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 $140,000 a year as a single person or $208,000 as a married couple for the privilege of contributing the maximum $6,500 in after- tax dollars to a Roth IRA. I do not recommend doing this before maxing out your 401(k).

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 2022 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!

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.


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.

1,091 thoughts on “How Much Should I Have Saved In My 401(k) By Age?”

  1. 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.

  2. 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.

  3. 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?

  4. 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.

  5. 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.

  6. 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.

  7. 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 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.

  8. 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.

  9. 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!


    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.

  10. 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.

  11. 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.

  12. 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.

  13. 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.

  14. 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

  15. 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.

  16. 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!

  17. 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.

  18. 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?

  19. “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.

  20. 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!

  21. 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.

  22. 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.

  23. 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.

  24. 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!

  25. 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,

    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.

  26. 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

  27. 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?

  28. 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.

  29. 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.

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

  31. 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.

  32. least squares


    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?


    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.

  33. 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.

  34. 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.

  35. 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.

  36. 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?

  37. 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.

  38. 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:


          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.

  39. 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,

  40. 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, 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.

  41. 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:


            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?


                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.

  42. 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

  43. 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.

  44. 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.

  45. 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.

  46. 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.

  47. 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.

  48. 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.

  49. 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.)

  50. 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?

  51. 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!

  52. 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 -

    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.


    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.


    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.

  54. 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.

  55. 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!

  56. 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.

  57. 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.

  58. 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 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 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.


    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.

  60. 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

  61. 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.

  62. 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.

  63. 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.


      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%

  64. 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?

  65. “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.

  66. 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.

  67. 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.

  68. 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!

  69. “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!’

  70. 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.

  71. 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).

      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, ), 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 –

  72. 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!

  73. 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.

  74. 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.

  75. 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.

  76. 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?

  77. 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.

  78. 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.

  79. 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.

  80. 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.

  81. 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?

  82. 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.

  83. 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?

  84. 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.

  85. 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.

  86. 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 :-)

  87. 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.

  88. 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.

  89. 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.

  90. 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.

  91. 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!

  92. 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?

  93. 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. :)

  94. 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!

  95. 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

  96. End of year mess up!heeeeeeeelp :(

    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?

  97. 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.

  98. 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!

  99. 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.


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

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



  100. 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.

  101. 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.


    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 :
          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…

  102. 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’

  103. 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?

  104. 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.

  105. 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.

  106. 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.

  107. 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.

  108. 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.

  109. 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.



      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.

  110. 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.

  111. 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.

  112. 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?

  113. 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.


        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.

  114. 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?

  115. 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.

  116. 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.

  117. 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.

  118. 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!

  119. 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.

  120. 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.

  121. 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.

  122. 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.

  123. 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…

  124. 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. 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?

  125. 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.

    ARB–Angry Retail Banker

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  131. LA Kid in NYC


    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….


  132. 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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  134. 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?

  135. $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.

      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.