire for a family of 4…. but it is possible. Health insurance and College tuition costs are probably the big unknowns in the equation as I see it.

      Overall- good job.

  275. SingleDCexec

    I very much appreciate this website. Sadly, it served to remind me how much I need to continue to save to have the quality retirement I want in Spain. I am 44 year-old workaholic bachelor who is an executive in the Federal government. I am very frugal, for example I:
    *purchased and drive a very frugal and practical inexpensive 15K vehicle in 2010 on 0% interest,
    *update my smartphone only when it is essential that I do so,
    *travel on a very strict budget,
    *avoid excessive eating out and hardly ever buy alcohol when I do,
    *wear nice suits I get at cutthroat prices online at a tiny fraction of what my friends spend on clothes,
    *almost always bring my own (healthy and hardy) lunch to work.
    *I clean my own house, maintain my own lawn, paint my house inside and out, perform all of my own repairs, etc.; and
    *get 8 dollar military hair cuts.

    Nevertheless, I have only managed to save 159,000 in my TSP (the 401K for Federal employees). One reason for this little savings is that I started my career only 10 years ago – late. There are also other reasons for my situation including, most notably, my having to borrow 30k on my retirement account to have enough for a down payment on a 450K property in 2008. I have eaten ramen and pork and beans to repay the 30k loan within 24 months in addition to maximizing my contributions to my TSP since ’09. Nevertheless, in addition to pouring in the maximum 17k (or whatever it may be increased to), I plan to add full catch-up contributions at age 50 and beyond.

    I refinanced my house last year on a 15 year loan. It’s still worth 450K. My current equity level is low: 125K. My increased mortgage payment takes a big chunk out of heavy one, nonetheless I am convinced that having my property paid off before I turn age 59 will give me many retirement options. I am only saving about 4% of my remaining salary for emergencies (dental, emergency house repairs, etc.) Real estate in my area is very stable and is expected to rise in my area due to transit improvements and proximity to downtown DC. My TSP is certainly lower than that of my friends, but few of them will have their houses paid off as early as I will. Moreover, since I will receive FERS (a relatively small fixed income-based Federal pension). Based on my high income, I should be able to make ends meet comfortably by age 62 by:

    *Keeping a healthy weight, working out and not smoking (we forget that the reason we are saving is to enjoy it later!);
    *Having my house paid off;
    *Having some savings;
    *Saving as much as possible in my TSP by then; and
    *Maximizing my earnings until so that I receive a decent FERS fixed pension.

    Spain, here I come…in 2030.

  276. i stumbled upon this website, while researching about investments. I think its a lot of great information. Im 24 y.o. and is blessed to earn approx 92,000-100,000 a year. How much should i put in my 403b? i havent started yet and from what ive been reading, people usually start at the age of 22. am i too late?

    also how do invest my money on stocks? I get scared in doing so since i have no idea with how the market works. any recommended websites or any reading materials regarding retirement and how to plan for it would be appreciated. Thanks!!

  277. Math/Finance - Recent Grad

    Ok. I’m 23. I just graduated college. I am starting a joke in NYC for around 60k. Rent + electric/gas/water + cable is like 20,000.

    I plan to max out Roth IRA. And put like 10,000 into the 401k plan my company provides.

    Is it realistic to save more?

    The cost of living in NYC is just so high. I am not sure what to do. If I contribute more than that, how can I enjoy my twenties?

    Please let me know what you think are some good ways to save money.

  278. Mike lopezeo

    Time the market mentioned then dollar cost averaging. To different principles that do not correlate . lol. Amounts a bit high but will it really hurt to save more. The guy isn’t asking you to send the cash to him. In the end it will only benefit yourself.

  279. Ipsecmerlin

    Your not living in reality. With 22 million people out of work and 80 percent of homes underwater, a savings rate in the negative for Americans.

    Please do not make me laugh, who the hell has the amounts of assets in your list?

  280. Interesting, but the $17k a limit goes up every year, so to to take $17k and multiply it backwards in time overstates how much people were allowed to contribute. As recently as 2000, the limit was $10.5k.

  281. It seems like these numbers for how much you can draw each year aren’t taking into consideration the interest earned on the lump sum each year. If you have $723,000 at 65 (the low end), you could live off the interest from that savings. If there is 7%/year growth, then you have $50,610 to live off of. As long as you don’t touch the principal, you’d be ok and even have money to give your children. What am I missing?

  282. I am 45 years old. I had 30k saved up by the time I was 30 years old (way below your chart numbers). I now have 240K in retirement savings, and 193K in personal savings, totaling 434K. I have some equity on my house, but I don’t pay much attention to that.

    I HATE IRA and 401K because I expect to die way before age 70 (based on my family medical history). Needless to say, I would prefer to abandon 401k because I probably would never even see that money.

    Live 20 years after retiremen? Average life expentancy is 78 years. Also, average family of 4 and 1/2 live on 48K a year, so why would anyone need 2 mil to retire unless you are living in Park Avenue? I think I would be very happy with 70K a year if I retire. I now live on around 40K a year and very happy with that. I spend around 20K on expenses and spend 20K on things that I can do without. I save more than 50% of what I make.

    The problem I see is that your numbers are based on someone who is not capable of planning and who is not capable of being financially sauvy or frugal. There should be another set of numbers for “normal” people who do not live a high life!

  283. Regarding your request to share 401k and age info, I’m 60 yrs old. “Downsided” just over 2 yrs ago. Currently have $880,000 in IRA, which was $859,000 when I was “retired”. Still owe $200K on my house, and paying healthcare insurance of $410/mo. but no other debt besides property taxes and utilities. Living pretty much a “no spend” life which sucks, since I have pretty good genes :-) Putting off having to touch the IRA for as long as possible.

  284. Please, immediately, let me know where in the US you are fining 3-4% yielding CD? You truly are a financial genius.

  285. Unfortunately, the reality is …

    “In total, 60 percent of workers report that the total value of their household’s savings and investments, excluding the value of their primary home and any defined benefit plans, is less than $25,000.”

    Source: ebri.org, March 2012

    1. Probably a lot more than those who do not max out their 401ks. Those who do max out their 401Ks are likely more focused on financial well being, and the financial well being of others. But, that’s just my opinion.

  286. Great post! I’m maxing out the 401k, but stopped adding to my Roth IRA because I wanted to save more for a home. Time to start maxing that out again!! I went to grad school so got a late start, but still it’s looking good. I wish all my friends would read this!!

  287. Knoton Lyon

    I would add that while you do want your retirement accounts to grow it is wise to not make yourself IRA rich and cash poor. While you get more tax benefits for contributing to your 401k and other tax-deferred accounts, you also want to make sure you have adequate taxable savings that you have access to.

  288. Okay, I recently turned 27 and have had the opportunity to save for the last two years. I was fortunate to land a job making around $110,000 a year with only an associates degree, and have about $30,000 in student loans. Since beginning my career I have paid off my loans to about $10,000 and have accumulated $40,000 in my 401K. I contribute 21% with an employer match of 7%. I feel like I am on a good path, but I am smart with my spending and have feverishly planned for my future. It seems to me that saving for retirement is a Catch 22 situation. Investing in your 401K is crucial at a young age, as your money has more time to brew, but you need that money the most at this point in life in order to purchase necessities. Later in life you don’t need as much of your paycheck, you tend to make more, but investing is not as crucial as the money will have less time to grow. Does this sound right?

    1. Sure, that’s about right. The more you make, the less of a percentage you will spend, and the more you will save.

      Contribute 17K to your 401K, not 21%. Max it out. 110K k is a good income.

      1. 21% plus 7% company match is over 17k. The money invested after 17k is just not allocated to a Roth after tax right?

  289. Hello there. I enjoyed the article although I suffered a tsunami of financial depression as I am sure most did (it seems that way from the posts). I have not a $ in my 401k but have just started one (just started a career). What I am seeking is some advice on how much to invest each year. Here are my details…

    Age 28
    Salary=115k + bonus (target 12%) so around 129k
    6% contribution from work (no match required) to 401k
    Also have a stock matching (8%:1%) and savings plan (1.3%:1.3%) so another 10% roughly or 13k in fully vested investments
    No Debt whatsoever
    90k in bank to buy first house (around 350-400k) will put 20% down on 15 year @ 2.8%
    Wife just quit career (will be SAHM) so no second income :(
    Will spend around 35% of net (after 401k & stock match) on home (mortgage, prop tax, elec, maintenance, insurance)
    Will spend 10% of net on Roth IRA’s (2)
    No expensive habits, no toys, no tv, used car, cheap vacay’s and cheap wine :)

    Here is what I plan to do:
    Max out 401k on top of employer to total 17k limit
    diversify the 13k in stock and savings
    try my best to max out my Roth IRA and wifes Roth IRA = 10k after tax
    Additional 21k per year going toward house principal – not interest (I am treating this as a non-investment as it will only keep up with inflation at best in most markets)
    That leaves me at around 60 k per year invested in 33% house, 66% funds etc (this is where i need advice)

    In addition we will be stashing away 500$ per month for three years to build an emerg fund for the house. That will be earning SFA interest over those years but we need it on a whim in case something fails around the house.

    So my questions are:

    Is this enough to put away – it will be our max without sacrificing on home size/location.
    what should i diversify the 66% into? It will be in company stock, some of which I will keep but want to spread the rest over medium to medium-low risk investments

    Should I start a taxable IRA to get the extra tax deduction rather than topping up the Roth IRA after tax? It will save me 25% correct? But the Roth IRA will be tax free when im 60…

    FYI I am a research scientist for a Fortune 500 and spent 10 years straight in University without a break (BSC, MSC, PHD; mostly scholarships and thus no debt). My second education will be self taught investing – this trumps the previous stuff!

    Thanks Financial Samurai – I just found your blog/site and look forward to being a tuned-in reader in the future :P

    1. Congrats for finally working and getting your PhD!

      My basic advice is to save until you start feeling the pain of saving. Continue for a couple months, and it will go away. Then raise your savings rate by 2% a month until you feel pain again, stay, and repeat.

      Pretty soon, you will be loaded. Just stay the course!

      1. Sounds akin to stretching. What do you think about maxing out the Roth IRA’s
        vs the other before tax options? Should you exhaust all before tax contributions
        first?

        Thanks again!

  290. This is an absolutely exhilarating debate on personal finances! I agree with the Samari about the concept of maxing out 401 K’s when it comes to future retirement. Planning for retirement is something that should be done everyday….I see 30 somethings living check to check all of the time. I also see some of the “posters” being “boasters”, saying “I have this, look at me”, not good for real discussion. I am one of the 30 somethings, married, with two good salaries, in an area of the country where good jobs are still there, and not living the dreaded check to check. I am not maxed out, but getting there on the IRS 401K line. AND I have rainy day fun, AND I am enjoying life on the way to enjoying life, AND I have a little jingle in my 401K.

    This is my question Samari, why is 62 or 65 even a legitimate number any more? My financial planning is to have what I need at that age, which is far less than your numbers and downsizing my job. Shouldn’t a plan of downsizing be part of retirement planning as well?

    1. I just use 62-65 b/c that’s when government benefits like SS start kicking in (67 for max benefits currently).

      Paying off the mortgage by retirement is probably the biggest “downsizing” expense plan most people should conduct.

      Which also means, renting for life is not that great.

  291. Wow… I feel I am so behind… I will spare you my personal past history and tell you my present situation. I make $40,000 a year. In my 401K plan I contribute 10% of my salary and have about $66,000. I have been working really hard to pay my debts which is now $2,000.
    How can I catch up? Is it too late? I am 50 years old.

    1. Brenda, are you single or have a partner?

      I would bump up your contribution by 2% a month until 20% and see how you feel. I think chances are that you will be able to do it.

      How long do you plan to work for? You get to withdraw penalty free at 59.5, but $66,000 is not going to last you long unless you have a pension. SS doesn’t kick in until 62 at the earliest.

      Good job on only having $2,000 in debt!

      1. Joey Salonga

        I’m in the same situation. Been putting 15% to my 401k half in small caps and half in int. stocks the last 15 years. I guest if only i didn’t have the guts and put it all in PTTRX it would have been doubled by now. Still hoping that the century of average of 10% will work-out for me, if not, i guest the wife will just have to share my military retirement check.

      2. Thank you for your reply. I am divorced with no children. I will take your advice and slowly increase my contribution until it gets to 20%. I hope I can manage.
        Thanks. it was not easy to get my debt down.But I am happier than I was before. I am just worried about my future. Thanks again for your reply.

        1. No problem Brenda. Perhaps find some other skills/interests to work on while you are doing your day job to build a new source of income stream. Create as many as possible b/c one day, something will end, you will have backup.

          It took me 3 years to create an income stream online. But now, I got to retire 5 years earlier than I could have otherwise.

          You’ve got 10 plus years to do it. Let’s give it a go!

  292. Fools-stop dealing on others and assuming a 5 return. The only person getting rich on your retirement plan is the issuers. You need residual income if you really want to retire. Put 17k each year into ur retirement! Then look at your year to date gains they will be 2percent this decade…. So that means 100k invested yields 2000 a year…..my rental made that return in the second month…it’s about real-estate. Inflation, great raise your rent. Deflation, lower your rent. Either way you are considerable more in control. My Kung Fu is strong

  293. I do not think you need the amounts you list in your charts. If a person has their home paid there is no reason they cannot live off or 60% of their working income. When a person retires they no longer save 10-15% in their 401Ks, they no longer pay the payroll taxes 7.75%, their federal taxes go down about 5%, they no longer pay local taxes, and their state taxes go down. Couple this with no longer having a $2000 per month house payment, less gas going to and from work, less clothes and eating out due to working and you can have the same life style making 60% of your income. Remember Social Security will also provide about $28K of income per year. Actually in 10 years SS will be around $35K per year.

    1. Without a mortgage, I agree. But what of those with a mortgage or who are lifetime renters?

      I’d rather be safe than sorry. But absolutely, one’s living expenses are different from others.

      1. Well, maybe people should have been buying houses with historically low interest rates to secure their future rather than throwing all that extra money at 401ks. There are so many ways to achieve an easy retirement than just throwing money into your 401k. Maybe you should start by saying, find a good basic home, contribute 10% to your 401k and try to not take the money out. After 5 or so years, rent out the home, or sell it if the market is good. Your retirement health cannot come before your current health. I think your mortgage/renter argument is actually where you prove that you are way too conservative. I make a good salary and get a match on 10% dollar for dollar, and I can manage to save 21k yearly all in, plus whatever savings I have. Additionally, IF Social Security is still around, then what? People making an average or slightly above average income cannot live for a future doomsday scenario…eating Ramen noodles so they can eat filet mignon when theyre 80.

  294. I stumbled upon this site recently… What he is proposing is more than doable. I am 32 and have $275K in my 401K. I have been working 10 years and my average salary is under $70K during that period. I believe the S&P averaged under a 5% return over that 10 year period, so I can only imagine with a 8% standard return. I have maxed out my 401K during that time and lived life fine. I have fun but try to be frugal where I can (car, hotel stays, flights, home, clothes, etc). I am sure folks will ask – I get a 5% match. Saved for a house and keeping at it. Great site to open folks eyes. Happy savings, just stick with it. It can be done. Higher income does obviously make it easier, but just do the best you can. Cheers.

  295. hi i am 24 and i have been doing my 401k about two years now. how much should i be putting in per month, to live comfortable later.

  296. Socially Retarded

    This is probably the worst financial advice I have ever read. You say you would rather have the security of a pension plan over the ability to control your own retirement with a 401k, but don’t you know that pension plans go bust all the time? I mean, just a few paragraphs down you admit that we shouldn’t rely on Social Security (or even our 401k) when we retire!

    Hello! Social Security is a Pension Plan!!!

    And why would you invest upwards of $17,000 a year into a 401k if you don’t even think it’s going to be around by the time you retire??? If you’re that risk-averse shouldn’t you just stick to your stupid CDs?

    Then there’s your chart. Your EXTREMELY conservative (to the point of retarded) chart! I don’t even know where to begin. But for the sake of everyone buying into your bullshit, I’ll try.

    Most very well-reputed financial advisers reccommend saving anywhere from 10% to 15% of your income per year depending on where you’re at age wise.

    I’m 24. I make $40,000/year. I save 10% weekly with a 5% employer match. I already have $16000 saved up in my 401k, and I plan on withdrawing approximately 4% every year for 30 years starting at the age of 60. Of course, I’ll probably be making a lot more by the time I retire, not to mention change professions a few times, but for the sake of simplicity let’s assume that I’ll be able to make due with 80% of my current salary. So let’s do the Math!

    Amount Saved by 60 Years Old
    7% Yearly Return for 34 Years (Conservative) – $1,076,263.83
    9% Yearly Return for 34 Years (Moderate) – $1,772,767.94
    11% Yearly Return for 34 Years (Aggressive) – $2,966,075.79

    Approximately 4% Yearly Withdrawal Until 90 Years Old
    Conservative – $43,050.52
    Moderate – $70,910.72
    Aggressive – $118643.03

    Well, would you look at that!!! By continuing to invest the same way that I have been for the past 5 years, I can retire with 100% of what I’m currently making–and that’s being conservative!

    Your advice, on the other hand, has me saving nearly 37.5% of my paycheck every week just so I can have peace of mind? How much freakin’ peace of mind do I need before I’m digging out of trash cans?

    Oh, but I forgot: you think earning anything less than $100,000 a year is laughable! Well, shame on you! I know plenty of people who would gladly accept $24,000 – $87,000 a year. Granted, they don’t send their kids to private school, but they’ve all learned how to squeeze a budget.

    So what are your thoughts? Judging by the comments you’ve left so far, I expect you’ll either tell me I need perspective or not say anything at all.

    Well here’s my final thought: you’re either a very scared, lonely little man (unlikely) or you meant to use this article to scare everyone into buying your affiliate products and e-book (likely).

    1. Dear Angry Commenter,

      You don’t have to feel bad about only making $40,000 and having $16,000 in your 401K. Instead, look to increase your income by mobilizing the energy you do have to do more.

      I’m proud of you for wanting to work for 36 more years until age 60. America needs your taxes for support. It is great your conservative assumption is for a 7% annual return for that long as well. A 5.5% risk premium over the 10-year treasury is fantastic, and you should consider a career in money management.

      Check back with me in 10 years and let me know how saving only 10% of your after tax income goes.

      Oh, and yes you should likely buy my book, because guys like you don’t have very long careers and get stuck.

      Good luck!

      S

      1. Ah, to be 24 and know it all again!

        I feel sorry for this kid. Clearly a lot of anger and frustration in his life. I guess if I could only save 10% of my income I’d be frustrated too.

        At least you can say you warned him 10 years later when he realizes he screwed, doesn’t want to do the same thing anymore and has nothing to show for!

        1. I hear yah. It’s natural to feel invincible at a young age and also frustrated because nobody really takes you seriously. Only time and experience will help.

          America really does need more people to work longer and harder because we need the tax revenue given we are spending so much. Hence, I am very thankful to those who want to work for a long, long time.

          I just had enough after 13 years and am happy to kick back for a while now. So far so good!

          https://www.financialsamurai.com/2012/07/08/taking-a-leap-of-faith-retiring-on-own-terms/

  297. I completely agree with your table. If one hopes to retire young and be able to generate a safe and steady income then at the very least one would need to be maxing their retirement accounts.

    I graduated from college last year and have 27k in my 401k, 31k in my IRA, and around 50k in other accounts. I’m maxing out my 401k, IRA, HSA and contribute the maximum my company allows to the after tax 401k option and save whatever I have extra in cash or put it in my taxable brokerage account. I am trying to save between 75%-90% of my after tax total compensation including company match and other financial perks by keeping my expenses low.

    What advice can you offer to someone young and wants to be an extreme saver? Do you think I should take a more conservative approach to investing and load up on CDs? Since I don’t have significant assets, I think I should be more aggressive with my investments and then switch over when I reach a more comfortable level. I’m not sure where I should be putting my money or if there are other options for tax deferral. My goal is to have the ability to retire young and decide at that time whether I actually want to do so.

    1. Start saving after tax money until it feels a little painful. Your spending habits will adjust within several weeks, and then save some more. Like tightening one’s braces. If it doesn’t hurt, nothing is happening.

  298. I loved this article – and I agree that Americans shouldn’t be babied into thinking that they are on track when they really aren’t.

    I’m 30, income in low 6-figures and have approx 150k in our 401k. That number would be higher had we not opened a sports bar during the recession, but the experience and knowledge gained was priceless and I wouldn’t have traded it for anything. All this while I held down a full-time corporate job. My husband is self-employed and we live off my income and bank his. We have a 15-year mortgage at 2.875% and are in the process of purchasing income properties.

    I moved out from my parents’ home at 18 and have supported myself 100% ever since, as did my husband, so please don’t think we have someone bankrolling us.

    We have about $10k in 529s for children not yet born, and are putting away about 5% of our income into stocks, and help support family and have a emergency fund of 6 month’s worth. All this and we live in LA, so it’s possible! Love your blog and the straight advice – those that are complaining are looking for the sugarcoating and will end up on welfare and complaining that Social Security is paying them too little. It’s up to us as individuals to look out for our own futures.

    Cheers!

    1. Hi Carol – Good stuff! I’m glad you are reading into an important message of the article which is, “Depend on nobody but yourself to save and live a life you want.”

      Good job planning, banking one income, and working on the 529!

      Best, Sam

  299. I have 1.8 million net worth. I have changed my focus away from face value of the investment to income stream over time. Currently I am focusing on buying and holding high quality companies with dividend history (like coca-cola, JNJ, Nestle, PM, and wells fargo). I think my annual dividend income will be 35-40k this year, and 45+ next year. I also have some rental income but I am not a big fan of real estate in general.

      1. If I have as much money as you do, I might hold 500k cash and bond. But I don’t have and I seem to have the heart of steel, so I can live with the up and down for now.

        1. Sounds like you have at least $1.2 mil in the stock market with those swings no? If so, that to me out of $1.8 is super aggressive and not something I’d feel comfortable with. But that’s just me. I do hope the markets rip higher!

        2. I have 1.5 in stock. I don’t mind market to go low at all. I made the most money when market went down. I don’t like depression, but a 50 percent drop is ok with me.

        3. I am ok with the drop, because I don’t need that much money to live on. I only spend small part of my overall income from regular job. I am an IT guy working at university. My wife works for government. I completely understand your position. You will be ok if we have another great depression, and I will most likely wiped out…. I think I can handle a 50 percent drop in net worth and 1 job loss in family at same time.

  300. I am 40 with 90k income and 367,000 401k balance. My wife is 39 with 100k income and 404,000 401k balance. We are currently saving max on 401k, and save additional 50k after tax. I think you chart is reasonable, but market condition has a lot of impact on the final results. For example my net worth was down 76,000 last month and up 64,000 this month. For the year I am up 230,000. My net worth increased over 1.2 million since march 2009, while my saving rate is fairly stable. I can see with a large investment portfolio the number can change quickly one way or the other.

  301. Don’t get caught up in this individuals non sense?OPINIO…

    For the average foe read David Bachs- How to be a Millionaire. Its very simple a latte a day.

    Wether you save a $1 or $100,000 one is better than none.

  302. Chris (Massachusetts)

    Interesting post and comments. Found this article while doing a google search about retirement savings at various stages. I won’t be needing to have that much money, thankfully. Here is the plan (which, barring any major issues, will continue to go just fine).

    1. Continue to not create CC debt and pay balances in full each month.
    2. Max out my and wife’s Roth each year in dividend vehicles (I know you hate them) – DRIP baby, DRIP!
    3. Invest heavily in taxable accounts (more dividend investments) **
    4. Retire at 50 on small pension.
    5. House paid off by 50, yearly bills < $7000.
    6. Pension covers this and still have some money left from it (small pension)
    7. Start tapping dividends from brokerage account at 50 — wife still works (her loss, but she wants to — won't need her income anyway, it's just gravy)
    8. Retirement kicks in to overdrive at 59.5 — start taking dividends from both Roths and leave principal alone.
    9. Between pension, Roths, and brokerage account we will be making WAY more than enough money to cover bills and have great fun.

    Principal untouched unless we want to. One just has to be smart about their investments to get the nice dividend returns. Some of the income is taxable, but the Roth dividends are not, and will produce more than enough.

    TRUST NOBODY BUT YOURSELF

    Good advice. I like your article, and the numbers seems just fine. But, I have my own strategy, and it's working just fine :)

    ** use these dividends as gravy until 59.5

    1. Chris,

      Excellent to hear! The key that stands out from your response is that you have a PLAN! Once people have a plan, they can then execute a plan and tinker a long the way.

      Sounds like you will be just fine!

      Best, Sam

  303. I will be 35 in August, and have $320K in my retirement accounts, etc. My husband will be 38, and he has $220K in his. We have about 4-5 month emergency fund. No debts, other than our 15-yr mortgages. We’re struggling to continue contributing 20% of our income since we have a child, and are wanting to contribute more to her 529. Do you have any recommendation on yearly/monthly amount contribution for 529? She will be 2 next month, and so far, we’ve contributed about $7000 to her account. Any thoughts on prioritization between retirement account vs. college savings? Thank you.

  304. I guess what I am saying is that there seems to be tax advantages later in life with the Roths.

  305. Thanks for the reply Sam. I can adjust my 401K plan next week. Is it your belief that the 401k plan is better then any other type of retirement savings? I am going to set it up to save the $17k, but I was wondering if it would be best if I “split” some of that money and did something like $13k in 401k plan per year and $4k in a Roth.
    Any input from anyone on that stratagy?

    Best wishes….

  306. I have a hard time with these figures. (savings per year / income level). They do not seem realistic, and they are out of line considerbly compared to advice I have paid for from finacial planners. That said, I now feel like I am nowhere on the path that I need to be on. I always thought I was a little ahead of the pack..guess not. I never went to collage (no loans). I live in Green Bay WI and the price of living is reasonable compared to large metro areas (but the pay is less too). I earn $82k per year salary and contribute 17% to a 401k with a very small employer contribution. My wife makes $40k per year and saves only 6% to her 401k. We have a total of $170k in our 401k’s combined. $15k in roth IRA’s. We have about $10k in cash and some land worth about $45k that we own free and clear. We have no debt except our house which is on a 15yr loan at 3.4% and is only worth about a $150k… I know we could save some more but we also have a 1 yr old child and want to enjoy life too. I feel like after reading this blog I am way off base and have to re-evaluate myself. I was hoping to guy a bigger house (about $250k) and now feel like that is the last thing I should be doing…Any advice anyone?

    Thanks..
    (found website by asking Google “how much money should I have at 36?”

    1. Hi Brian,

      Nice to hear from you. I’ve always said that if if doesn’t hurt a little to save, you’re not saving enough. With a combined income of $122,000 living in WI, saving $17,000 pre-tax out of your $80,000 shouldn’t be THAT difficult. I was saving $15,000 making $45,000 in NYC.

      Do you have any other savings in vehicles other than your 401Ks and ROTHs? $185,000 is not bad at 36, but you’ve got to be realistic. At the rate you’re going, do you think that’s enough to live off for 20+ years?

      Maybe you should reconsider getting a bigger house and use that money to save more.

      Best, Sam

    2. Maybe financial planners give conservative advice so you’ll feel better about your situation for a little while but then you need to come back to them in the future as their advice wasn’t aggressive enough and they keep earning more money as a result of more consulting.

      It’s like quitting a bad habit. Some go cold turkey and some do baby steps. Baby steps in retirement planning might not be optimal financially but maybe it works for those who don’t have the discipline to dive in all the way. At least baby steps is better than no steps.

  307. I am not near as intelligent as the rest of you. So here it goes: i have put into my 401k for 2 years now. I am 25. Yes i realize that at the rate i am going i will only have perhaps, 50,000 in there by retirement. I have bills and a child…so as others have asked: what class do you base your numbers? I would love to have millions at retirement but, i do not think that is nearly possible for anyone making 40,000k/ year.

    1. Not sure Chrissy. I remember making $40,000 in NYC and put away $15,000 pre-tax at the time, bunking with another fellow in a studio. It wasn’t the best living arrangement, but good enough!

    2. Chrissy,
      Something is better than nothing! That is exactly my worry with this article–I am sure FS does not want to discourage people from saving, but rather encourage them. But, if the mountain looks to be too tall, you may decide not to start climbing it at all.

      You can’t solve your entire life in one day–it comes piece by piece. It is important to do what you can now. But it is also important to understand there is more you need to do, and when opportunities arise, take advantage of them! For example, when you get your next raise, it’s easy to put that into a new car, or home improvements; but make sure to give your retirement some attention, too. Increasing your contribution by another 1% at the time you get a raise will put away money you have never seen before, and are not relying on today. This is a way to tackle the disparity over several years, but still early enough to have many years of compounding left.

  308. Dear Mr. Financial Samurai : ) ,

    I just absolutely loved your article. I am 28 but I am seemingly addicted to reading about retirement and saving. : ) I was a late start – didn’t get married until 25 and didn’t start really saving until then. We had nothing to being with, but kept our 8k from the first time homebuyer’s credit, and then I got a 20k inheritance. I started my 401k and have recently saved my first 10k in there – yay! I was quite happy about that. Now, I just got my first gov’t job and am starting right away with contributing 10% to get their 5% match. Next Spring once I go up a GS level (career step position), I will certainly be maxing out at the 17k per year for the TSP. I can’t wait to get started saving. Besides this, I am probably able to save another 500-1,000 per month into our savings which I’ll probably put on a ‘raise your rate’ CD with an online bank. That is the plan, anyhow. I am more afraid of risk, even though I am young, so for example, my 401k monies will probably all be in the G-fund. Hopefully saving extra money in savings each month will make up for not investing it in the L-fund, etc. Anyhow. 1 month of federal service down – 29.5 more years to go. Ha! : ) Thanks for a great article.

    1. Nice to hear from you! How’d you find me? :)

      Glad to hear you are so enthusiastic about saving! I do hope you can last 29.5 more years, b/c I know I started to tire after 10. Please subscribe to the site and keep in touch. You might love a new book I’m releasing by mid July.

      Best, Sam

    2. Elizabeth,
      It is outstanding that you are able to save so much, but your situation makes me want to amend a prior comment. If your retirement savings is locked up in Treasuries (through the G fund) and CD’s, you absolutely will need to follow Samurai’s guidelines here. Why? Because both of these investments will lose money after inflation. Interest rates right now are at rock bottom, but inflation is not. If you want to match Samurai’s Low End case, you would need to be yielding 2.5% nominally. Otherwise, you are doing worse! And that is not considering a likely increase in inflation as the Federal government needs to address its debt.

      You must, of course, deal with your own comfort level of risk. Investing in stocks will do you no good if you become so worried about their performance in a downturn that you withdraw your investments, and thus realize a loss. But over the time span of your working life, Your best bet for appreciation is to participate in the stock market. It recovered from the Great Depression. It will (and largely, already has) recovered from the Great Recession. CD’s are great for income. But they offer no chance for capital appreciation–they are only one step better than stuffing your mattress.

      Don’t believe me? Try the Wharton School’s article, “The End of the 30-year Bond Bull Market?”
      https://knowledge.wharton.upenn.edu/article.cfm?articleid=2965

      Like all bubbles, when the herd says “this is the place to be!” it’s time to run. That was internet stocks in 1999, real estate in 2007, and it’s “safe” investments now in 2012. I myself am looking to reduce my stock exposure into more binds (I am 40, and I am 90% stocks / 10% bonds) but I will not do so until interest rates are at an equilibrium point.

    3. If you are in your 20’s, it is -sic borderline- irrational to only have money in the G. Stay out of F as well as it won’t be decent again until interest rates are higher. Don’t put more than 20% if G+F as diversification is not a bad thing, just don’t overdo with those two. You are so young! Now is the time to take on some risk. Seems like you were married and thus, became more financially aware in one of the worst investing years so maybe it has biased you to be more scared of risk. You have to think long-run instead of being afraid of the 2008’s and staying in G is no way to live. You can’t hear it but your future self is screaming at you to at least go L2050.

  309. Keeping' it real

    This is unreal. To me, someone with 500 grand anywhere is f-ing rich.
    I don’t know where you people live and work, but in
    Central Missouri I don’t know a hand ful of individuals with more than $100,000
    In any type of asssets.

    1. Nobody is saying having 500 grand isnt rich. This isn’t an article about the definition of rich is. This is an article that provides a guideline as to how much folks should have saved so they can live a retirement with less money worries.

      It also depends on at what age you have that $500K. Before 40, not bad!

  310. It isn’t necessary to replace income at retirement: just consumption. The numbers above seem to have been created with the intention of achieving a particular unstated income at retirement. At retirement one presumably does not have kids to support, car payments, mortgage payments, student loans, transportation costs, etc.. And, most obviously, you aren’t saving for retirement in retirement. The key point is that consumption spending at retirement is what needs to be replaced. Further, the return assumptions in the analysis are garbage. There are very safe bond funds that return more than 5%. The equity markets are extremely volatile, but a reasonable annualized return number for equity markets is closer to 8 percent. The SP500 is up 6.4% this year already. My point is these numbers neglect critical features of the retirement equation and advise people poorly. From some responses this advice is bad to the point where some people seem panicked. It is, frankly, irresponsible to produce a poorly considered table and tell people to follow it regardless of their personal situation.

    To everyone on this forum, I suggest you get professional advice from an independent advisor with a CFA designation.

    1. You can make excuses all you want. It won’t make up for your shortfall.

      I don’t have anything to gain from this report, so your “independent advisor” comment is warranted.

      What are your credentials Greg?

  311. And for those of us who have been laid off?

    What about a person who was in a field with no 401k offering for their younger years, and who was too busy trying to get by, but was also ignorant to the fact that we need to save for retirement?

    That chart seemed ridiculous, not everyone makes enough money to contribute that way. Employer match? I laughed myself under the table.

    I have an aunt like you, she thinks everyone is in the money since she is, and she married into money at that. She does not understand regular people much less those of us who don’t have thousands stored away in retirement.

    I saved diligently for a few years and saved a whopping 6 grand, and have another 6 grand in stocks. I have never had that much saved in my life.

    Maybe I should give you my aunts phone number. Oh, also, she is a millionaire but wants to apply for the LIFELINE phone for low-income households.

    The high and mighty people who act like it, do not help anyone. The people with wisdom to kindly help others with a helpful attitude can actually make a difference in someone else’s life.

    I forgot my chart for how many nice things you should publish for a person at your age.

    1. Lulu,

      I’m sorry you have been laid off. I hope you at least got a severance package to hold you through until you get a new job.

      I worked at McDonald’s for $3.25 an hour when I first started off, getting in at 6am and working til 2pm after lunch.

      I made sacrifices and lived in a studio w/ another dude after college in NYC and rarely ever ate out for the first year at least so I can save.

      Good luck to you.

      S

  312. I got here by googling “how old are you and how much do you have saved?” because I was curious to see how I fared compared to others. And this link came up as the 6th result from that google search. As I read through some of the replies, I see comments by people saying the numbers in the article is not realistic. But I think this sums up to show how off a lot of people are to what they truly need to retire at age 58/60/65. Just think about it, if you retire at 60 and you expect to live 25 years or more AND you expect to take out 80% of your salary every year (also factoring for inflation), you’d need quite a cushion!! Sure many people are not saving nearly enough, but that’s fine as long as you’re realistic about when you want to retire (and for some people it may be never). We have a tendency to compare our situation to the average joe and jane (and I’m no exception to this) but realize that this logic is flawed because the average joe/jane do not have nearly enough to retire. How does comparing oneself to someone else measure a person’s ability to retire? My point is don’t flame the article because the numbers are not what you have, the OP posted the numbers as what you really need to retire at your desired age. If you don’t have that and unable to change your current course, then realize that you won’t be able to retire when you want to retire.

    1. Right on! Just work longer folks. That’s the simple solution.

      However, if you DON’T want to work longer, then savings and diversifying of income streams is a MUST.

  313. ARe you KIDDING me? Do you realize the average american has about $35,000 in retirement? Your numbers are insane, you are talking about the top 5% of Americans here. Not even remotely close to reality or most people’s situations.

      1. You might want to shift from using absolute dollars in your chart to using percentages of annual income. Why should a person waste so much time when they are young trying to sock away ‘too much’ money? Following your chart up to 65 would result in savings that would allow annual spending between 200k to 600k a year until death. That might be a fine standard for the 1% that actually does make over $400k per year, but average incomes and costs of living are much smaller for average Americans, especially those not in metropolitan areas.
        You should also remind people that you are supposed to live a good life all the way through. I would much prefer to spend more money with my family NOW than to have more later when I have far less important things to do with it. Trip to Disney World with the kids now > luxury two week cruise when I am 70

        1. I’m not sure if one can ever save “too much” money, because even if they do save “too much” they can always leave it to their loved ones or to the poor.

          Please read: There’s No Point Making Money If You Don’t Spend It

          The goal of this post is to give people a guideline and to highlight what they could very well have if they save consistently and stay disciplined. People can certainly live a great life while maxing out their 401Ks.

  314. I was planning to work to 65. Also forgot to mention I am buying company stock at 10k a year. (which I sell and diversify once I receive it ).

  315. Hi

    It looks like I am way behind :(, I am making 130K – 45 years old just paid of my student loans 3 years ago. I have had somewhat of a turbulent life style and have really on only recently started thinking about saving. Right now I maxing out on 401K + putting 19,500 extra in stock + 5K in Roth IRA. I have 40k cash right now which I am considering putting down on buying a rental home. Is there anything else I should be doing? Of course one has to live life as well, can’t just sit at home and do nothing to save right :) some of us will not reach 65 statistically speaking….

    BTW found your website through google when I searched for “how much should I have saved by 45”

    1. Peter, thanks for sharing your story. You’re only behind if you want to retire before a specified age. Hence, if you’re OK with working longer, then you’ll be fine!

      How long do you want to work until?

  316. @tom

    I couldn’t agree more. I’m 22 years old, from Ohio, and just started my career this past week. I am very fortunate because I’m making $43,500 a year with no student loans and really no other expenses other than rent, utilities, gas, cable/internet, etc. I have it budgeted to save around 10% into my 401k and another 5-8% in liquid savings accounts. So with my contributions of $4,350 a year + my employers contributions of $2,175 (Up to 5% of salary) I’ll have around $6,525. I’d say that’s pretty good considering I’m right out of school. Most of my friends are only making around 30k a year and have loans to pay so they won’t hardly be able to put anything into their 401k’s. Therefore, I think your numbers are a little high.

    1. Cody,
      You’re off to an excellent start! A well-designed 401(k) plan should encourage you to save “enough” with its matching incentive, and this appears to be pretty good. (Now, do they have low-cost indexing options for you as investment choices?)

      The money you save in your 20’s is the most important for your retirement account, because it has the longest time to compound. And it should compound–you are putting off the reward for your work for 45 years! But regardless of the absolute amount, you are also sparing yourself from hard choices in your future: house, marriage, kids’ education. When you don’t have to compare that constantly to funding your retirement, you will have a lot less stress. I, for one, think you have an amazing amount of perspective for your age.

      For what it’s worth, if you are looking for information for planning a number of aspects of your financial life, I highly recommend “Your Money Ratios” by Charles Ferrell. No book or article can take the place of your own personal financial plan. But the book not only has its own model, but Charles also thoroughly explains the assumptions he makes in his model, so you can work adjustments on your own.

  317. I’m 35 and I only have 155k in my 401k. I didn’t max out the 401k until this year because I used the extra money to pay off my mortgage. Can’t say I’d do it any differently as having a paid off house is pretty awesome both in free cash flow and in peace of mind.

  318. Thank you for a very informative and objective view on retirement. I’m only 22, however, through a business I started almost two years ago, I’ve been fortunate enough to be already making 55k or so a year after taxes. Obviously there is no employer match when you are self employed, however, I’m currently trying to contribute around 20k a year to retirement accounts. I was raised conservative middle class, and as such, was woefully unprepared to handle money once I was making 4500 or so a month. Unfortunately I didn’t come upon this post earlier, as I have wasted over 15k+ on “toys” I didn’t need, and ones that depreciated rapidly in value. Right now I’m maxing my IRA and putting the rest in investment accounts (mostly mutual funds and some bonds)… should I be doing anything differently to ensure 35 years or so from now I will be prepared to live comfortably in retirement? I’ve heard about a solo 401k, however, being as young as I am, I don’t know much about investing :-(

    I agree that the numbers listed appear high at first, especially to someone how may be making only 25k or so after taxes, however, I’m not relying on Social Security being there in 35+ years, and who knows what returns we will see in the coming years…Better to be prepared than find yourself in a hole later in life because you didn’t prepare. I could (and have considered) purchase a nice new car or truck when I graduate college, however, instead I plan to drive a used vehicle that will cost a lot less. It’s tempting to want the best of everything, however, I’ve learned the hard way that is one of the easiest ways to lose any money you have. Good luck everyone and happy investing :-)

    1. David, I think you’ve got a great attitude and will do VERY well if you keep your savings habits up! It’s funny how some can take this article and get motivated while others like “Shocked” just get pissed and bash for their lack of progress.

      Drive used and be proud! A new car is a personal finance killer!

      1. Thanks for the prompt reply; I appreciate your insight and look forward to picking your brain with this response :-) Just so no one envies my position too much… spending 20-30+ hrs a week working in addition to going to college full time means luxuries including socializing with friends and “going out” at night are given up, however, I didn’t want to end up in a mountain of student loan debt. I have too many friends in that position, paying 1k or more a month for the next 8 years or longer…not a position I wanted to find myself in. The problem is once you fall in that hole, the system makes it so hard to ever get back out and climb the ladder of success. In addition, I know that if/when I get married or start a family, saving an optimal amount may probably no longer be possible due to additional expenses. Thus, it is in my best interest to save as much as I can as early as I can, even if I need to “slack off” later in life.

        My question is… where should I be putting my retirement money? Right now I have 10k in an IRA (only started last year so I’m already capped for 2012 too :-( ) and the rest, around 18k, in an investment account split 10% high risk, 35% medium risk, and the rest in a low risk mutual fund, focusing mainly on municipal bonds and transportation revenue, etc). In your opinion, should I be investing more aggressively, or be looking at any different retirement instruments? Also, should I be putting the money in a Roth IRA or just a normal one? I’ve heard conflicting things and want to make sure I don’t hurt myself in the future :-/

        Thanks again,

        Dave

  319. This is an interesting post and I applaud you for attempting it, but I think your casual analysis does a disservice to people–you are so alarmist that I expect you will discourage people from even trying.

    Specifically, you present this as the minimum necessary scenario, but you have several very conservative assumptions which, if someone followed your recommendations, would have people saving much more than they required.

    1) You project a return of 0-5%. (I assume this is after inflation) You say that 5%, in fact, is “…aggressive in this environment.” This is falling for recency bias. If we are talking about a 40 year retirement, then “this environment” has no relevance–you should look to comparable time periods for estimates of return. In this case 0% is totally out of range, and 5% would be a conservative amount. Look to long-term (nominal) returns of 9-11%, and after-inflation returns of 6-8%. This is the market return over more than a century–a century that included the great depression.

    2) You apparently assume 0% return during retirement, as your annual payout expectations are simply your total at 65 divided by 20. Even if I wanted to move all my money into a zero-growth, absolutely safe investment it would return more. I can get a lifetime immediate annuity today of $182k per year for that $2.6M, not $131k. So just this point alone shows you are off by 30%.

    3) Although you do state this explicitly, excluding a company match again grossly underestimates the amount saved. Matches are important to help young savers boost their savings while it has a long time to compound. And, if designed right, a match should motivate you to save a target amount to achieve what the pension used to do: provide you 80% of your income. You can do this with (conservatively!) 15% of your income saved–including the match!

    1. I’m so bullish that you have 9-11% nominal return gains a year for the next 40 years! Makes me very happy that the US consumer is doing well.

      What have your actual nominal gains averaged a year for the past 10 years? thx

      1. But that’s just my point…projecting the return of the last 10 years for 40 years into the future would be just as ludicrous as projecting the return during the 1990’s for the same time. (by the way, it was 19% CAGR)

        Going back 40 years from 1971 to 2011, the CAGR is 11.6%. It’s not go-go, and it’s not the end of the world. There were plenty of recessions in there (stagflation, anyone?) and plenty of booms. Just like there will be in the next 40 years.

        1. Matt, do you have a blog? Would be interested to read more of your thoughts on this subject.

        2. Kathryn,

          No, I do not. Although my wife will say it’s pretty easy to get me to talk about investing and personal finance, I am wary that I have enough time to comment regularly. Thank you for your interest, though! As I mention further down these comments, if you are looking for a plainly-written explanation of retirement investing that is a pretty good match for my perspective, try “Your Money Ratios” by Charles Farrell.

    2. Matt, it is better to be conservative in my assumptions and have people beat on the upside, than be aggressive and have people get to the end of their working career and ask, “WTF?!”

      1. So it should be read as a ‘high end conservative’ amount. Gotcha.

        When I first read the ranges, I assumed high end meant extreme bullish conditions for the next 40 years and low end meant extreme bearish conditions. Silly me!

  320. Wha? I have 16 kids and just keeping up on the welfare checks and WIC (we only get 5600/mo. in food stamps) This is so crazy. I have an annuity payment from a company I sued that I just sold to JG Wentworth for 2.1 M. I feel like I will be ok if I am able to save 1.5 M and continue to receive my disabilty check for $1600/mo. plus my aforementioned foodstamps. Since the medical is free for life it seems ok. I just got a sick new Corvette with a tow hitch (for the kids and the trailer) and since our reservation just got approved we are guaranteed another $20k/mo + $1k per child under 5, $2k for 5-10 and $11 and up is $4k each so we are looking good.

  321. I think this website is designed more towards self employed/professionals. Most people who make the average or below are not really interested in financial planning. Both my wife and I are 30, and the last two years we both made 150k each giver or take a few grand, and I would not consider us out of the ordinary among our friends. Work harder, this is America, the land of opportunity. Also, we graduated with over 140k in student debt, so we were not handed anything by our parents, with my wife being an immigrant. Anything is possible if you put your mind to it.

  322. How funny…..As someone that has been diligently saving since graduating from college I find this article off base. According to your article “How to save for retirement if you don’t make much” you have a chart that for example says that if you make 85k-100k that you should save 30% of your income. Let’s see after I pay all taxes (real estate, sales, state income, federal, etc…) then save 30% of my income I would have a total of 20% of my income to live off of. Which is $17,000 per year or $1,416 dollars a month. Please…. not doable in these hard times. F.Y.I. I live in an upper middle class neighborhood and I pay $13,000 just in real estate taxes here in Illinois. In my fine state you pay around 50% of ones income in all taxes collected. I do believe that you are spot on as to how much one would need to retire and live a comfortable lifestyle but not very doable anymore I am afraid and sad to say. I only have a low mortgage and no other debt and find it extremely hard to save at this time. Hoping for a change in the form of drastically reduced taxes.

    1. I also live in Illinois, and I wanted to argue that most Illinois residents don’t pay nearly 50% in taxes, as the Illinois income tax rate is only 5%, but then I calculated that I pay about 30% of my gross annual salary on federal and state income taxes, real estate taxes, medicare and social security. That doesn’t include sales tax (which can be over 10% of the price of goods in some counties). When I consider that I have health insurance premiums deducted, my take home pay (minus real estate taxes) is only about 60% of my gross income, and I don’t live in a super high priced area of Illinois. I’m 27, make a $58k/yr salary and I’ve lived in Illinois all my life. Is it that unusual to pay 40% or more of your gross salary in taxes, social security, and health insurance?

  323. The idea that by age 30 everyone should have a minimum of 127k in retirement is beyond insane. I make a better salary than most of my friends, college graduates, some with masters (not high school dropouts is what I mean to say) and it would be nearly 30% of my salary to contribute the maximum. To contribute the maximum in a semi-comfortable fashion, assuming you eat peanut butter and crackers every night, have no other major debts (school, car, etc..) and take the bus everywhere you go, you would have to fork over 20% of a 90k a year salary.

    To assume a 30 year old is making anywhere near 90k “on average” is laughable, bordering on a severe case of retardation or some scenario in which you have been wrapped in a velvet blanket and fed shavings of gold from a unicorn. As of 2011 the median salary in the United States was roughly $42k (numbers from the Social Security Administration). That is including all ages, NOT limited to age 30 and under. That would mean to max out contributions the average person would have to save 40% of their salary. Imagine how much LESS the average 30 year old makes than 42k.

    What you are hypothesizing here is ludicrous, the chart you developed is garbage and your view of the real world is so disgustingly slanted that you should here forth be banned from publicly expressing your point of view.

    Strong, bizarre language, I know but it is important people understand to severity of this author’s incompetence.

    1. Sorry you don’t have the discipline to save money. You can always work longer to make up for your lack of savings and earnings. I’d rather just relax and enjoy life.

      Here’s how to save more for retirement if you don’t make much.

      1. Wow, you are still being so hard headed with this many people explaining that unless you make in excess of 140k (each individual) your numbers are unrealistic? I have no issues with how much I’m saving, I truly believe I am on the right track to retire at my goal age of 58. You fail to address any of the counter points your readers have made and my opinion is no longer that your articles analysis is inaccurate and greatly exaggerated but also now that you are a poor journalist or blogger, whatever you call yourself here.

        I still think, and clearly many others also reading this article, that your estimates and assumptions aren’t based in reality. The situation grows darker when the reader realizes that you are both immature and incapable of having an intelligent discussion.

        1. Shocked,
          You think Sam’s (i.e. Financial Samurai’s) are a stretch?
          Perhaps you should read some of Jacob’s views over at ERE (earlyretirementextreme.com). :-D

          What is funny is that MOST kids that are living at home CHOOSE to not pay down their student loans, or accrue consumer debt while they are living at home. I am one such idiot.
          If people payoff their debt (obviously they have to stop accruing it first), then they’d have a lot more to put towards retirement savings & still have fun.

          Everything is about choices that we all make at different points in our life.

          I truly wish I’d saved A LOT more when I was younger, since the compounding effect would’ve put me on a much more comfortable level at this point in my life (well into $1M if I’d only saved a mere 10% of my paycheck since I was 18).

          So to suggest that he is incompetent is less than honest.

          FWIW, my wife and I are currently up to saving 12% of our income (1 paycheck), and keeping very good food on the table, even supporting 6 people (2 adults + 4 kids) on a salary just into 6 figures. And yes, we have crazy property taxes here in the state of NJ. Not to mention consumer and housing debt (15 year mtg). And the company I work for kicks in another 4% toward retirement. And yes that salary has taken about 15 years to achieve.

        2. The reality is, we’re not saving enough and are doomed to lose our economic status if we don’t shape up, save up and take care of ourselves.

          I’m not going to baby America into writing an article that makes them feel OK about their savings when I hear people only have $100,000 saved up on average in their 50s?

          Save more folks.

    2. Shocked…being very conservative here with my numbers. Assume you get out of college at 22 and are hired making $45,000 per year. If you put 17% of your income into a 401k (approx $7,650) and on average got a 4% raise a year. Over a 10 year period you would save approx $92,000 dollars and that doesnt include company match. The rule of 7’s or 10’s, can’t remember exactly, shows that an average return of 7% over 10 years you will double your money. Now that doesn’t mean you will have $180,000 at that 10 year point, but you will have something probably north of $150,000. Now I know that is hard to fathom, but those of us in our 50’s that have been riding the ride for a while know that it is very much attainable. Now we all have to balance what we are paid and what we absolutely need to live. This will change over time, as it did with me, and eventually you will be able to do the 17%. It doesn’t come right away. Most programs offer some kind of automatic increase with your 401k as your receive annual increases. Don’t get discouraged. It seems like an impossibility but it truely isn’t. If you have time, google the “time value of money” and you will be amazed. That coupled with dollar cost averaging is an amazing concept that works. Good luck with your savings.

    3. Bravo “Shocked”, I was attempting to formulate a response to the author as well as to those replying proudly about how much they’ve been able to save. Your response summarizes my thoughts exactly (and w/humor, I might add). I think the author and those who respond positivley with their own testimonials are types who think that any good fortune is directly attributable to their own positive choices, and anyone who has saved less than them must be uneducated, lazy, overspenders. The post and many responses are condescending and unrealistic for most people.

      1. Good fortune has a lot to do with LUCK. And the harder we work, the luckier we get. The people I know who have earned the most coincidentally or not have been the biggest risk takers who have worked the hardest.

        How about you?

  324. Great post. Just want to ask are the balances definitely per person? I always look at my husbands balances and mine as one when planning for retirement. But if I should double these for the two of us then man are we in trouble. We’re sitting right at the low end for the age group 35-40 together. As I’m the primary breadwinner so maybe this works for us. Also, I stumbled across this post via google search on 401k balances by age.

    1. The balances are per person, b/c it is only fair to the people out there who never get married.

      However, once you get married, and consider marriage as one entity under law, then you can look at balances as per couple.

      How did you stumble across this post btw? I’m always interested in knowing. thx!

  325. This is really ridiculous. To comment on your 300,000 by the time someone was 18 is absolutely ludicrous. 17,000 per year is insanity unless you are well into six figures. I had to re-read this thing a couple times to make sure I wasn’t jumping to conclusions. This site should have a disclaimer that it is only relevant to doctors, lawyers etc.

  326. By far the most realistic and raw fact guideline for retirement I’ve come across. I have $200,000.00 in total retirement savings at age 32. This number includes 401k, Roth IRA, and standard mutual fund. I’ve always tried to contribute as much as possible to 401k and have been fortunate to max the last 2 years. I’ve found it helpful to increase my contribution after receiving a raise or bonus. I also put $2,500 per year in 529 savings plan for my two young children.

    Just refinanced my primary residence to a 15 year fixed at 2.875%. My intermediate term goal was to have my house paid off by 40 years old, but with this rate I feel investment opportunity provides a better growth scenario.
    Personally, I feel having liquid cash (at least 9-12 months) is the most important goal – assuming no debt.

    My long-term goal is to retire at 65 with approximately 4-5 million.

    Thanks, and good luck!

      1. @Joe: I am not calling you a liar. I was shopping for rate during that time for 15yrs note and the best I found is around 3%. My credit score is over 800. This is with a bank I deal with many yrs. Tell me how you do it? Rate not apr was over 3. I think you meant apr when you stated 2.875…

        1. I always check online via Quicken Loans. Since they don’t have physical branches, their overhead costs are low and their rates are some of the best. Like looking at a product in the store, and buying it on Amazon for cheaper.

        2. I checked bankrate.com daily and decided to go with loan depot. Closed in 35 days with $1,800 closing cost. 2.875 apr.

  327. Not everyone is so lucky to save the max, mr. samurai. In 2007-08, I lost half of my 401k in the crash, at age 27. There is no way I will make that 35 guideline, even the low end. I think your lower age numbers are pretty high for most people. I’m sure there’s a bunch of us in this position.

    In the end, the only numbers that matter is the retirement number and what you do with it after retirement. In retirement, I’ll be able to choose where I live and the associated cost of living, which will be much, much lower than this very high cost metro area.

    I currently live much more frugally than my friends, family and neighbors. Oh, and in case you are wondering, I max it @17k and have been maxing for the last few years.

    1. Tom, I feel your pain about the 2008 crash. I lost about 20-25% in my 401K during that 12 month period. I had about 60% in equities, the rest in a stable value fund.

      The low end of my chart EXCLUDES all employer match. My employer has matched $13-$24,000 every year for the past 10 years. Give that some growth, and that’s real money. I’m sure many employers match at least $3,000 a year.

      1. I also made a foolish move and reallocated in ’08, almost near the bottom. I’ll never make that mistake again.

        Yes, my employer does match 3k. It’s a decent company but sounds like I could use a better one. Still, I fell good about maxing and I’m on the right track. At 32, I only have 62k, but it’s double what I had 18 months ago.

        It’s great to know I have plenty time to catch up. I also did not get caught up in the Real Estate bust, thankfully. Many of my friends and neighbors in their mid 30’s were not so lucky. One neighbord paid 280k for a condo 5-6 years ago. I’ve been there 10 months and now owe 165k!

        It’s a great article. I just don’t think many people max in their 20’s, even college grads. Hopefully they will see this and make better choices with thier 401k and in general.

  328. manormanjack

    I am 51, so per your chart, I should have saved between $468,000 and $1,075,000. My husband is 53 and in the same range. I have about $500,000 in my IRA/401K/403b/457B etc. accounts and my husband has about $720,000 in his. My husband gets to put about $40,000 in per year, via a SEP via his partnership/business. So I am thinking that we are OK per your chart even though we have major student loans to pay off for our five kids.

    We max our retirement contributions every year – even now, when we are borrowing to finish putting our five kids through college; this spring, 3 will have graduated (with jobs). The other two are still in college. This is our 3rd year with 3 in college. We are just barely going to make it through the college costs and likely will not retire until we “retire” all of that debt plus our mortgage. We don’t have any other savings left, other than retirement.

    We are hoping to have $3-5M by retirement, and we are hoping to retire as close to 60 years old as possible.

    1. $1.2 million sounds not bad at age 51/53 combined. You’ve got 7-9 more years to triple that. Seems feasible if the markets hold up.

      When you say you don’t have any other savings left, does that mean you have no liquid after tax savings in the bank?

      Also, why not let your 5 kids pay for their own way through school, or split some of the cost?

      BTW, how did you stumble across this post?

      1. IF the markets hold up. You’re suggesting that everyone put every penny into that giant
        casino/ponzi scheme called the stock market.

        Grossly irresponsible. You can get wiped out overnight. Is this all just an elaborate
        troll designed to infuriate people with impossibly high financial goals? Most people
        are flat-ass broke in this country, and it’s getting worse.

        1. I hate to agree. However the person writing this has lived with Mom and Dad until age 30 or is completing a college project and has no clue about the real world.

          I make $180,000 a year and am on target and it takes all I have and I conservative.

          This person has goo targets however is clueless with reality.

        2. The market is not a ponzi scheme. People need to realize they cannot just throw their money into the market and forget about it. I look for trends and time the market with my 401K mutual funds. When I see a recession coming and the market starts going down, I reinvest my funds into the money market account and bonds. I have 11 times the amount in my 401K in 17 years. This includes the two big recession of 2000 and 2007. In times of a recession and the market is low you should be maxing out your 401K. Look up the term dollar cost averaging.

        3. Financial Samurai – Can you tell me how you are getting 3-4% off CDs? I have been searching and scouring the web for such a percentage, and they are not to be found anywhere. It seems to me that the only place you can make any kind of return is in the market or real estate…both of which are risky as you start to approach retiring.

          1. Stone man, I took out several 7 year CDs 2-3 years ago, so I’ve got 4-5 years left for these.

            I’ve got to reinvest in other instruments after maturity and get busy building other income streams before the duration runs out. So far, so good!

  329. Hello. There are many things to consider in life as we only go around ONE time. First and foremost it does not matter how much you have in your 401K if you dont’ live to 59 1/2 “you can’t take it with you” . Alot of financial peopel will use the word Retirement to scare people. I for one don’t need alot in retirement, as I am a simple person. I dont like to travel and having a cold drink and newspaper or a cup of coffee is just fine to me. For one when you retire hoepfully one would have no mortgage or very little left. Some type of Social Security in some form will be there. I dont see the rational behind maxing out a 401K that you have no idea if you can enjoy it. Even if you make it to your 60s, are you going to be able to truely enjoy the money. I say save Reasonably what you can , don’t let your future dicktate the present, it truely is not worth it. I am 27 years old and been saving in 401k for 3 years and have 14K in it. The idea someone who is retired needs 1 million dollars is absurd, i bet most can live off 2,000 a month just fine.

    1. The “one go around in life” is a great excuse not to save enough. It made me feel better when I didn’t feel like saving aggressively.

      Having 14K in your 401K at 27 is better than 0. Just expect to work a loooooooong time.

      How much capital do you think you need to have to generate $2,000 a month?

      1. Here is the way i look at it. Take inflation out of the equation, as my salary should go up along the way. I work 30 more years, say i have 200,000 in 401K, putting 5K a year in for 30 years. plus interest. Then i take out 1,400 a month. Which would give me 1,000 a month take home in retirement and last me 200,000/1400 142 months or about 12 years. I also then work for the govt, and get a small pension 1% of salary for every year worked. so 30 years, i would get 30 % of the average of my high three years salary. the avereage pension right now is around 800 a month. I also then except some type of Social Security as I have and will have paid into it my whole life. so 1,000 a month in 401k, 800 a month pension, and say a modest 1,000 from social security, that is 2,800 a month. If you have no mortage, i dont see any reason one could not make it on 2,800 a month. Some form of Social Security will be there, unless you don’t have faith in the US Govt. which the dollar is still as good as gold througout the world (look at bond market).Giving up today’s expereinces to save for the unknown tomorrow is risky in it’s own right.

      2. 14k at age 27 is fine. Don’t listen to this guy’s “looooooong time” bs.

        Max that 401k. Up it each month until you max it. Do your best, live frugally now and in retirement and you’ll be fine.

        Not everyone idea of a “comfortable retirement” is a yacht in Ft Lauderdale.

  330. I assumed the chart was for the 401K only. I’m more wondering how folks are getting 300K and higher out of a 401K over the past 15 or so years. The contribution limits were lower, and there were two pretty large stock market corrections during that time period. Your chart isnot what is concerning me. Your chart is based on investing $17K per year. I didn’t have that opportunity over the past 16 years; I had to stay within the law, which gradually increased from 9,500 through where it is today. I did that, and I thought I invested aggresively and well. The consern comes from a couple of posters who have indicated that, under the same circumstances, they were able to be at the high end of your scale (which is based on higher contribution limits). In other words, others could not have legally invested more in their 401K than I, yet they have much more. My employer matches at 5%, which I think is on the pretty good end, so that only leaves return as the possible difference. I’m asking your opinion on, given the market, if my current value ($260K) is more common, or if $300K+ would be more common over the past 15/16 years. Put another way… should folks that have already been in for the past 15 years (not able to contribute $17K that entire time… one of your assumptions) really be freaking out if they’ve been maxing and aggressive, and aren’t on the high end of your 401K projection. Alternatively… am I totally misreading this and your chart is not just 401K, but total savings?

    1. No, you are right. This is just the 401K chart, which I actually write-off to zero since the government can’t severely tax it extra upon withdrawal. I don’t trust the government.

      People should only “freak out” if they run the numbers and realize they can’t retire by X date they wish to retire. Once they do, they get more aggressive.

      The longer you stay with a company, and the more senior you are, the bigger your 401K match. Many people I know have $17,000-$25,000 MATCHES on their $17,000 pre-tax contribution a year for example.

      https://www.financialsamurai.com/2011/04/28/how-good-is-the-average-401k-match/

  331. Sam,

    I’m a bit confused about testimonials here from folks in their early 30’s indicating that their 401K’s are in the high end of your chart (300K and higher). I think I understand that your table is aimed at younger folks that would be starting with their 401K now, with the limit at $17,000. As I remember, the $17,000 limit has been a rolling limit since the law was put in place. I’m 38. I only have $260K in my 401K and have been maxing contributions and 5% employer match for 16 years. The plan’s not a dog, either. I’m reasonably aggressive in my investing, and my overall ROI is a little over 5%. When I started in 1996, however, the limit was a lot lower ($9,500). Granted I’m still in your range at $560K because I’ve been averaging saving about 59% of net salary (After 401K) in an IRA and individual non-tax advantaged accounts, and I have an additional $220K equity in a house that I’ll have paid off in two months. This definitely wasn’t because of the 401K, though. Is my 401K really that poorly performing; or am I correct in think that $331K in 13 years (if you were 35 years old NOW with the historic limits), would be either challenging or incredibly lucky…

    1. Mitch, at 38 with $260,000, you’re in the ballpark for what I think you should have, albeit at the lower end. You are right in that I am assuming these numbers more as we move forward. However, that’s not to say that someone 38 and finding this article online shouldn’t be roughly within this range imo.

      But, with your IRA, you’re well within the range if not above right, with $560K. So, where’s the confusion?

  332. This is awful advice. Maxing out a 401(k) is irresponsible unless you are making well into the 6+ figures and can afford losing that amount of money. It’s far better to take full advantage of the employer match, and save whatever you can. With the money you save, put some aside and invest on your own and learn the market. If that fails, look at roth IRAs and personal investment managers, CDs, Bonds, etc. It’s much better to have your money put in a variety of places.

    And 99% of people are not going to be able to put away the max contribution of 16.5k a year without living in a cardboard box, or living with relatives for free, if they are even able to then. This chart also complete disregards market swings (for the good or bad).

    Don’t feel bad if you are no-where near the goals on this chart and you are < 50, not many people are.

    Bottom line is, live as frugally as YOU can. Someone may be happy driving a 30 year old jalopy and living in a ratty apartment with the goal to retire early, or have a great retirement. Personally, I live frugally in many areas of my life but I do spend money to have a good time when I'm young. I want to live comfortably in retirement, but there are so many things you can do when you are young that you can't do even at 50. Don't go blowing your money trying to keep up with Johnsons, but by all means DO LIVE! After all, what's the point of being super frugal if you just get run over by a car the next day and never really lived?

    1. Some good excuses why you don’t save. Now do you wonder why so many Americans are in trouble?

      I maxed out my 401k ever since I made only $40,000 a year and sved at least 20% of my after tax income. I’ve had a great time since, and the 401k is now above the high end in my chart for someone mid 30’s. It’s up to you man. Bailouts are the American way so I don’t blame you.

  333. Discussions like this should not instill fear but create drive. I went back to get my MBA because without it my income would not have allowed me to reach my goals. Plus, it is a insurance policy if I wind up in the job market or want to switch careers.

    At 40, my 401K it at the lower end. I have some after tax accounts as well. I feel slightly behind but I am disciplined and understand investing enough to believe I will be in good shape. I agree with the earlier post about not living life today in order to hit a large retirement balance. I have enough retired relatives that are so consumed watching their retirement accounts that they don’t seem to really enjoy the freedom that they have.

    While you’re on this journey you need to learn how to make value-based trade-offs. We like to travel so I drive a 10 year old car. We downsized to start sending our kids through college. Etc. I’m not saving for full-retirement as much as getting to a point I can become self employed or pursue a rewarding job that may come with less pay. I actually like working so retirement probably means 20hrs/week versus 50 and maybe doing that work remotely from a beach :) While the $$ amount is a good target you need to envision a retirement future filled with enjoyment such that it makes the investment like saving up for something worthwhile.

    1. I hope my post creates motivation and drive. My intent is to not instill fear in people, but to motivate them to save more and earn more b/c if people don’t, retirement is going to be a loooooooooong ways away.

  334. With all do respect, I think that some of these numbers are not taking into consideration the amounts of student loan debt and the low income for people these days. I graduated 10 years ago with $80k in debt, that’s ~ $700/mth in school loans that I pay, and still pay, each month. I invest 10% into my 401k, as well as about $3,000/yr into an IRA. Currently, I’m at a total of about $45k in retirement at 32. Unfortunately, I’m no where near any of the numbers, however, I’ve invested when and where I can, and am smart with my spending. I have 2.5 yrs left of school loan, then I’ll be able to invest a little more, hopefully. I just don’t think that you’ve taken into consideration the amount of student loan debt that my Generation and the Generation behind me have accumulated, and to no fault from us.

    1. You’re right. I haven’t taken into consideration someone with $80,000 in debt. However, implicitly, I assume anybody who takes out $80,000 in debt must have a much higher income job upon graduation, otherwise, that would be irrational to take on that much only make, say, $30,000 a year right?

      Congrats on only having 2.5 years left of the school loan. Just run the math on whether you think $45K is enough at 32.

  335. I read these post with interest. I realize the article was geared toward a younger generation but at 55 I may still need to make some adjustments. I was not able to begin contributing to a 401k until I was about 35, as none of the companies I worked for had them. I can honestly say that from that first day it became available I jumped in and have continued to tackle my plans for retirement. All this discussion about not enough funds to go around are just excuses. Yes I had my own excuses for awhile as well, but my plan began with contributing whatever amount would be matched. After that, half of every increase went to retirement until I hit 20%. I now have in retirement accounts over 500k. It is still under the number for my age on the chart above, but hey I got a late start. Any tax refund I get is applied to my annual Roth contibutions and I also contibute the over 55 ‘make up’ contributions. All this and a husband who was forced into early retirement while I was back at school getting my Masters. Now there is a student loan debt and only one income…. but my retirement contributions remain firm.

    There will always be excuses to not do something, but usually that just means you are not committed to doing what you know you need to do at that time.

    Great article and many interesting post. Thanks

  336. I find it interesting that you’re recommending maxing out a 401k before looking at other investment vehicles.

    The tried and true advice is to contribute your employer match, then max out a Roth IRA, then go back to the 401k. This will allow you earlier access to some money if you decide to retire early and could also save you from rising tax rates in the future.

    I would also be surprised to hear that many folks in their low 20’s have the ability to max out their 401k contribution, I would think that starts to get more realistic once you’re in your mid to late 20’s.

  337. I am recently divorced and as a result of the separation agreement I had to give up $79k out of my IRA and Roth IRA to my ex-spouse. It could have been much worse, my ex-spouse and her smart attorney used my retirement valulation as of 9/30/2011 instead of the date when the divorce was final. The stock market and my retirement assets grew quite a bit between 9/30/2011 through 3/1/2012, my ex-spouse did not get any of that growth (about $50k).

    Anyway, as a result of the divorce I ended up raiding my Roth IRA in the amount of $40,000 to secure a down-payment on a house. Do you have any ideas how I might re-pay my Roth IRA via a 60-day rollover? Right know I have $190k in my Roth IRA, $225k in my 401k, $15k in a non-retirement account (individual stock with a cost basis of $35,000), and $80k in home equity from the martial residence that is tied up because the ex-spouse refuses to sell or buy me out. If I could get her to sell or buy me out, my problems would be solved.

    1. Tough situation Patrick. Why not “re-pay” your Roth IRA as you go? At least you got to tap it, which is a positive that everyone talks about, even though I’m against a ROTH.

  338. Paul Turner

    This is nonsense…scrimping and saving to this ridiculous degree. Have a life when you are young, find a job you like doing, stay fit and work until you drop. Reminds me of all those daft “Millionaire Next Door” books.

  339. My oldest son just turned 18 and got a decent job with an electric co-op(starting out at a base pay of $9/hr with a raise after his probation period). They seem to have a good retirement plan but I am unsure of exactly what to advise him into signing up for. They have a 401k, a Roth401K, and something called a 457 plan (if memory serves me correctly). It would be SC state retirement and the co-op matches a percentage of his retirement contributions.
    The portfolio that came with his papers suggested he save 7% of his earnings for his age. This sounded low to me so I opted to suggest 10% (which would have only been $36 a week) into the regular 401k. I then suggested $50 a week…he opted to do the $50 and if/when he gets any raises he said he will increase the amount he contributes.
    I want him to start out CORRECTLY so that he will have an easier, more care-free time in his older age.
    Any suggestions? Thanks

  340. I am 42 and me and me and my wife earn about 140,000 combined. I started saving when I had a paper route when I was 12. I graduated high school with about 15,000 in the bank which I used for college. My wife quit working to stay with the kids for about 7 years, since she came back, her entire pay check was put in savings after maxing her 401K. We pretended it didn’t exist. I currently am saving about 60,000 a year on 140,000 of income because we spend like we did when I made 40,000. I drive a 10 year old car, but we go on nice vacations each year Florida, California but normally we take the pop up or find a lower price hotel. We do have fun, but we are careful what we spend and always find a deal. I chose to put everything in my home to pay it off which we finished paying in 2007 ($250,000 house). Our paychecks combined 5 years ago were only 70,000 and now i spend about the same as I did before so more savings. I now have about 325,000 in my retirement (55% is roth 45% is pretax). Then I have about 162,000 in non retirement accounts. My problem (good problem) is that I have to much savings to put all in retirement account so the rest goes in non retirement accounts but I try to keep in funds to get the 15% long term cap gain treatment. I put in 10,000 in roth (5 for each of us), 17,000 in my work 401 type account, wife puts in 15,000 403B (she only makes 20k) then the rest goes in non tax accounts. I actually think I am saving too much. When I consider I only use about 45,000 a year after tax and I pay for my kids stuff, I really wont need more than 45,000 when I retire (after tax) and still have fun. If we get 25K from Soc Security, I only need 20K which I have enough already. What do you think?

    1. Pack, I think you have a fantastic mindset and will retire fine with no problems at all! It really is having the proper mindset, and you living on like you made just 40K is the right way to go.

  341. I am not a disciplined saver accept when it comes to my 403B plan. I receive a company match to my 403B account. I’ve been contributing the max amount and consider the match as an additional bonus contribution each year. Is there any penalty for putting in more to this account than the annual tax free allowance?

  342. Okay so I looked at your link. Based on your 401k chart above you think an income level of 65k-85k is neccessary to max out your 401k. And you assume that is doable in your second year of employment out of College base on the chart above.

    So from another article you quote from IRS Top 25% earn $67,280.

    So one has to assume your chart is for the Top 25% and above.

    Those are the facts. Draw your own conclusions lest I best blamed for making excuses.

  343. Again you deflect from answering any real question that challenges your assumptions. The facts are I do make more than I did ten years ago at the same job and I do save more than I did ten years ago.

    I still contend you’ve over inflated your charts. Until you go into more detail about the assumption of the idividual reflected in the chart regarding their income, living expenses, ect. then it remains questionable at best.

    1. Hal/Tom – If you don’t want to max out your 401K, stop blaming me. Just accept the fact that you will have to work for longer. It’s no big deal, because not saving means you like to work for longer, or you would be saving more.

      You might enjoy this post, “How To Save More For Retirement If You Don’t Make Much”. Start looking within and stop making excuses.

      1. I’ll look at your link and see if there is anything of value. Again you make these assumptions about me that I don’t “WANT” to max out my 401K. And that I am somehow blaming you for something that is not even in your control. I’ll repeat your own advice. Stop making excuses! Have honor and answer questions asked about your own website and how you get to the conclusions. “Financial Samurai exists to thought provoke and learn from the community.” Doesn’t feel like you are learning from us but blaming us.

        1. What’s your question? Where I learned this info? If so, I learned it from my own experience, my own bank account, and what I think people need to have at the minimum to have a chance of retirement. You? Where’s your website? How much do you have in your 401K? How long have you been working? At what age did you cross the $1 million net worth threshold? Give me some of your credentials. Thanks!

  344. This chart is ridiculas. I made 28k a year out of college with a bachelors in architecture. So your saying I can put away 17k and live off 11k a year? No! Half of that would be rent. And besides I think your only allowed to contribute to a max % of your income.

      1. You don’t see reality for most people. Since you start off over inflating your assumptions you end up over inflated. Out curiosity what part of the country do you live? Back to your charts. These are not ifs but facts. My first year I made 28k and for the next three years that didn’t change. But according to your chart in year two I should have made an 8,000 dollar contribution. Then in year three I should be contributing 17,000 on the low end. So do you have a more meaningful response than, Did you not see 0$ in the first year? Where did you go to school and learn this stuff?

  345. Nowhere do I see in the assumptions that the 401(k) is the only savings vehicle utilized. You mention no after tax contributions, but it seems pretty short-sighted and an “all eggs in one basket” approach to use the 401(k) as your only retirement savings vehicle. If I take the literal approach and compare my 401(k) balance to your table, I’m in the mid-to-low end of my age group (34, turning 35 this year – I used the 35 row). If I include my other savings vehicles for a more complete retirement savings health check, I’m in the 50 year old range. Bottom line is it’s misleading, short-sighted and of minimal value to only look at the 401(k) to take a retirement health check. There are plenty of other investment options available. Otherwise, this entry is an exercise in math (my meaningless number is bigger than your meaningless number). While I applaud your efforts to incite one of the most ambitious savings campaigns I’ve seen in the blogosphere (most are woefully lax in their savings targets), I ask that you map the entire road toward the destination, not just one segment.

  346. Not sure what you mean by can I live off the $74,000 pace but I do use the advice access tool through my financial company. Here is how it reads…..

    Likelihood Achieving Retirement Goal of $40,880 * 95%

    Obviously I need to turn it up but I am on track for what I had signed up for….My wife is a teacher and doesn’t make a a lot and we plan on having 1-2 children. I also have a Roth IRA (which you despise) and that currently has $15,000….I guess it’s all based on what you can save based on your salary. Just a little depressed at the chart. Appreciate the discussion.

    1. Basically, at your current rate of savings, will you get there? You’ve saved $74,000 since college. Does that mean in 30 years, you’ll save about $400,000? A 4% return on $400,000 is $16,000 a year.

      To generate $40,880 a year in income, you will need $1.85 million based on a 2.2% risk free return, or about $1 million based on a 4% return.

      How long does your retirement calculator have you working until and what return assumption are they using? Don’t just rely on the calculator.

  347. Hello,

    I’ll be 34 in June….Have been contributing to my company 401k since June 2003…..There are times I contributed 10% and times 7%…..my company matches 4%……as of March 2012 I have $72,000 in my 401k…..after reading your chart I feel like a complete failure.

    Your thoughts mighty Samurai?

  348. I am 32 started investing at 24 16% the Max that we could put in now we are aloud to put 25% so i now am currently putting 25% in my 401k. I make 45k a year for a family of four. I really don’t know if I’m doing the right thing. We need a new house because we currently live in a one bedroom home and our kids schooling cost 12k a year. I sacrifice a lot for my children’s future and my own. I guess its hard because we live pay check to paycheck we always make things work we never have anything new and have never got to go on a vacation my question is. ..is it better to enjoy life now or in the future I guess I look at it this way if I’m not around to enjoy it in the future then hopefully my kids will enjoy my hard work and get to do the things I never got to do also invest things wisely for the future of their children and so on. I am nowhere near the
    amount you say but I am proud of what I have .should I sacrifice my 401k for a new house or should I um homeschooling my kids to afford a new house if I don’t make since or it sounds like I’m just babbling its because of lack of sleep do to work schedule and overtime hours

    1. Howdy! I like your attitude and you surely are responsible and headed in the right direction. Your kids will anchor you. Just don’t forget to build liquid reserves as well. No job or income is guaranteed.

  349. Widobberman

    Age 34 with 401k balance of $120K. In school until age 25, so started work later than your chart assumes. Your chart seems reasonably in line with calculations I’ve done. Did not max out 401k until 2 years ago, but will every year going forward.

    It is not worth it to max out your 401k and save in ‘retirement savings’ more than 15% of your pay. There is a lot more to life than the Golden years. Your militaristic approach seems geared to those that have no discipline in financial matters. Even still passing up family vacations while your income is small just to get a few more K in the retirement fund is folly.

    1. It’s not worth it? What do you mean? The 401K max should be automatic imo.

      Now that you have 120K in your 401K, write it off and start saving liquid money that has no early withdrawal penalty.

  350. The only issue I have with this is that when i was 24, I was only making 25,000 a year. (I live in a very low CoL location.) Living off of 8 grand a year, just doesn’t work, heck, I was paying 6 grand just in rent for the whole year!

    Now that I’m older, in a much more lucrative position at work, and married, I’m much closer to maxing out my contributions and catching up to where we should be on the savings front.

    I’ve always tried to look at things in percentages though. I have ALWAYS at least maxed to the employer contribution, and after the first raise or two, instead of getting that nicer car, put the difference into savings instead.

    You gotta do the best you can with what you’ve got.

  351. Paul @ Make Money Make Cents

    Great Article. A bit scary as well. I am in my mid twenties and am at the low end of the spectrum. I have kept too much of my money in my regular savings, and need to start contributing more to my IRA’s. I finally am finishing school this year, so hopefully that can help increase the income and increase the savings!

  352. Sorry, Samurai, but you are basing a chart without having any idea of what the person’s income needs are? Really?

    1. Really. How would you definie income needs?

      Seems you are more upset with this chart and not being in the range from your past 3 comments. Instead of get upset, do something about it.

  353. I LOVE this chart! I’m two years out of college and have about $40,000 in retirement investments. I’m planning on adding about $25,000 this year, so I should have $65,000 by the time I’ve been out of college for three years, keeping nicely in line with that chart. I will probably end up adding some more and could end up past the $70,000 mark – we’ll see.

    (I include taxable investment accounts as part of my “retirement investments” as well.)

  354. Wow…this chart was a real kick in the gut. I had thought I was doing pretty well, but for my age (almost 39) I’m at half of the low end, using the Age 40 line.

    Even more embarassing, I have two business degrees (a BA and a Masters) and work in Finance and Investments. I have a diversified portfolio of mutual funds in both my rollover IRA and 401k, contribute 10% which exceeds my company match. I started investing at 22 with $1,000, and as of yesterday, the market value of my Roth IRA, Rollover IRA, and 401k is $124,000. Adding in my vested $18k pension balance brings my total portfolio to just over $140k.

    My salary is $73k, I have virtually credit card debt, no car payment, $3,000 in savings, a fixed-rate mortgage on a townhome near Seattle that is underwater like everyone else’s, and a student loan payment for my Masters degree. I’d love to be able to max my 401k every year…I clearly understand the time value of money…but putting in $16,500 a year isn’t practical for me right now. I could probably increase my contribution to 15%, but I also want to build up my “emergency fund” as well. I realize overnight money market fund rates are near 0%, but I want to have enough in savings just in case.

    Clearly, I’m not doing enough. I thought I was ahead of the curve when it comes to investing.

    Depressed (maybe now sleepless?) in rainy Seattle,
    Steven

    1. Widobberman

      Do not despair. Sounds like you are in very good shape and have appropriate priorities of building up a larger emergency fund first. This chart is not very useful for people with incomes below $120K or so. You will only need retirement income commensurate with the income you’ve earned during your lifetime. If you salary stayed at $73K, why on earth would you need to retire with more income than that annually- that is where this ‘max it out’ philosophy fails.

      The assumptions on payout after retirement are misleading as well- the assume you plan to keep the principal balance intact ($723K x 5% = 36K per the article). Leaving an inheritance is nice, but not necessary. I think you’re doing great.

  355. @Daniel
    I agree that there is no “one size fits all”. My experience: I joined the military and spent 10 years working for Uncle Sam. At the time there was no TSP (gov’t equivalent to 401K). I got out after 10 years so I wasn’t eligible for a retirement check. I’m not complaining about that but the military folks don’t make a whole lot of money. So I was then 28 when I out of the military, got my first job and 401K wasn’t offered. Switched jobs at age 34 and now have a really good match on my 401K and am 100% vested from day one. I max out my pre-tax contribution and am quickly catching up to where I should be but I really started 12 years later than most people who start at 22 or 23 years of age (fresh out of college). I still have 30+ years of work ahead of me and if I keep maxing the 401K and putting other money into stocks I should be able to retire very comfortably. On the flip side is my military experience landed me a job making well over 6 figures so although I didn’t make much at first, it has really paid off in the long run. I hope others don’t get discouraged if they are “behind” according to the chart.

      1. Widobberman

        The charts are not realistic because they ignore annual income. People adjust their lifestyle to their income. They should save accordingly- to keep the lifestyle they are comfortable with. For some that will mean maxing out 401k and doing other savings besides, for many that will result in saving significantly less than the $17K/year in the chart.

  356. Financial Samurai,
    Everything you document in this article is relative wise. “Save money, accept a 5% annual return. Hopefully beat inflation by a notch and have amply money upon retirement.” However, the reality is that the market, the S&P as a benchmark is still in negative territory since 2000. On top of that, most hedge funds last year lagged the performance of the S&P. That’s even before we dish out management fees for our respective funds that most of us don’t even realize.
    So is 5% an acceptable return?? Not in my book. Looking at coarse Math. The market trades 5 out of 7 days. Probably 250 days a year(give or take). Assume a real conservative trading volatility of 1/2% a day. For a professional to average 5% return on such a scale is ludicrious.
    The funny thing about 401K’s is a lot of people don’t consider it real money. You never had it!! It’s like a tax except it went into your 401K. I can’t touch it because of a 10% penalty. Craziness!!!
    Happy to explain my situation but ultimately my key message is “manage your money like you own it. Be smart.”

    1. The 5% assumption is conservative enough in my book b/c I don’t include the company matches in my chart at all.

      For example, my $17,000 annual contribution this year will get matched by about $23,000 due to a match and profit sharing for a total of $40,000. This $23,000 buffer is not included at all, and I know many people who have good matches as well.

  357. KC @ PsychoMoney

    I like the way you laid it out for us, it is a good guideline but as a lot of the commenters have said it is not going to be perfect for everyone, just something to help guide you.

  358. “you have to make less than $110,000 a year for the privilege of contributing after tax dollars in a a Roth IRA.”

    There is is workaround for this as Congress repealed the income limit for Roth conversions in 2010 so high income earners can contribute indirectly to Roth IRAs. What I do is first make a contribution to a traditional IRA and then immediately convert it into a Roth IRA.

      1. Widobberman

        The $65K limit is only for claiming the tax deduction. If you earn more than that, you can still make the contribution into the traditional IRA and then convert it to a Roth as the original poster said.

  359. Edward Antrobus

    The big problem is the one-size fits all assumptions. I’m 30 now, plan on working till at least 70, and only expect to live to 75 (no-one in my family has lived longer). At the rate we saved last year, without any capital gains, we would have about as much money per year as we do when I’m between jobs. So as long as my retirement account gains faster than inflation, I’m set.

      1. Name withheld

        It’s less what the job is than it is that I’m doing something. I can’t stand being idle. I had surgery 3 months ago and two days later, I was already disobeying doctor ordered rest and recovery to hang pictures on the wall.

  360. We are on the low end according to your chart Sam! And I thought we were doing pretty good. My wife and I both have pensions and combined with social security, I am counting on about 50% of what SSA is projecting, we should be able to maintain our current lifestyle. Having said that I am currently trying to build additional income streams with the goal of having enough to fund our dream retirement!

  361. Love the dialogue. I am amazed at how many of your readers are in range. Maybe you attract the above average savers here.

  362. Marissa @ Thirty Six Months

    So according to this, I am on the low end of the chart. Time to start making more money to put away. Its odd that I was preaching about RRSP (401k- Canada style) to my sister yesterday. Compound interest is a magical thing.

  363. That chart is AWESOME. I am working on some videos (even though you said in your 2011 projection that most suck at videos). I may need to work in your chart in one of them and link to you if ok.

  364. Find financial advisor

    It’s never too early to start planning for your retirement. In fact, compounding of earnings is so powerful that those who start saving for retirement in their 20s can amass large nest eggs with relatively little effort, as long as they invest regularly. For example, a 25 year old who invests $2,000 a year for eight years and never invests an additional dollar after the age of 33 , will earn more by the age of 65 than a 34 year old who invests $2000 a year for 32 years, even though the 35 year old invests four times as much.

  365. Shaun @ Money Cactus

    Great post, I love the table. We have a different system here in Australia, but I’d love to be working with a similar age Vs savings guideline. Unfortunately I’m below the low end at the moment, better look at fixing that!

  366. Roger the Amateur Financier

    “Readers, care to share your thoughts on your age and how much you have in your 401K? If not, do you agree with the estimates above based on age or years of experience? What are some of the things you notice from the chart?”

    Well, I’m currently 29 (going to hit the big 3-0 in October), and currently have $25,000 in my IRA accounts (No 401(k) as a grad student, alas), which puts me about five years behind schedule for the Low End, not exactly where I want to be. I would argue, as many others have, that it’s a bit much to expect AL of us right out of school (or again, still in school) to be able to max out a 401(k) plans with $17,000 each year, particularly if, like me, we’re only earning about $16,000 per year, which includes a healthy $4000 from blogging and related activities. This is not to say that it isn’t a goal for me (it is), nor that by the time we’re say, 30 or so, we should be trying to max out our 401(k) accounts (and our IRAs, and put some additional money aside in non-retirement accounts, to boot), just that, it does seem to be a high a bar to reach. (Just as an aside, I am currently putting 10% of my earnings aside in IRAs, so I am at least attempting to do what I can to build up the ol’ net worth.)

    As for what I noticed from the chart, while it’s not technically from the chart, I couldn’t help but notice that you referred to amounts like $131,000 (aka, more than $25,000 higher than the maximum I can expect to earn as a biochemist if I stay in Pennsylvania) and $86,000 (aka, twice as much as the typical biochemist starting salary, even with a Masters’ degree) with the word ‘only’. While I can understand the desire to want the maximum possible income available to you during retirement, I can’t imagine not being able to live pretty darn well on such an amount, particularly since, again, I’m getting by on under $20,000 right now. (Admittedly, I’m ignoring the effects of inflation, and the fact that $86,000 when I turn 65 will probably only be able to purchase ~$21,000 worth of goods, but then I could argue that stocks historically return about 5% above the rate of inflation, and well, you get the picture.) Heck, even the $24,000-$36,000 amounts seem fairly reasonable (particularly since, again, I’m only expecting to earn ~$40,000 per year when I first graduate with my M.S.); if I’m saving anywhere near the 50% you’re suggesting, I’m going to living on less than that when I first start working, anyway.

    “If you want to blast holes at the Ideal 401K Chart, ask yourself why you are blasting holes. Could it be that you are actually just making excuses for your own lack of saving discipline?”

    Well, I wasn’t trying to blast holes, per se, just noting that most of us youngsters probably aren’t going to be get to the listed levels of savings quite as quick as this table suggests. By 40, 45, if not earlier, I fully expect to have saved as much as you have listed, if not more, although at the moment, yes, I’ll admit, my saving levels have fallen behind.

    “How much of your after-tax, after 401K/IRA contribution are you saving?”

    Currently, nothing; trying to provide myself (to say nothing of my fiancee) with food, a place to sleep, and utilities consumes all the money I take home (and frankly, I sometimes worry that even the 10% of my income I DO invest in my retirement accounts is too much, given everything else I need to do with my funds). My goal is to eventually reach the point where I am maxing out my 401(k), maxing out my IRA (and my (by then) wife’s IRA, as well), contribute to 529 plans for my (future) kid(s), and still put at least $500 per month into a non-retirement account; but that’s for when I’ve gotten my degree, a decent job (starting the hunt now, to get a jump on things) and have a more substantial source of income.

    1. Rog, thanks for sharing your thoughts. As a person who worked, and now is finishing up their Master’s degree, I wish you the best of luck in the field of your choice. I’d look more not at your age, but at your normalized years of work experience.

      The point of the chart is to provide a gauge for people’s retirement’s based on age or based on work experience. And if one is behind, to perhaps create an “OH SHIT” moment to start cracking.

      Math doesn’t lie. It just is what it is. If saving is not painful, I don’t think people are saving enough.

  367. Obviously your chart is in California currency. Could you please convert it to Michigan currency so I can better see how I stack up?!

    I am 35 and have only about $50k in retirement savings. I always use 10-12% though for my expected rate of return over a long period of time. I fully expect and plan to have over $2 million at age 65 at my current savings rate.

    1. Ha! Good one on California currency. Let’s do some simple math with some benefit of the doubt.

      You started saving at 25 and after 10 years, saved $50,000. You plan to work for 30 more years. At your current rate, you will have $200,000. Let’s say you saved quadruple that amount, that’s $800,000. How do we get to $2 million? 10-12% annual rate of return is aggressive imo.

      1. I get to $2 million by compounding interest over the entire time period and by assuming a slight yearly increase in salary. I know 10-12% is aggressive, but that is exactly how I have my funds invested, aggressively. To me, if I were only expecting an average return of 5%, it wouldn’t be worth putting money into mutual funds. Heck, it wasn’t that long ago that bank CD’s were paying that much! If expected returns were that dismal, I would rather invest my money elsewhere (like real estate). Let’s just hope, come 65, I wasn’t completely wrong!

  368. Just wondering how you would save in our circumstance. Combined income $72k before taxes. We max out our IRAs ($10k) and have another annual savings vehicle ($7k). That leaves about $37k after taxes (assuming 25%). Divide by 12 minus rent ($1200) = $1883. Minus childcare for toddler ($1050) and that leaves $833 for all expenses/car/food/insurance. Maxing out my husband’s 401k (my company doesn’t have one) is $1416 per month. That would leave a negative amount for us to live on. What would be your advice?

    1. $1,050 for child care seems like a lot…. as that’s over $15,000 in gross income you have to earn to pay for it (25% of your total income). The 10K IRA contribution is great. What is “7K annual savings vehicle”?

      If 72K is your combined income, then I would match up to your employer match, and try and save the rest in a liquid account. Still try to shoot for saving as much as you can, but know that if you save too much, you can always use those savings.

      1. Unfortunately there is no employer match for 401K for my husband otherwise we’d totally be putting that money in. Who passes up free money? And yes, childcare is super pricey but that was all we could find for his age that wasn’t sketchy. He’s still in diapers, which ups the cost of preschool quite a bit. It goes down as they get older.
        The 7K savings vehicle is (shameful) an adjustable life policy his parents told us to get when we got married. It took me a few years to realize what it actually was, and while it’s not specifically a horrid idea, it makes me grumpy to realize what we’ve gotten ourselves into. It’s still earning 4%, so I guess it’s better than nothing in this economy.
        We have $55,800 in IRA’s (I’m 30 and my husband is 35), and $25K cash available in the life policy (death benefit is a half million). Compared to people we know and friends of ours who use their tax returns to buy trips to Mexico instead of funding their IRA’s, I thought we were doing good. But according to your chart and the other readers, we are WAAAAAYY behind. It’s kind of freaking me out now.

        1. Hi Kris,

          Got it. Pretty kind of like my previous post on the “ideal weight”, this chart is my idea of a realistic ideal 401k chart which isn’t the end all, be all.

          We have to do the math though. $55,800 after 7-12 years of work saved is not a lot of popcorn. Let’s say you both work 30 more years, 3x the amount of time. If after that, you only save $250,000, given this is your run rate, how many years do you think you can live off $250,000? Hopefully social security will be at least 70% there, but who knows. Don’t depend on it.

          If you aren’t feeling any pain saving money, I don’t think you’re saving enough.

          1. 55,800 x 30 years at 7% is almost a half million IF you don’t save anymore at all. It’s not impossible to hit at least a million with additional savings while paying off your mortgage. Not saying that’s optimal, but it’s not terrible. We didn’t have much saved until we were in our 40s. We will hit 7 figures if the economy holds up, but the college bill is the kicker… could have had 2 homes for that $$$. No subsidies for decent earners.

  369. Marie at FamilyMoneyValues

    401K’s have only been around since the 1980’s. Prior to that you could only save $2K per year pre-tax. The premise that you will be in a lower tax bracket after retirement is probably false – considering the state of the world economy.

    I had been working 25 years when I retired at 61 so your chart doesn’t fit well with my experience (and probably with the experience of a lot of females) – at least from the number of years worked/age correlation. However I still fit within your ranges as far as amount saved goes.

    Your main point is valid. You can’t just rely on tax deferred investments to fund your later years. Consider tax free investments made with after tax dollars – things such as muni bonds. We would have done better using these instead of IRAs!

    1. Hi Marie – Sounds good. Hopefully $2,000 back in the 80s felt like $17,000 now!

      Guessing tax rates is a crap shoot. The one thing is that once we are addicted to lower rates/prices/fees, we REVOLT whenever they are attempted to be raised. Hence, I look forward to decades of current tax rates.

      We have the power to just move to a no state income tax state like Washington, Nevada, Wyoming, Florida. That’s what I plan to do.

    2. There’s no way we will be in the same tax bracket unless the tax tables change and they start socking everyone at 30%.

      1. Seems a recipe for uncertainty: continuing lack of federal spending restraint, exceptionally poor individual money management from the voters, debt voodoo economic theory driving policy for decades, taxes so low that they don’t make a dent in paying as we go, and no real plan for the future. I can’t see how taxes DON’T change in the future, or tax law on current tax-advantaged tools this audience champion.

        We do see economic indicators showing our current trajectory (debt:GDP ratio is one — I’ll provide a link below for illustration — hardly peer-reviewed but a starting point for numbers). Then again, we are refinancing that national debt at historically low interest rates — about the only ray of sunshine buying us some reprieve time to figure things out.

        thebalance.com/national-debt-by-year-compared-to-gdp-and-major-events-3306287

  370. I’m 28 and have about $100,000 in my 401K thanks to company match of 5% of salary, and maxing contributions. As Sam said, it’s not enough, but it feels good to slowly accumulate this over time.

  371. It’s fantastic to see everyone’s response. Crazy how well a huge % of your readers are doing. Although I’d say it’s not too fair for people who have entered the job market in the last 5 years.

    That being said, my fiancee and I are at 110k at 27. So that would put us slightly below your chart but we also purchased an investment property during that time so that gives me a little hope that we’ll be able to retire some day.

    Here’s to hoping for the 5% number vs. the flat number :)

    A lot of people say they only invest up to the company match which is silly, especially if you live in a high tax state like CA or NY. Who’s to say you won’t move later to a lower tax state where any investment in your 401k will automagically earn you the difference in tax rates. And the bankruptcy protection mentioned earlier coupled with no taxes on earnings and it’s crazy not to max out.

    1. Hi Mate, thanks for sharing your perspective. 110K + an investment property sounds like a great track you are on as you build multiple wealth buckets.

      Yes, I do think it’s kind of nonsensical to not max the 401K out if one has the capacity. I plan to move to one of the no state income tax states when I’m retired to save 10% per annum FOR SURE!

  372. Everyday Tips

    Don’t know how much interest you would have gained in those ten years anyway. Looking back to the year 2000, the market was at 11,000. Of course, there were some dips, but the market definitely has not delivered the types of returns I thought we would get over that span of time.

  373. Josh Malamak

    At 29 Years old, I have approx 23k in 401k, no where near your recommended amount.
    However, I did buy a house which has appreciated significantly in value, paid for a wedding, paid off my student loans and opened a business .

    I have read many of your other articles, and I applaud you for being a strong believer in furthering your education. However, how many people who earn 100k+ graduate and start earning that money by 22? I was 26 before I had my first real paycheck.

    I think its very easy to put a chart like the one you put up, however, you must look at the big picture. While my 401k savings do not meet your samurai standards, my net worth is likely significantly higher than most my age (approx 650k due to real estate holdings). Having money locked up in 401k great, but this obsession of saving as much as you can also hinder your ability to build your wealth by taking risks and having your money appreciate in value through other means such as real estate or other business investing.

    Live frugal and save every penny you can? That’s boring. Taking smart calculated risks and

    1. T
      Thanks for your comment Josh. If you have read plenty of my articles, you’ll know that retirement savings/401k is one of many separate wealth buckets I focus on.

      Check out my real estate category for example.

      I’d caution you to include your primary residence in your net worth calculation. A lot of times it is an illusion and lulls people into a false sense of security. The money in your house is not liquid.

      Do you have more liquid cash/investments other than the illiquid 401k money?

      1. Joshua Malamak

        I do have other liquid investments, they are under my business ownership however. While I appreciate your point of view that cash is king, I still believe that it should make up a small fraction of a young person’s financial portfolio. Of course primary residence should be factored into your net worth. Despite this common trend of fear of the housing market, some markets are still appreciating, and have not been affected by the crash (or very minimally affected). I purchased my Boston area home in 2008, and while various markets were crashing, ours continued to appreciate modestly.

        Someone famously once wrote “soaring home prices are used to reward these risk-takers with an inflated net worth and a false sense of wealth; but having 0% equity in anything can hardly be classified as ownership.” Would you make this argument with a stock that rises? Or any other asset. This is the definition of equity. What you paid vs its value. I think we’ve been conditioned to fear the housing market, but in a lot of American markets, it is still once of the best savings vehicle.

        The problem is, you can’t view “wealth buckets” in isolation. It would be relatively impossible for a 29 year old to save 182k as your chart suggests and put a 20-30% down payment on a home at the same time. I love seeing money in my accounts as much as the next guy, but sometimes to grow your money you have to spend some money, especially if you are secure in your career.

        FYI, your financial blog is superior than most I have come across while surfing the interwebs. Always an entertaining and educational read.

        jm

  374. After reading this blog it appears I am screwed. I guess the writer must assume that the 20 somethings are getting heavy financial support from their parents, living at home until 40 or something along those lines, because there is no feasible way for most people in their 20’s to save the amounts listed above.
    Here is my personal scenario: At age 23 I was making 30K a year (how was I supposed to save 17K out of that?). By age 25 I was making 42K (pretax) contributing 6% to 401K, rent + utilities was $16K/year, and since I live in NYC the cost of living is extremely high. Now at age 27, I make 55K, rent/utilities is still 16K, and my current employer does not offer a 401K plan. I do not live a lavish lifestyle by any means, but I still find it difficult to save even a buck or two here and there.
    As for my investments, for the 2 1/2 years I was able to contribute 6% (matched) to my 401K, I was able to save about 10K, however, due to the markets, I lost 35% on my investment so I am now down to 6,500. I have been contributing fairly regularly to a Roth IRA, and I should have had over 30K saved in that, but again because of poor market conditions I lost another 30% and that is now down to 23,500. So at this point, I have 30K saved towards retirement at age 27, with an additional 20K in cash and 5K in silver.
    Am I screwed for retirement?

    1. I don’t think you’re screwed at all, since you’ve got 35+ more years to save and invest!

      55k ain’t bad. Just do the math on what you think you’ll need to retire. Perhaps change investment strategies as 30% loss for one’s entire portfolio generally shouldn’t happen if the right mix of fixed income, cash and equities is there. And if so, should rebound over time. Just contributing 17k increases your entire investments by 35%.

      1. What do you suggest I change with my investment strategy? It seems that most investments are down 30% the past year. Since I am young, I think I should be aggressive with my investment approach, since I should be able to make back any short term losses over time. My portfolio looks like this:

        Roth IRA – 7.5K in Foreign Mutual Fund, 7.2K in Domestic Mutual Fund, 4.2K in Focus Fund, 5K in Money Market (too afraid to invest).
        401K – 6.5K in Company Stock
        Personal – 5K in Silver Bullion (physically held)
        20K in univested cash.

        Any suggestions to rebalancing my portfolio? Any suggestions for my uninvested cash?

        Thanks for the advice.

        1. I think your Roth looks pretty good. You might want to consider investing the extra 5K of money market cash into corporate bond and TIPS if you’re too afraid to invest it.

          Also, in the 401K, I’d significantly reduce your company stock to only about 5% of your balance. If your company went downhill you’d probably not only lose your job but also most of your 401K balance. Make your 401K allocation similar to your Roth IRA and you’ll be fine.

          Also, make sure your uninvested cash is in a high yield savings account or CD (Ally has great CD’s that charge minimal interest to get your cash out). Best of luck!

    2. Seems pretty good, but not according to the charts, which are also, up to you to decide. Keep swinging for the fences if you have the risk tolerance though! I’m investing as aggressively as I can!

  375. I agree with your overall argument that people need to be saving a heck of a lot more tha than the traditionally touted 10% and not rely on the gov. Or others.

    I think your numbers cited are not realistic.
    Take someone who makes 70k per year.
    17k/70k (401k) is about 24% of pay.
    5k/70k (IRA) is about 7% of pay.
    Use the 20% after tax contribution figure cited in your post
    Many people pay about 40% in taxes if your factor in all (state loc federal property social security). Some will pay more!
    That leaves about 9% of pay or about 525 dollars per month for things like food clothes rent /mortgage, eating out, raising a family etc for the Earner in my example.

    1. Locar,

      Write out an actual income statement on someone making $70,000 and contributing 17k and 5k. Remember, 17k is pretax contribution.

      Once you see the net number you see it’s enough to survive.

      1. 70k – 17k (401) = 53k
        53k * 0.4 (taxes)= 31.8k
        31.8k * 0.2 (after tax) =25.4k
        25.4k-5k (Roth) = 20.4k
        20.4k/12 = 1.7k per month.

        From that you have to build emergency fund buy a house etc.

        1. Can you clarify your 40% tax rate, and then taxing your after income again by another 20%?

          With a 53k income, your effective Fed tax rate is about 17%. Add max 9% state, and you’re at 26%.

        2. Your math is wrong. You should have about $34,000 left over after 17K contribution and taxes i.e. $2,800/month.

          Sam is wise to make you do the math, so you can recognize your ways. You should send him several thousand bucks for correcting your errors, learning for yourself, and changing your mindset!

        3. You are not contributing 5K/month towards a Roth IRA as 5K is the max annual contribution. So subtract 5K from your January calculation, and you will have an extra 5K every month from February-December.

          Also, where are you getting your figures for income tax? I understand you are over estimating on the initial 40%, but where is the additional 20% hit coming from?

  376. Well, my husband and I combined are somewhere are in the lower 1/3rd for our age. However, the stock market hasn’t helped us, we barely had matching, and there was no way we could afford to max out our retirement plans early on (not to mention, 17k was not allowed 15 years ago.) We basically sacrificed retirement savings in order for me to stay home with the kiddos for many years. However, we will catch up when they are off the payroll.

    By the way, my son is headed to University of Michigan in the fall. The money just keeps flowing out the door… :)

        1. Everyday Tips

          You got it. We have some money put away for college, but not enough to cover all 3 kids for 4 years of college. I want them to take out some loans anyway, but I do plan on bearing the lions share of the burden.

  377. I spent a lot of time on my post, Why was my post deleted? I was looking forward to your responses to my arguments. I was hoping this would be an open forum. :-) please bring the post back if you can.

  378. Maxing out your 401k every year is mathmatically completely rational. The wonders of accrued interest etc. However there are a few things you are not considering.

    1. Time has value, especially when you are young enough to truly enjoy it. Those extra hours most americans will have to spend working to max out their 401k will cut into time with family, friends, leisure, and all those wonderful moments where you think ” Wow I’m glad I was here for that”

    2. Most “frugal” people I know focus so much on saving to reach a certain goal or to follow a certain pattern that they neglect themselves. So they dont go on vacation, dont buy gym memberships, all so they can live ” comfortably” at 65. Then they get to 65 and since theyve been working their asses off forever and dont know how to relax. They then spend there days watching tv at home trying to convince themselves they’re happy because they planned ahead and have this wonderful huge house to show for it even though they use only 3 rooms.

    3. Almost half of American Families are in the world’s top 1%. If you save even a little you will be better off then virtually the ENTIRE REST OF THE WORLD at retirement. As technology progresses, I’d be completly ok with a one bedroom apartment with my virtual reality machine at 65. I’d rather climb the alps now instead of having an extra 20,000 dollars at 65 thinking what if.

    3. Many proponents of maxing out there 401k believe it is necessary because we will have nothing else to fall back on. Like this is already a fact.

    I agree The baby boomer generation will be an issue in their old age. and social security/healthcare needs to be fixed. However things should even out over time. America has consistently come back strong over the course of history. And there’s nothing like a crises to finally get Americans to make the hard decisons and get constructive things done. Families and Rich Uncles will continue to exist. As will silly older people who maxed out their 401k’s and leave all that money to their kids so they can actually enjoy life.

    I personally save 5% of my salary with 100% employee match. I think this is a good balance since it takes into account the value of time and enjoying life.

    1. Hi Andrew,

      I am curious of the math used in the first point #3 (listed twice) – that almost half of the American families are in the worlds top 1%. Do you mean worlds top 10%? The world is 7 billion people and 1% of that is 70 million people, even if Americans represent a higher percentage of people in the world top 1%, I’d wager that it is no more than 20% of the 70 million number (remember by population the USA is 5% of the world).

      -Mike

  379. Thoughts on creating a SEP 401K?

    When you say “we are way ahead”, are you saying you guys are way ahead of DOUBLE the range for your age in the charts since it’s per person? If so, share your strategies. thx!

    1. Awesome! Then I won’t fill guilty winning the $500 off you when Obama wins! :)

      Why do you think all those who disagree with the chart are under 33 years old and all those who accept or agree with the chart are older than 33?

  380. I feel your pain about the pathetically low limit we are allowed to contribute to our retirement savings pre-tax. Thanks for sharing your perspective in Canada.

    At least your health care is cheap and good!!

  381. This is silly fantasy talk. 66% of wage earners in the us make less than 40k / year. 50% make less than 26k. I can tell you right now that the vast majority of people in this country will never come close to these out of touch goals.

      1. My figures are from Social Security Administration data based on W-2
        forms submitted by employers to the Internal Revenue Service. It has
        been widely reported. ) The exact number is
        $26,364, though arguing between 26k and 33k is silly.  Basically your
        advice to more than half of the working population is to put their
        entire year’s net income into a 401k. You obviously have no comprehension of
        reality. The least you could do is be clear to your readers that the recomendations you are making are geared towards a small minority of upper income earners.

        And please save your “if you want to work longer that’s your business” garbage. No one wants to work forever but the majority of Americans have no choice.

        1. I’m sorry if you do not believe you can make more than 26-33k a year.

          And I’m disappointed you think that contributing to your 401k is with net income. You can contribute up to 17k pretax this year and then with after tax/net income up to around 49k total for all contributions.

          Believe in yourself, or not.

        2. The 17K contribution to 401K is pre-tax income. You believing it’s with net income concludes why you do not believe.

        3. I’m aware that contributions are pre tax and you are again deflecting the point. Please explain how half of all americans are going to retire when they make less than 30k a year considering living expenses eat up all of their income. You won’t explain because you can’t and you could care less to even try. Your reply to 100+ million people is “work harder” and “believe”? Your class’s day is coming and we will take great pleasure in your demise. You have no real life skills and will serve no purpose to society once it comes crumbling down around you. We’ll see who is successful and self sufficient when you have nothing and the tables are turned.


          1. If you knew, why did you write 17k contribution of net income?

            The fact is, if you are stuck earning only 33k a year, you will have a difficult time retiring and will likely have to work for much longer than average.

            You can always move overseas to a lower cost of living country. I feel your anger, and I’m sorry you feel stuck making your income. Maybe Obama can redistribute more wealth and provide more benefits to lower income earners when he gets re-elected.

            I’d direct your anger towards improving your income.

        4. In my 20s, I made $50,000 on average and put away $15,000 a year on average. I didn’t make any excuses, and am glad I did.

  382. I am below the low end for my age group, but I am contributing all I can now. One of my former employers didn’t have a 401k program so I opened an IRA at that time. I don’t contribute to it anymore though and focus on my 401k instead. Employer matching really makes a difference.

    1. Maggie@SquarePennies

      I like this benefit of keeping money in a 401K, not that I’m anticipating bankruptcy. When my husband turns 70 he is required to take the money out of the 401K. Are there any other places to put that money that are also safe in case of bankruptcy? We’ll need to roll it over in about a year and are looking at various alternatives.

  383. I stopped contributing to a 401k since age 33 since there was no plan available while working overseas. So my 401k balance is just under half of the low end figure for a 40 year old. But I’m killing it in after tax savings so am not too worried.

    -Mike

  384. Darwin's Money

    I’m a tad below the low end for my age. But I like the alternatives like Roth IRA (lower fees and better selections), real estate investments (alternative asset class, much higher returns than equities are anticipated to return either based on historical returns or based on current valuations) and I also think I’ll be paying a much higher tax rate in the future than presently, so I prefer to take the tax free income later rather than tax deductible contributions now. Additionally, I’m putting quite a bit toward 529s each year which not everyone does. Overall, I’m luke-warm on my 401(k) as a retirement vehicle but like the multiple streams of income approach rather than focusing too much on that one vehicle.

    1. I agree w/ you on the multiple income stream. Why not just max up your 401K too though as one of the income streams?

      I definitely don’t think most people will be in the same tax bracket in retirement as now. To generate passive/semi-passive income to equal our current working income would be brutally difficult!

  385. Yay! I scrape in = just over 9k at 23. Granted, that includes a nice boost in the government Kiwisaver kickstart and tax credits (which sadly are being halved).

  386. Dan Thompson

    The reality is, we need to re-evaluate how we think about retirement. 401s (or in Canada RRSPs) are great tools but we can’t think of them as THE solution. When we were retiring at 65 and dying at 75 maxing out our contributions through our working years would be plenty to retire on.

    If we intend to keep our current standard of living through out retirement we will be forced down one of three roads

    A) Cut back on expenses and save more now
    B) Work longer
    C) Invest wisely to generate income into retirement. Through moderate to high yield stocks, income from blogs, rental properties or some other means of income. Ideally this income comes in one of two forms – passive or close to passive income or doing something part time that you actually enjoy.

    Based on your last post on 401s I anticipate most will be choosing option B.
    Best,
    Dan

    1. Working longer definitely seems to be the easiest option, fortunately or unfortunately. One year work is like a TWO BANGER.. as that’s one more year to save, and one less year you need to draw from your savings/401K/retirement accounts.

  387. Maggie@SquarePennies

    We always maxed out our 401K contribution up to the point where the employer no longer matched. After that we saved in a savings account and invested in some stocks. Altogether we were saving/investing about 40% of our income. We thought we were doing pretty well until the market tanked and cut our 401K in half. Some of it has come back, but not nearly enough. We were on track to have saved a million by retirement and ended up with about half that. My husband was forced into early retirement at the age os 62 and was not able to find another job. I had stayed home with our kids, but did some substitute teaching to supplement our income. Then I got cancer & could no longer work. That was about the same time my husband was forced into retirement. It was lucky in a way as he was able to take care of me until I recovered. We are fortunate to have a decent pension from his job and have not had to dip into our 401K yet. Your advice sounds good to me. Saving all you can is important, especially if you don’t have a pension as many don’t.

    1. 40% is great! The 2008 downturn was such a doozy.

      I hope your cancer is in remission Maggie! I’m glad you still have at least 500K and a pension. That is a great combo. So many folks don’t have a pension, let alone the 500K.

      Best of wealth to you two! Hope your hubbie is enjoying retirement. Why not! Life is short.

      1. Maggie@SquarePennies

        Thanks. I’m in remission for over 8 years so that’s as close to being “cured” as it gets. We are lucky to have the pension and are lucky to be able to live off of it. We even end up saving money on it. We have enough for travel and helping out our grown kids as needed. All in all we came out ok, even with the downturn. I sometimes wonder if I should have worked full-time, but the kids turned out really well, so it seems to have been a good decision to stay at home with them.

        Yes, my husband enjoys retirement as do I. Thanks for all your good wishes and I wish you the same! Life is an adventure!

        1. Maggie, I respect what you and your husband have done, and I was wondering how you were doing today?

  388. You can never have too much saved! There are so many elements that can exhaust your savings such as illness, medical insurance costs and how long you will live. Multiple income and multiple retirement are the way to go.

  389. Jeff @ Sustainable Life Blog

    I dont even have a 401k currently – I’ve got a pension through work (i’m lucky, I know, and my state’s is _not_ underfunded like most) and my roth IRA. I’m hoping to be able to increase my side income enough to open a SEP-IRA for my side hustle to save more for retirement, though I’m also considering alternate ways.

    1. You definitely are lucky! Just don’t count on it still being there in 10 years or when you retire. Hence, save like a mad man on the side.

      Do you still get your pension if you quit early? Ie how many years do you need to work in order to get it?

  390. So where am I supposed to be if I started working in the US only ten years ago? I eyeballed the table and of course I am not even on the lower end of my age. I guess I should just look not at age but at total years worked, right?

  391. Sunil l Expedited Wealth Building through Entrepreneurship

    the estimates seem reasonable to me. there are other investments as well that i hope most are considering parallel to the 401k plan, such as high yield CDs, bonds, precious metals, IRAs, etc. to look at any one in isolation does not represent how well/poor one is doing in my opinion….but the factual table above is interesting nonetheless…

  392. I am way behind, but with my better half we should be close to the minimum for our age. But because of this post I’ve decided to double my contributions. :) I’m also working towards a pension – one year left to qualify.

    One thing you’ve neglected in your calculations is that one will still accrue interest after retirement and therefore one should have slightly more money to spend per year. The value I calculate with 5% interest with 20 years to live is $55k per year starting with $723,000 and $200k starting with $2,618,000.

  393. Most people under 25 can’t contribute that much to a 401(k). Most don’t make $70,000 a year, and even then, there are student loans (and sometimes credit card debt) to pay off at a higher than 5% interest rate.

    Not all retirement investing must be done in a 401(k). I would suggest more of a gradual increase, $5,000 a year for 2-3 years and then increasing. Then, when you can afford it in 30s and 40s, just invest an extra $5,000 a year in an IRA and you’ll make up for lost time.

    1. Good excuses, love them! Throw in a car too!

      How does one contribute to an IRA in their 30s and 40s to “catch up” when the government doesn’t allow people making over $110,000 a year to contribute?

      Why fall behind to catch up when you can keep up or zoom ahead?

      1. How can people afford to contribute $17,000 a year if their total incomes (before taxes) are at $50,000? Even I would not have been able to do that in my 2nd year out of college had I not started a successful side business.

        1. You can’t live off $33,000 a year, which so happens to be the middle 50% of income earners in America?

          Come on now. $33,000 is the top 1% in THE WORLD!

          Please share more excuses.

          1. I’ve heard Frank Armstrong say “There is someone out there that is leading a full and happy life on 70% of what you make.” If you apply that saying widely, then that number could be just about anything.

        2. It’s possible, but why would you want to live off $33,000 a year just to have $130,000/year in retirement? I think there’s a much better balance. What I’m doing seems to be working well, don’t you think?

          Also, if you think that $17,000 is the right amount for someone making $50,000/year, what about someone making $40,000 or $30,000? Surely they can’t afford to put away that much.

          There is no one-size-fits-all. People who get a masters degree can’t even start working until they’re 25, so they’ll need to catch up later in life. And with two incomes in most families, $8,500/each should do the trick. No need to go crazy with this at a young age. Do what you can, everything will work out in the end.

          1. I guess I don’t believe “hope” and belief everything will work out in the end, is a good strategy.

            There definitely is no one size fits all. Depending on where you live, $33,000 is enough to provide any 20-something year old enough to live a happy life.

            In fact, savings itself gives pleasure to many people, including myself because it’s fun!

            1. $33k is enough to live off of??? No offense, but you’re out of touch with reality sir. Rent in the northern Virginia area for a one bedroom apartment is upwards of $1,800/month. Add groceries, bills, car payment, gas, student loans, etc. and you’re lucky to have $100 left at the end of the month. Hell, I make $130k/year and am living paycheck to paycheck.

      2. Those over 110K take a lower base salary and the difference goes into bonus and pension for them. So they still get to invest into 401ks, etc. Plus profit-sharing. So they actually get away with more. Again your calculations are unrealistic of the majority.

      3. Yea.. live off 33k a year for 40 years when you’re young and able to fully enjoy life so you can live off 100k a year for 20 years when you are older and not able to do the things you can do now. Sign me up. This OCD about retirement in a nutshell. Save as much as you can while enjoying the process of life. UNBELIEVABLE

  394. 34 years old, $345,000 in 401K after 12.5 years of working. I’ve maxed it out every year since 23, and plan to do so for as long as I work. I think your charts are pretty realistic, to account for the ups and downs of the markets.

  395. Hmmm…so if:
    1.) I shouldn’t expect to see my money come back to me until I’m 80 some years old, and
    2.) I don’t want to work until I’m 80

    …then it doesn’t make much sense in my mind to be putting all that I can toward a 401(k). Why not put (assuming a $17,000 yearly contribution), $9,000 per year toward a 401(k) and $8,000 per year toward a non-retirement investment account so that if I do want to retire at 65, that I’ll have plenty of access to funds?

    Sure there are implications of investing after-tax money, but I’d rather pay for the privilege of having a nest egg to get me through the 15 years of living I’d like to do before those 401(k) and IRA payouts come.

    Or am I missing something?

    1. Leah,

      Yes, you missed the point. Instead of investing the $8k in a “non retirement” investment account after just 9k in the 401k, that money should go into the 401k to max it out and THEN take your $8,000 after tax and invest it.

      Our money should be there unless we are taken over by a Socialist Dictator. Mentally writing off your 401k is a conservative way to force yourself to save more in after tax income on your own.

      Sam

      1. Definitely won’t have an extra $8,000 to throw around after maxing out the 401(k), that’s for sure. If you can do it, that’s great. But if you can’t, I don’t think that it will make-or-break retirement.

        If my spouse and I max out our Roth IRA and 401(k) contributions, we will have saved roughly $44,000 per year to that endeavor. Assuming we save for 40 years, that the contribution levels never rise, and that we yield 5% over time, we’ll have a nearly $6M nest egg WITHOUT the extra savings.

        And then we get back to whether we can even access that money, as you predict, until we’re 80. I certainly won’t need the full $6M after 80 years old, but it would be really nice to have part of that growing outside of a retirement account, so that I could have $3M to retire on before the retirement accounts mature and $3M after (roughly).

        Does that make more sense?

        1. Leah, you’re comparing apples to mangos.

          The chart above is for individuals, and the theme is to trust nobody but yourself to max out and save more.

          You should do what you feel comfortable with. If you decide to split the 17k btwn 401k and non 401k investments, that’s fine. Just be careful with your investment assumptions as history has showed we can lose money too.

          A long term marriage with 44k annual savings for the long term sounds good. Yet, will $6 million for two people really be enough to live comfortably by then? I’m not sure, hence the suggestion to save even more.

          Sam

    2. Better to put into 401(k) because it grows tax-free. If you need to access that money, you can take it out and pay a penalty, but that’s going to be better than your capital gains tax.

          1. Remember that people like Wells Fargo don’t like telling you about avoiding the tax by structuring withdrawals as “substantially equal periodic payments” (SEPP), because they don’t like it when people withdraw money for any reason (they admit you “may” pay a penalty, maybe thinking of this).

            SEPP isn’t an everyday tool, but it just means you can access retirement savings in an orderly fashion at an early age, paying only the same one-time income tax you pay for normal IRA/401k withdrawals at older ages.

  396. Hi Sam,

    My company offers a Roth 401k, which I contribute 7% to with a 4% match. I also max out my Roth IRA each year, but I’m wondering how these figures translate to Roth accounts because I don’t invest any money pre-tax. I’m 26 and make 45k/yr and I feel more secure with post-tax figures. Any feedback?

    Thanks,
    Jenn

    1. Hi Jenn,

      If the 401k is a pipsqueak, the IRA is the pipsqueeks’ pre pubescent son. It’s horribly inadequate.

      Contributing post tax dollars is better than contributing nothing, esp given no taxation of gains upon withdrawal.

      However, what’s more important is the amount. 11% x 45k = $5,000 a year. Better than a punch in the stomach, but not enough to live off in retirement. Play around with the calculator in the post.

      1. Thank you for the feedback. My question is what would the guidelines for after tax retirement balances be? 5,000 post tax is greater than 5,000 pre-tax, and I’m trying to figure out what my goal range for age 30 should be in after tax dollars.

        A little about myself: I started saving for retirement at 24, i’m now 26 and have $20k saved (Roth 401K and Roth IRA) on a 45k salary. I save a total of $10K/year (5,000 IRA + 5,000 401K). I know I’m behind but I’m trying to compare apples to apples here to see just how far behind.

        Because my salary is low and it’s so early in my career I went with Roth accounts, but sometimes I question whether I should diversify by contributing to a traditional 401K (my company offers both) instead. I hope to be making a much higher income in the future but nothing is certain.

  397. Sam,
    It seems to me that your posts are geared towards people who make a crapload more money than I do. Maxing out my 401k at this point would be close to impossible, especially given my current debt. That max contribution is more than half of my gross income. Any practical advice for the little guy?

    1. Hi Rachel,

      Without knowing your age, education and debt level, I can’t provide specific good advice.

      The answer is likely to make more money because if you stay at $35k/year and don’t have a pension, life might be very difficult in the latter years since Social Security doesn’t cut it.

      The more you share, the more I can suggest.

      Thx,

      Sam

      1. Sam,
        I’m 28 with a BA in the most useless subject known to man for attempting to make money, and I have approx 30k in debt including car/student loans. It breaks down to living expenses on 1 check and debt on other with a little bit left over for my 401k, which has about 15k or so in it after the hit i took from being laid off and losing the unvested employer match in the middle of our economic implosion a couple years ago. I’m contributing currently and will up my contributions another 1% next quarter (missed deadline for this quarter). Obviously earning more would be ideal. Even a monkey at a keyboard can figure that out. I’m not convinced going back to school for a master’s degree would be a great idea due to expense as well as personal preference. I hate what I do. I know I need to save more. My point was not advice for my personal situation, but advice for people who are not high earners with great corporate jobs with bonuses and stock options. It seems like most of your articles are assuming your readers make this great money and don’t take into account that there are tons of us trying to be financially responsible on less than half what you’re working with.

        1. You left out your income.

          Have a read in making more money: https://www.financialsamurai.com/2010/10/03/how-to-make-six-figures-income-at-almost-any-age/

          I am a monkey and I started started this site in the summer of 2009. This site has now allowed me to retire in just under 3 years if I wanted to. What’s the point? Even a monkey like me can make more money, so you should have no problem.

          This site is not focused on financial mediocrity. It is up to you to decide your financial future. There are hundreds of OF. Logs that are geared towards a larger majority. Or go read Kiplinger’s or a publication like that.

        2. Income as stated above was less than double the 17k. More specifically it’s about 32k. I’ve read that article Sam. The monkey comment wasn’t directed at you. Obviously you’re doing well and worked hard to get there. Why do you think I keep reading this site? I could talk to monkeys sitting at keyboards all day long, but obviously it’s better to interact with someone who is successful. I’m just trying to understand your mindset. Do you have advice for the transition between mediocrity and greatness?

          1. Perhaps a good strategy for you is to calculate the difference between 17k and what you are pretax contributing now, and aim to make more by that much money.

            This way, it doesn’t seem as daunting. Make sure that whatever money you do make extra gets saved either in the 401k or other account. Make that your mission for 2012.

            My mindset is basically “I can’t believe I have a normal functioning brain and body and live in America. If I can’t make it here, then I might as well shoot myself because there are billions less fortunate who would kill to just have this chance.”

        3. I agree with Rachel. These calculations are unrealistic and off based. If only 1% of folks are considered wealthy and produces enough income to contribute up to max, how come unemployment rate is so high, crime rate is high? Folks would of just tapped into their 401k even if there’s penalty charges. eats going to jail or foreclosure. Bankruptcy, foreclosure would not have topple giant companies such as Lehman and Merrill Lynch. Most college heads do not even have 6k to buy a decent car muc less place it into a 401k. They come out of college indebted with no jobs and sometimes with a low paying internship for at least 2-3 years. By the time they finally land a 40-45k paying job they are about 26 yrs old. I work in the finance field as a Treasurer in NYC financial district . Unless you are an executive your not savings these fake #’s you presented in your 401k. Let’s not forget those with MBAs and still cannot find jobs to make enough to even pay back loans that eating up all their salary. Plus the expense of food, shelter, etc.

  398. Billy Zelsnack

    So first you say to max out your 401K and then you say to expect the rules to change and that it is likely that you’re not going to be able to get at the money when you need it? This really does not make a 401K sound like a rational way to save for retirement.

    1. Mentally write it off and expect it to never be there. It probably will, b/c there would be a mutiny in America and it’s illegal, just expect the taxation rules to change for the WORSE not for the best.

      The goal is to get people thinking about saving AFTER they’ve maxed out their 401K and rely on their own.

  399. We’re looking ahead, which is why I cap the assumption at $17,000 a year for the rest of one’s working life to be conservative. I realize that past maximum contribution levels are lower. But again, the article isn’t really to help those in their 50s and 60s, as much as it is to help those who still have 20+ years of work to do.

    1. Cool, although the chart isn’t mean to make people feel good about their progress. The chart is meant to be neutral and simply “a matter of fact”.

      If a 30 year old only has $127,000 after 8 years of work in their 401K after all the company matching as well, they are at the lower end of what they should have, and it’s still not enough as the conclusion states.

      I do hear what you are saying on maybe the younger folks on this chart being less in the range. More knuckleheads at this age, with excuses like I don’t make enough, I need a car, nice clothes, yada yada yada :)

  400. I’m 46 and have have $398,820 in my 401K. I started when I was 25 years old and have maxed it out every year. In many of the years my employer maxed the contribution at 10% of my salary not the IRS limit.

    I just calculated my return for the past 20 years and was a measly 5.1% compounded growth – no where near the 15-20% growth I was getting in the 1990’s. I thought I was going to be living on easy street in retirement in the 1990’s with the returns I was getting!!!!

    I’m probably saving about 15% of my income after my 401K contributions. However, I’m also paying down my mortgage debt which is not included in the 15% number. My mortgage interest rate is low – thus paying it off might not be the best thing to do financially BUT, it allows me to sleep better and thus that is what I’m doing.

    1. Not bad Dave! You’ve fallen right in-line with the chart, and with the 5% compounded growth assumption that I used.

      If you can keep going, and then retire mortgage free, that will be great.

      How much longer do you plan to work?

      1. How long do I plan on working? – At least until I think I have enough money to have plenty of $$$ in retirement. Thus it depends on the returns I get on my 401K and other investments. Only time will tell. It is definately longer than I thought in the late 1990’s!!!!!!

    2. retirebyforty

      I am almost 40 and I’m at the low end there as well. I have contributed the max since I was 22, but the stock market did not do well at all since 2000.

        1. retirebyforty

          Our net worth is not bad because we kept adding money.
          I plan to do the solo 401k. It might start off slow, but I will try to increase the contribution if I generate good income from self employment.

        1. Actually, nothing that Trump has done will affect our economy for anther year AT THE VERY LEAST. You’re still riding the wave of the Obama administration. So, admit that!

        2. Dan, really? You posted this nonsense? What is your metric by which the Other Guy and the opposition Congress ‘moved’ anything vs. the Current Guy and his same-party Congress? Are we talking balanced budgets out of Congress (since 2001)? Are we talking gains of the DOW? Who controlled Congress (you know, the people who make laws and tax us) from 2001 to today? What were their budgets? Whose tenures made gains with the DOW vs losses? We’ve lost 11% on the DOW in a week. Your short-snidedness may be premature. Let’s check back in 3 months and 3 years. Oh, is that inflation I smell, or the debt that has gone up more this past single year than any other past single year. Nicely done, Dan. This is an economic website, not political fantasyland like FauxNews or CNN.

            1. Joe — ?? I’m happy to wait out the next two or three years and determine where this fool and the rest of the Elephants take us. No balanced budget, utter lies from the ‘Conservatives’ regarding fiscal responsibility. I didn’t expect it from the Donkeys nor did those nitwits promise it. The current governance is nothing but liars, and it’s time we call out their ‘supporters’, too. We have a fiscal responsibility to our children — this website is about education, and whom we vote into power affects our long-term well being. Hold them accountable — vote them all out.

  401. Jeffrey Trull

    This is very timely given my post today about not investing! I don’t have a 401K since I have never worked at a job that allows for one (although I do work at a nonprofit now and could fund a 403b). I do fund IRAs, and at age 26 I’m only slightly below where I should be according to your chart. If I had delightedly invested and followed your strategy since age 22, I know I’d have at least as much as your chart indicates.

    1. Hi Jeff,

      Thnx for sharing. I have a feeling there will be a proportionately higher amount of people under 35 who say they are below these ranges, and a disproportionate amount of 35+ year olds who are at the high end or above these ranges.

      Save and invest like a banshee!

      Sam

      1. What do you think an ideal ratio of tax advantaged savings to non-tax advantaged savings are for someone in the first 5 years of their career and going forward?

        1. There’s not really a “ratio.” First you should seek to establish some basic emergency savings fund that can get you through tough times. How much that is depends on how stable your job/income is. Then you should fully fund tax advantaged accounts (401k/457/403 + ROTH IRA or backdoor ROTH IRA + HSA). Only once those are filled should you then contribute to a taxable account.

          The only exception would be if you are saving for a specific purpose, such as a down payment on a house or car, then obviously you wouldn’t want to put that $ in a tax advantaged account due to the early withdrawal penalty. Keep that short term money in a CD or money market fund instead.

          And remember that your most important time to save is at the start of your career, not towards the end, so that the money can compound.

        2. 1. Have 12 months of expenses in your bank in cash (actually, use credit union so you can raise interest from it). That’s your emergency fund in case you get fired, so you won’t have to take out a loan to buy food

          2. Contribute to 401k. Max is 18,500. It will go up to 19,000 next year.
          3.If there’s still money left, contribute to IRA. Max is 5,500, will go to 6k next year.
          4. Any other money you arent using to save up for products (saving for a new car, new tv, etc) can go into a regular brokerage (I suggest robinhood, it is free and you can do it on your phone. No fees)

          There’s no particular need to worry about percentages and ratios of tax-exempt/taxable investments. By the time you retire, you should have millions and taxes will not matter very much. As for your taxable accounts, president trump has been kind enough to slash capital gains to a meager 15% for middle class.

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