Explaining Why The Median 401(k) Retirement Balance By Age Is Dangerously Low

The median 401(k) retirement balance is low. With such low median 401(k) retirement balances by generation, it may be harder for a large swatch of Americans to retire comfortably. This post interviews various people with low 401(k) balances who explain why their 401(k) balances are so low.

You likely won't be able to live off your 401(k) alone in retirement. However, you should be able to combine your 401(k) with alternative savings, other passive investments, and Social Security to live a financially free life when the time comes to withdraw at the age of 59.5. Most Americans don't have pensions.

The reality is that the median account balance in the U.S. is only around $72,000 for 55-64 year olds in 2022 according to Vanguard, one of the largest 401k managers. The average 401k balance for 55-64 year olds is roughly $178,000.

But the average is screwed up to due the super wealthy. Even with $178,000 in your 401k at retirement age, you aren't going to be living it up for the next 20 – 30 years without alternative sources of income.

Average and Median 401k Balance By Age Group - Vanguard
Source: Vanguard balances

According to data from Fidelity, here’s the average 401k breakdown by age in 2023:

  • Ages 20 – 29: $9,900
  • Ages 30 – 39: $38,400
  • Ages 40 – 49: $91,000
  • Ages 50 – 59: $152,700
  • Ages 60 – 69: $167,700
  • Ages 70 – 79: $160,200

Given the median age of Americans is 35.3 according to the US Census Bureau, the median 401(k) balance per person should be closer to $150,000 – $500,000 according to my 401(k) retirement savings guide instead of these pitifully low levels.

In this article, I'd like to share some stories on what happened to all the missing savings because we all know we should be maxing out our 401k every year for as long as we work. 

Median 401(k) Retirement Balance Calculations

The below chart shows what a typical 22 year-old-college graduate should have accumulated in their 401(k) retirement balance if they followed my advice and started maxing out their 401(k) after two years of working.

The maximum pre-tax contribution amount is $22,500 in 2023 and will likely increase by $500 a year every couple of years to keep up with inflation.

I've divided the chart into three columns to account for older savers, middle age savers, and younger saves due to the different maximum contribution limits. I've also accounted for different return and company matching metrics.

The bottom line: everybody who consistently contributes to their 401k over a 38 year career will likely have at least $1,000,000 in their account. The 401k savings targets by age can also act as a total savings guideline as well if you wish. The median 401(k) retirement balance by age can improve if everybody starts saving more.

401k savings targets by age

Median 401(k) Retirement Balance By Age Discrepancies Explained

I've been consulting with more clients about their personal finances and what I've discovered is that something always seems to come up and knock someone off their retirement savings path.

It's all fine and dandy to assume everyone should logically max out their 401(k) or at least save 20% of their after tax income until retirement, but this is seldom the case.

With consent from my clients, let me share several case studies on retirement balances to illustrate some points. I'll also highlight one reader's e-mail feedback about the topic as well as my own example. Names are changed for privacy reasons.

Case Study One On Why Their 401k Is Low – Family To Support

Joe is 42 years old and makes $120,000 a year as an engineer. He's been working for 19 years and has $80,000 in his 401(k) (vs $300,000+ recommended). When I asked him to share his 401(k) situation he shrugged.

He never considered maxing out his 401(k) because he always thought he wouldn't have enough money left to take care for his wife and son. His wife worked for the first eight years and decided to stay at home after giving birth. Going from a two income family to a one income family is difficult if you're not use to saving half.

Joe has about $12,000 in after-tax savings which will cover about four months of living expenses just in case something bad happens. Given the thin buffer, we talked about the importance of getting long term disability.

When I dug deeper, I realized Joe has a penchant for fixing up old cars. All told, he's spent over $60,000 after taxes to beautify his two 1965 Mustangs.

Case Study Two On Why Her 401k Is So Low – Expensive Living

Sally is 32 years old, and makes $75,000 + bonus as a medical equipment sales rep. Sally got her Master's degree in healthcare, and graduated with $27,000 in debt at the age of 24. She pays about $500 a month in student loans which she plans to pay off in 10 years tops.

After seven and a half years of working at a reputable firm, Sally's 401(k) retirement balance is $70,000 compared to a recommended $127,000 after eight years of work experience according to my guide.

Sally only contributed 10% of her annual gross salary into her 401(k) because of her school debt, car payments, credit card payments, and $2,600 a month rent here in San Francisco.

Sally's case shows that education is expensive and good paying jobs come with higher cost of living. Sally has about $5,000 in savings in the bank.

Case Study Three On Why Her 401k Is Low – High Income Burnout

Susie is 34 years old, single and makes $150,000 + bonus as a VP at an investment bank based in San Francisco. She's been working for 12 consecutive years out of college. In between years 10 and 12, Susie took a 1.5 year hiatus to become a baker during the financial crisis.

She was burned out and wanted to try something new. But, after spending $25,000 for tuition, missing out on 1.5 years worth of income, and getting screamed at while making only $10 an hour, she realized being a baker at a restaurant was not for her. “If I'm going to get yelled at making $10 an hour, I might as well make a lot of money!” Susie joked.

Susie has about $150,000 in her 401(k), 50% higher than the current median according to Transamerica. However, given she didn't earn any money for 1.5 years and paid a lot for tuition.

Susie is also about $50,000 light based on my guide. Susie was only contributing about 10% of her pre-tax income to her 401(k) for her entire career because she didn't want to tie her money up beyond the company match.

Case Study Four Why His 401k Is So Low – Highly Educated Couple

An e-mail from a reader responding to the Average Net Worth For The Above Average Person article:

“I noticed that most of your posts are geared towards people who start working at age 22 with minimal debt – as just one example, your “above average” people projections.

But many “above average” people do not start working at age 22 and incur substantial debt before they start working. For example, I am a lawyer that obtained a master's degree and then a law degree before starting my career at age 28. My wife is a doctor, who completed her residency and started practicing at age 28 as well. Both of us started our careers with substantial student loan burdens – over $325,000 between the both of us.

Our late start means we lose a lot of the magic of compounding interest. And our debt burden takes a big chunk of our monthly income. These are significant challenges.

Case Study Five Why His 401k Is So Low – Early Retiree

My 401(k) was about $400,000 when I left work at age 34 in 2012. It grew to about $550,000 in 2020, and now to about $900,000 in 2023.

What I miss about work was my $20,000 – $25,000 a year in profit sharing. That addition was a huge boost to my annual 401(k) that cannot be underestimated.

It was only until 2014 when I realized I could open up a Solo 401(k) with the freelance income I was generating. My Solo 401(k) now has about $240,000.

Although missing out on 401(k) matching is a bummer, I have enjoyed my time as a fake retiree since 2012. Since I left work I've grown Financial Samurai and my online income. As a result, I've been able to grow my SEP IRA, which is worth about $370,000.

I've also written a bestselling severance negotiation book called How To Engineer Your Layoff. I also wrote a WSJ bestselling book called, Buy This, Not That. The income earned from these two creative projects can add to my Solo 401(k).

Case Study Six Why His 401k Is So Low- A Nasty Divorce

A reader shares his story,

What is misleading as to why many 401k’s are half or less what they should be is one word…DIVORCE. I am currently 44 yrs old. When I was 37 in 2008, I had $125,000 in my 401k and then….BOOM! Stock market crashed and my 401k was worth $80,000. Yeah not fun. 7 years later my portfolio recovered to $130,000. But then I had to go through a divorce.

Now I’m back to $65,000. Ridiculous. Over 50% of married couples get divorced and many men are paying Child Support and Alimony and aside from losing half our retirement we now have nothing for years to invest…but I digress.”

Case Study Seven Why His 401k Is So Low- A Bear Market

After 10+ years of a bull market, the bear market finally came back in 1Q2020. The S&P 500 at one point lost 32% in a matter of weeks. It has since clawed its way back in expectation of a second half recovery. However, the downturn clearly hit a lot of 401(k) portfolios hard.

Then, in early 2022, a correction happened again with the S&P 500 and NASDAQ both declining by 10%. The stock market has had a great run since the pandemic began. However, volatility is back and lower return assumptions are here for stocks and bonds for the next 10 years.

Instead of just investing in stocks, consider bonds and real estate. Real estate tends to significantly outperform during downturns if real estate is not the cause of a downturn.

Take a look at the historical investment returns of Fundrise. Fundrise is my favorite real estate crowdfunding platform, especially during tough stock market years. Fundrise offers vertically integrated private real estate funds to take advantage of the inflation wave. It's free to sign up and explore.

Case Study Eight – Black Swan Events Like A Global Pandemic

Who would have forecasted a global pandemic that caused months of lockdowns in America and around the world? The S&P 500 sold off by 32% from peak to trough in March 2020, and many people panicked and sold some stock. It's understandable since the previous recession saw a 55% drop in the S&P 500. 

In addition, who would have thought the S&P 500 would rebound so quickly and surge far beyond its pre-pandemic highs so quickly? You just never know, which is why it's good to stay invested for the long run.

Today, there are more 401(k) millionaires than ever before because the stock market rebounded. But capital preservation is important, as we realized again in the 2022 bear market.

Bear markets and black swan events have a nasty way of crushing our 401(k)s. Therefore, please always pay attention to your risk exposure and asset allocation.

401k balances by generation

Other Exogenous Variables Affecting 401(k) Balances

Here are more variables affecting 401(k) balances. We talked about economic conditions and market volatility. But a couple more variables include the inflation rate and legislative changes.

Inflation Rate Impact

Inflation can help boost stock prices, but it can also hurt stock prices. It depends on where we are in the inflationary cycle.

As inflation took off in 2022 and reached a peak of about 9% in mid-2022, stocks began to take a dive. The Fed started aggressively hiking rates causing more panic in the stock market. As a result, the average 401(k) balance fell by over 15% in 2022, largely due to inflation.

However, inflation finally began to roll over in 2023. Stocks began rebounding as investors felt more optimistic that inflation and interest rate hikes would end. With high risk-free rates and a rebound in stocks, 401(k) balances have also rebound.

On a micro level, higher inflation rates reduces purchasing power. With reduced purchasing power, more cash is needed to buy the same goods and services. Therefore, consumers may end up contributing less to their 401(k)s in a high inflation environment, thereby bringing down the average and median 401(k) balances.

Legislative Changes

Changes in tax laws or retirement savings regulations can affect 401(k) balances. 

For instance, changes to 401(k) contribution limits, withdrawal rules, or tax advantages associated with 401(k)s can influence how much individuals can save and, ultimately, the size of their retirement nest egg.

One of the biggest changes to tax-advantaged retirement plans came from the introduction of the SECURE Act and SECURE Act 2.0. These new retirement legislative changes should theoretically help boost the average and median 401(k) balances.

Historical 401(k) maximum contribution limits and explaining why the average and median 401(k) balances are so low

Life Happens To Us All, Which Can Bring Down 401(k) Balances

We all know we should be maxing out your 401(k)s but don't because something always seems to get in the way. Who would have thought a global pandemic would shut down the economy for years? Crazy!

Not only should everybody contribute the maximum they can to their tax-advantaged accounts, people need to focus on building their taxable accounts as well. If you want to retire early, it is your taxable accounts and real estate investments which will provide the passive income necessary to be free.

Life gets in the way of our retirement savings plans all the time. We have tuition to pay, expensive cars to fix, vacations to take, concerts to attend, shoes to buy, Range Rover Superchargers to drive, alimony to pay, sickness to deal with and economic dislocations to experience. No wonder why the median 401(k) retirement balance isn't very high.

Here's another chart comparing the median and average 401(k) balance by age and my 401(k) guidance if we continuously max out your 401(k) each year. The idea of my chart is to help you realize what's possible.

The Latest 401(k) Balance By Age Versus Recommended Balance For A Comfortable Retirement - median 401(k) retirement balance

Some of us just like to honestly blow lots of money and not give a damn! There's always an excuse for not saving. However, if you don't want to become one of those tragedy stories or a burden to your fellow citizens, then I suggest increasing your 401(k) contributions and after tax savings percentages.

If the amount you are savings doesn't hurt, then you are not saving enough. At the end of our careers, we only have ourselves to blame if we come up short.

Unless you have developed alternative income streams, paid off your house, and have other after tax savings, living off $350,000-$500,000 for the next 20-30 years is just $12,000 – $25,000 a year.

Pay yourself first before anything else and max out your 401K. After you've maxed out your 401(k), figure out where you can save some more in your after-tax investment accounts. The goal is to generate passive income. You can no longer count on a pension or Social Security to support you in retirement.

The only thing you can count on for living a comfortable retirement is you!

Build More Wealth With Real Estate

Real estate is my favorite way to build wealth. Even with a low 401k retirement balance, you can do just fine if you have a solid real estate portfolio.

Real estate is a tangible asset that is less volatile, provides utility, and generates income. By the time I was 30, I had bought two properties in San Francisco and one property in Lake Tahoe. Now, these properties are funding my retirement.

In 2016, I started diversifying into heartland real estate to take advantage of lower valuations and higher cap rates. I did so by investing $810,000 with real estate crowdfunding platforms. With interest rates down, the value of cash flow is up. Further, the pandemic has made working from home more common.

Best Private Real Estate Investment Platforms

Fundrise: A way for accredited and non-accredited investors to diversify into real estate through private eFunds. Fundrise has been around since 2012 and has consistently generated steady returns, no matter what the stock market is doing. For most people, investing in a diversified eREIT is the way to go. 

CrowdStreet: A way for accredited investors to invest in individual real estate opportunities mostly in 18-hour cities. 18-hour cities are secondary cities with lower valuations, higher rental yields, and potentially higher growth due to job growth and demographic trends.

If you have a lot more capital, you can build you own diversified real estate portfolio. Just make sure to thoroughly screen each sponsor before investing.

Recommendation To Manage Your Finances Easier

The best way to build wealth is to get a handle on your finances by signing up with Empower. They are a free online platform which aggregates all your financial accounts on their Dashboard. This way, you can see where you can optimize.

Before Empower, I had to log into eight different systems to track 28 different accounts. Now, I can just log into Empower to see how my stock accounts are doing. I can see how my net worth is progressing and where my spending is going.

One of their best tools is the 401K/Portfolio Fee Analyzer. It has helped me save over $1,700 in annual portfolio fees I had no idea I was paying. It's the best tool to help you beat the median 401(k) balance by age. You just click on the Investment Tab. It then runs your portfolio through their fee analyzer with one click of the button. 

Another awesome feature is their Retirement Planning Calculator. It uses your real inputs to run a Monte Carlo simulation to best estimate your retirement financials. Definitely see how you stand!

Personal Capital Retirement Planner
How is your retirement outlook doing? Empower's Retirement Planning Calculator

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Why The Median 401(k) Retirement Balance Is So Low is a FS original post.

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195 thoughts on “Explaining Why The Median 401(k) Retirement Balance By Age Is Dangerously Low”

  1. As always, I loved your post and this is a really important topic to all those who haven’t saved enough to date. For some of us who have and might be in our mid 50’s, the leap from your age 55 to 60 numbers is considerable. As an example, we will use your high end numbers for the acct balances moving from $3M to $5M in just five years. By my math it would take an approx 9% return plus full contributions (+catch up) and a nice employer match to get the $2M additional in just 5 years. How do you suppose one should do that given the age risk and the considerable rate of return required, or is this number just too high?

    Thanks as always,


  2. Two other private equity crowdfund sources that I’ve invested in, besides Fundrise are YieldStreet and Percent. Percent is definitely the best of the three. I believe both require accreditation, which means “have a lot of spare money to invest”.

    And I have some retirement age friends who are even well below the median for the 401K, not good.

  3. Matthew Urban

    Hello. Enjoy reading articles on your website. What made significant difference in my 401K value was taking advantage of a Self Directed Brokerage Account feature. Chose to follow gut instincts then buy and hold attitude; a wild ride but has paid dividends. Guess I was very risk tolerant; not for everybody, and confirmed in talking in general to others. Found my approach to be very unusual and full of risks.

  4. This is a late-to-the-party comment, but aren’t these median 401(k) values based on accounts and not individuals? My 24 year-old daughter has a $2,000 401(k) from her first employer, a $4,000 balance in a second account from her current employer and a $12,000 Roth IRA that she is funding with savings after maxing out her employer 401(k) match. I think that some of these things would note an average balance of $3,000 from the 2 401(k) accounts, and 10 years from now when her 2nd account is $100,000 and first is $4,000, the data may interpret that as an average account situation of $52,000. Am I wrong that these old accounts are throwing the data off?

    1. My thought too. I converted a 401k with a previous employer to an IRA for lower fees. That money disappears in these stats but it’s still a component of my savings.

    2. I agree. I think it is highly likely individual account balances are being confused with total retirement assets. If someone has multiple accounts with some at Fidelity, others at Vanguard, and still others at Schwab, who can link them all together to get an aggregate amount other than Empower/Personal Capital? I’d love to see statistics from Empower on overall balances. I think the results might be very different.

  5. In the case study that said:
    “ 7 years ago at age 37 in 2008 I had $125,000 in my 401k and then….BOOM! Stock market crashed and my 401k was worth $80,000. Yeah not fun. 7 years later it has now recovered but that’s lost years and now my 401k is worth $130,000 ”

    What is not mentioned is that he MUST have made a horrible mistake in either stopping/slowing his contributions during a market “crash”, and/or switching his allocations to something more “conservative” during the “crash”. I have been 100% S&P 500, never flinched, kept dollar cost averaging in throughout every recession/“crash” in the last 20 years, and it has never take me anywhere near 7+ years to get back above any local mins. My returns have also crushed REIT so idk why you are so big on REITs, but most of what you say otherwise I agree with.

    1. Thanks for pointing this out. 7 years later was actually 2015 for this fella. Obviously, if he kept investing, his portfolio would be much higher today.

      However, the still doesn’t nullify the point that a divorce set him back.

      Regarding asset class performance over the past 20 years, REITs have actually performed best. Here’s the data from JP Morgan Asset Management.

      But even better, is owning physical property with leverage, tax deductions, rental income appreciation and so forth. It’s much easier to take big positions with real estate, which may end up creating much more wealth than buying an S&P 500 index fund.

      There are many ways to peel a mango! The one thing is that investors have made so much money since the start of the pandemic that many are living it up in the YOLO Economy and taking things down a notch.

      Personally, I’m taking a sabbatical for a couple months b/c there’s no need to work as hard for money anymore.

  6. Hey Sam,
    You have great financial advice but a lot of your projections are based on people starting work after college. Have you though about doing a few articles catered toward those with late starts due to long education (lawyers, physicians, PhDs, etc)? I think a lot of your readers fall into these categories.

    1. Yes, you would use the Years Worked column instead of the age column. And where there is no Years Worked column, then you would do the calculation yourself to match up the figures in the chart.

      I’ll add more Years Worked column in future charts.

  7. Papa Foxtrot

    I always recommend starting saving for retirement while you are young. You may only start your career in you 20s, maybe even 30s, but you are probably working and some of the money could be used to save for retirement. I was capable of saving 5 figures for retirement before I was 20 and before I started my career. That is a rare opportunity though and I understand why people may not be able to pull this off. But even if you only start with a thousand you would have more than the median person if you invest in a stock portfolio.

  8. I am looking at a related subject or which there is almost nothing out there so wonder if the readers of this blog have a point-of-view on this. One pension fund manager mentioned that Boston Consulting Group did a survey for them. One of the unintended and unanticipated outcomes is that defined contribution (401k, IRA’s etc) retirees actually save more IN RETIREMENT than those that receive a regular pension. Presumably because of the certainty of the income flow. Are there any other studies or personal experience that bear this out?

  9. Can you take money out of a traditional IRA, then transfer it into an existing ROTH IRA? What are the tax consequences?



  10. The most common reason for low average 401k balances wasn’t mentioned anywhere: most people have multiple employers, and hence multiple 401ks, over the course of their careers. What matters then isn’t the balance in each individual account, but the aggregate amount for an individual or family. Financial surveys, and the resultant advice, should be focused on that statistic.

    1. This. Less than 10% of my portfolio is in my current 401k, and I’m likely about to make another move. Surveys of 401k balances in isolation are not at all useful. What’s the average tenure these days, 5 or 6 years?

      1. MedianAccurate

        Anyone who is organized with their finances consolidates and rolls over their 401ks. I don’t think this median is that far off from reality. Most Americans live paycheck to paycheck… probably 60-70% have barely anything saved in a 401k or pillage it often.


    I’m 27 and making started making $40k and now I’m up to $65K in D.C. I’ve already stashed away $20k in my retirements accounts and that’s after paying off $78k in students loans. If you’re making $50K+ then there is definitely a way to fill up your retirement unless you have kids then that will make it tougher, but I know people doing it.

    1. Benny Blanco

      All here is well and good advice. Let me add one thing to it. Passive income. The POWER of actively investing vs handing your money all to someone else for hopeful 7% returns year over year.

      Take that cash in 401k if enough and buy rental property potential place with low risk. Rent them. Generate positive cashflow on them as early in life as possible. Pay the interest back to your own 401k you borrowed from. Properties paid off by retirement, or if you generate enough substitute a salary and retire early pursuing your own business or life dreams.

      401k is a must I agree, but its foolish to bank your retirement on how the economy is going to be doing when its time to pull it out.

      Stats – 34. 5 kids. Wife makes 60k Salary, I make 50k salary. My 2 rentals net 1k positive cash flow while also paying all taxes and mortgages. We also own our house now that we live in.

      Networth above our debts is 150k. Average person our age is 8k networth give or take.

      at 28 I had zero 401k, 40k in debt from a divorce, no house, horrible credit. Meet with a lender on how to obtain your first property as soon as possible. Go FHA, live in it 2 years, move out, rent it. Do it again.

      The 8k down on my first place will net me over 1 million in cash over 30 years. Half of this will go to the taxes and loan of course, but thats 500k in cash flow. After 30 years its paid off unless I do it sooner. I can tell you that 8k in a 401k will never compound enough to do that.

      1. Disagree, at my company I’ve seen people’s 401K grow to 1 million in 10-15 years. I’m small on the totem pole at the company 13 years in, have 600K in my 401k and I’m in my early 40s and started late investing in my late 20s

  12. Hi Sam,

    Dusting off this older post. I was wondering if you have any advice for how to save if you have a pension set up with your company of employment? I realize that this is rare to find these days – but it also means that I can’t find a lot of advice online on how to save when I have this to fall back on later.

    Some context: I live and work in San Francisco and am 28 years old. I contribute 8% pre-tax to a 403b and have a pension plan with my employer on top of that.


    1. I would save as if the pension plan wasn’t there at all. Take control of your own financial destiny, because there are no guarantees that pension will be there when you retire.

  13. I graduated college with lower debt.

    Highly Educated Couple (late start, high college debt) – This is one of the reasons why I’m against the constant rant to tax high income. Everyone ignores the making of the pie, they just see the result and want to help themselves to it.

    1. I like how he doesn’t even respond to this case study 4. He just quotes a comment he receives. Nice case study, genius. Nobody has 500k in 401k at 35 except some investment banker who had connections to land a very high paying job right out of college. This whole article and all of your projections are a joke. I’m in the 95th percentile and have been quite prudent in my savings and have 120k at 34.

      1. There is another possibility. You’re actually not in the 94th percentile and you’re not doing as well as you think. How long do you think you can last on $124,000 in retirement savings?

        1. Brilliant response. I suppose that *is* a possibility. Tell me what percentile 235,000 AGI is though.

          And considering I’m not retiring at 34 and plan to save for another 30 years or so I don’t have to worry about your hypothetical question.

            1. My point was that you didn’t really do a case study 4. Many people in high income brackets are there because they did graduate or professional schools (JD/MD/PhD etc) and didn’t start working and saving at all until almost 30 and the oftentimes were saddled with very large student loan debts to repay first. My other point was that your target for young savers is really only possible if you somehow come out of undergrad and land yourself a six figure job and have no student loans. those projections are just not realistic for 99% of people.

      2. Hi Mark,

        I did not had $500K at 35 but it was pretty close (approx $440K). I am not an investment banker and did not land 7 digit salary out of college (started out making $44K). I guess my trick was not to start family and buy a house until I was almost 40. I maxed out my 401K and invested as much as I could in after tax money into stocks. I realize this is not a typical situation as most people choose to start family in late 20th/early 30th. My point is that it is possible even without 7 digit salary, but obviously large salary helps :)

        Thank you,

  14. Personally I think you need goals for your accounts in retirement. It is inadequate to just “max out the 401K” as a plan. It ignores the actual granularity of need and risk in retirement. In retirement the 401K will help you max out your taxes. Tax rates are progressive and RMD is progressive so your tax bill is progressive squared. In retirement since the government owns part of your money and is in control of distribution if you have a big wad your screwed. If tax rates go up or RMD % goes up your screwed squared. In retirement you need WR money and self insurance money. WR money to live on and insurance money in case you get cancer or start alzin. The chance of cancer is 1/3 and the chance of serious cancer is 2/5 of the 1 that gets it. The average treatment cost can be as high 92K/yr and the average joker that is afflicted is broke in 4 years. Alzheimer’s has a 1/10 incidence at 65 increasing to 1/3 by 85 and has a 12 year average longevity meaning on the average you can linger for 12 years before death. If you are married both of you are going to die so there is a better than even chance one or both is getting an expensive disease. In addition taxes are often calculated around married filing jointly when a spouse dies and RMD is in force it can kick the surviving spouse up 2 additional brackets as a single. So your max out strategy is a Sword of Damocles waiting to lop your wife’s financial head off once you kick the bucket. A better choice is to max out tax efficiency in targeted accounts. In my portfolio I have a Roth account with $1M I Roth converted from the TIRA/401K. I left 600K in the TIRA in bonds. When that RMD’s it will throw off about 30K/yr as a taxable annuity and grow slowly. My SS is 50K of which .85 or 42K is taxable married filing jointly is good to 104K top level with standard deduction meaning my 72K income can grow for many years and still be in the 12% bracket. In the 12% bracket I can pull post tax money out cap gains free so I can easily pull an additional 50-60K/yr out at virtually no more tax. I also have a few hundred K of tax loss harvest available from recessions gone by for when I finally move from .12 to .22. This is maximum tax efficiency. If I die my wife’s taxes go up slightly not dramatically. I have several mil in post tax money to draw from as needed. The Roth just sits there compounding and I don’t consider it as WR money at all. It’s insurance and legacy money if I alz I’ll be in a good nursing home instead of a snake pit If we both alz there is enough there to get the job done. If the widow make takes me and my death is cheap my kids will eventually get the Roth. So that’s 4 accounts earmarked for specific reasons taxable tax loss harvest and residual TIRA is for WR and Roth is for insurance/legacy. I also have a 2 tier risk profile My main portfolio is risked at 10% or 2/3 market risk but I have a low 1/4 market risk “emergency fund” risked with a total stock short term treasury efficient frontier tangent portfolio. It turns out the biggest SOR risk is in early retirement. If you have 3 or so years of WR in a low risk account you can close off the high risk portfolio until the recession is over re-balancing as necessary. By living on the low risk money you effectively re-sequence the SOR profile to a better sequence saving the portfolio. The ability to re-sequencing is most important in early retirement. About 10 years in you can start some withdrawal from the emergency fund if desired. You need to fund all of this as you grow your money.

    If you look at your Personal Capital monte carlo graph it proceeds to age 93. It has a maximum projected. THIS IS YOUR STARTING POINT. You calculate the max projected at your death and work backward to whatever age you are now and that informs you on what you will need to save and how you divy up the money into accounts based on tax efficiency. Then and only then will you really understand how to adjust your appetites. My projected end of life portfolio is 15M my projected need between now and my wife’s eventual death is 5M. I will likely go first, she is younger with long lived genetics. I have it planned at the 50% confidence level, 10% and 5% and have a 99+% chance of success regardless of SORR

    1. You wrote way too much info. Not many people want to read a massively long comment. Also, you went on way too many tangents. All in all your comment isn’t worth reading in full.

  15. Brandon Wood

    But arguably shouldn’t the balance be low for most young people because they should be throwing their money at student loans and other debts first?? These numbers are astronomically higher than they once were. If many company’s don’t offer a match anymore isn’t it simple math to put off 401K contributions?

  16. PortfolioFullOfAir

    Wasn’t able to start putting into a retirement fund until I was in my 30s, mainly due to a combination of student loans and medical debt, and with my income I can’t even come close to maxing out my contribute to an IRA alone (the mere idea of also having a 401k almost blows my mind – I’d be homeless). With that said, according to these figures, I’ll likely never retire. With the aforementioned medical issues this likely won’t be an issue, but it still warrants some rumination. In fact, the only people I know who come close to meeting these goals are the small minority of individuals who make 150-200k annual income, which are no indicative of the adult population at large. With cost-of-living going up, wages stagnating, and most people making abysmal 50-figure incomes, becoming a swing trader with a bunch of investment properties isn’t an adventurous risk, it’s just not a reality at all.

  17. Mr. Samurai,

    You always post such an interesting and insightfull articles. I will share my part. Me and my wife are engineers. I am 37 and she is 34. I started working from age 28 with a PhD and she started working from age 29. In sort, for around 10 years of work I am able to save $190K in 401K (including employer match (5%) from old company and maxing out from last 5 years and no matching from new employer). My wife has $115K with 5% employer matching.
    Do you think, with two ( 4 and 7 year olds) kids, together we saved around $300K in 401K so far, is good. No debt except mortgage. Are we on right track?
    Please let me know.


  18. Maybe you shouldn’t compare your live with 99% of us american who struggle to make ends meat. Everyone is saying the economy is so well but my wage hasn’t gone up in the past 8 yrs except for the COLA. I actually find these figures great. I’m 36 and I wish I had 24 grand in my 401k

      1. Is that suppose to help me and make me feel better? How? I earn 48k a year and can’t barely put food in my Family’s table so I’m sorry if I don’t feel I live in the wealthiest country in the world! Maybe you do !

        1. No, but it should help motivate you to realize that you can work on a side hustle, start your own website, or do other things to help you make more money. But at the end of the day, it’s up to you.

          1. Sad state of affairs where people have to have side hustles to have financial security.

            Remember in the 80s when a shoe salesman in Chicago burbs had a house, SAHM and a few kids… sure he was broke and could barely afford food, but at imagine on a shoe salesman salary these days

            1. Mark,
              What are you talking about? Job markets change. Your comment is like saying “Remember the good old days when a stage coach driver in LA had a house, a SAHM and a few kids…sure he was broke and could barely afford food, but at [sic] imagine on a stage coach driver salary these days.”

              Mark, labor markets change. People buy shoes online for much cheaper than they ever did from a shoes salesmen with a much wider, diverse selection. Get use to it. And stop whining.

  19. Thoughtful reader

    Isn’t another reason why 401k balances are low is that people go to different jobs? When people go to a different job they often roll over their 401k to IRA. Then they start their balance of 401k at zero. I think these statistics from Fidelity and Vanguard are misleading when they look only at 401k and accounts rather than the sum of 401k and IRA.

  20. Sam,

    Interesting article. Reading it and the comments…my concern is that for most people it’s unreasonable. I don’t see how most people can afford to max out their 401K and do what you suggest. I’m not saying you aren’t giving great advice. It’s just life gets in the way.

    I’m 47 yrs old (Old man), worked at NASA for 22 yrs after grad school in Houston. Pay is ok, I make around 100K now (Started at 30K). I have a 25 yr old daughter, that I had to pay for school. I had a hurricane destroy my house. So expensives pop up.

    So even though I make a good salary, I can’t make the max contribution. I know a lot of people around my age that either don’t have a 401K because they can’t afford it and are just surviving or barely contribute.

    I would love to max contribute. I currently can only sock away 8% with a 5% max. I do have 333K so I will maybe make your low end.

    Your comments above seem to be above average salaries. I mean the average salary is what 60-70k in the US?

    I am curious. Why you are doing total savings vs salary? Most sites do a percent of your current salary that they expect you to live on.

    Again, great job. Look for me under a bridge in 20 yrs!

    1. PortfolioFullOfAir@gmail.com

      “I mean the average salary is what 60-70k in the US?”

      I’ve read that is is within that range, but I have also read that it is in the 50s. If you have a handful of people who make 30k, and one who makes 120k, though, it tends to fudge the numbers.

  21. Your article is a good one. Im a small business owner and my wife and I are quite a bit behind your threshold and plan on retiring early. Our stats are ages 34 & 36. 155k wife IRA, 130k in mine. 400k in brokerage account. 785k in real estate that’s owned free and clear. 35k in universal life insurance policies between the two of us. There area lot of different vehicles people have for retirement. Even though I am way below your threshold I am confident we will be able to be FIRE and retire early. My vehicle has the brokerage account and it has real estate. Now having said that you should discuss some of the other alternative spots people may have money. Especially the higher wage earner you gave examples of. Earning 150k a year you can still only stuff 18,500.00 in a 401k. They should be exercising options. If they can’t afford to save additional they are likely living beyond their means. With a 401k the appreciation really starts to hit hard in the last few years the money sits there.

  22. Good information. It is always easier to comprehend in a “case study ” example that you can compare to your own real life. There were at least a couple case studies to which I could personally relate.

    I would like to make an unsolicited and likely unwelcome point on case study 7. I don’t know if a political statement was being made or what the intent was, but I hope it is obvious to others from the case study. If she could not be legally married because the “gender was wrong”, this person would have no legal responsibility for the deceased loved one’s medical bills. Paying them out of some misguided loyalty to the deceased seems foolish in this example.

    I realize this was probably just a fictional example to illustrate the situation. In addition to being more careful savers, it is just as vital in the long term for people to be more educated in their spending at the same time. Seems like many $1000’s and sleepless nights wasted over a non collectible debt. The law is the law, so hopefully, a spiteful decision to prove a social point didn’t elicit them to join these estates in a trust outside of a legal marriage. If so, it backfired and put the other partner on the hook for financial disaster. For my social statement, it is even more egregious that if they were legally married, the surviving spouse would still be on the hook for these debts after such a personal loss. But, like I said, the law is the law.

  23. johnnybgood

    Sam, how confident are you at your job? Do you feel it’s stable? I was in the same predicament as you. My wife and I both owed about $50K student loans. We had lower interest rates, but the crooks called Mohela bought out our student loans and jacked up our interest rates to close to 8%. I’m pretty sure that’s illegal, but what can you do? We were paying a good $4,000+ IN INTEREST ALONE per year!

    So, I took out a 401K loan and paid off that sucker. I’m currently paying my 401K loan back, and the interest (like 4%), goes right back into my 401K! Student loan interest deduction you say? I wrote a complicated Excel program that calculates taxes down to just a few dollars (due to the IRS using tax tables and me using formulas). It’s got everything you can imagine, almost any scenario, all sorts of deductions, itemized, self-employment, etc. Heck, it even tracks my expenses so I know exactly what I’m spending. It confirms I don’t save a whole lot with student loan deductions, which is what helped me make that decide to take out a 401K loan. The “lost gain” is made up by not having to pay ridiculous interest + 401K loan payment goes back to me. Plus, married, you get penalized and the max you can deduct is $2,500. Anyways, I started doing insane overtime (15+ hours), which brings me into the 6 figure level. At this rate, I’ll pay off ALL my debt in 2 years, and then it’ll be like $40K+ after-tax all free, AFTER all expenses are paid. I am maxing out 401K at the same time and maxing out a Roth IRA too. Once my income is free, I’m going to split my contribution half into a Roth 401K (which thankfully my work also offers).

    I also created a super duper cool Excel tool that does all my 401K/IRA calculations, including inflation, median household income, different rates of return, projections etc. Everything. It’s super cool and has helped me get my financial bearings back.

    Just a thought. Good luck my friend.

    BTW, you MUST do at least 15% or more into 401K, and max out a Roth IRA. You will thank me later, trust me. IRS Required Minimum Distributions don’t apply to Roth IRAs, and it’s what the rich bastards use to transfer money to their kids, tax free. When you do thank me (not if, but when), please remember I accept donations *wink*

  24. Hey Sam,

    25 years old and I am about to graduate from grad school. After 6 months I will enter repayment on my loans. Because I chose to work full-time while going to school full-time, my salary bumped me out of any subsidized loans/need-based scholarships etc. I am looking at $40,000 in loans with a federal interest rate of 5.6%. My question is that I have maxed out my 401k for the past 3 years I have been working (18% of income), I bought a home, paid off a car in full, and currently contribute 6% (at 3%/100% company match) into our company stock purchase plan. Would you recommend reducing 401k contribution to pay off student loans, leasing home out and renting apartment to have some secondary income, or just significant lifestyle cuts?

  25. I think it’s a massive oversight to not reccomend a Roth IRA before an employer 401k. Obviously if you are lucky enough to get a good match then do that first buy Roth IRA for you and spouse should be maxed before 1 more dime goes into an employer plan. The fees in these plans will eat you alive especially as your balance grows. These plans have high fees with a lot less flexibility than a Roth IRA as far as what you can buy. Vanguard Roth IRA doesn’t have fees or even trade commissions if you buy their funds which are generally the most respected in the world for the low expense ratios. Employer plans are generally terrible.

  26. Husband – 52 yrs old – 430K in 401K – planning to work until 65
    Myself – 46 yrs old – 585k in 401k – planning to retire in 6-7 years

    No pension plan.
    800K equity on home
    230K saved to fund my daughter’s college
    150K ESPP
    Emergency funds – 70K

    Will we be able to retire comfortably? We are First generation immigrants to this country. So no clue how much is needed for retirement and we haven’t seen any family members retiring yet.


    1. $150k in company stock? You need to diversify. I’m always surprised by how many people at work just let company stock pile up.

    2. Hi Seethalu,

      First of all congrats on the good job. Let’s break this down:

      As of the time you wrote the artice:

      Husband 52 and has 430k in 401k
      Wife 46 and has 585k in 401k

      You don’t list other factors such as income, insurance brokerage accounts etc… If your husband works until age 65 and maxes out his 401k and these calculations assume no company match and a modest 8% annual return the balance will be 1,641,335.82 at the time of his retirement. You should be able to safely withdrawl 90k from that account without running out of money.

      You mentioned you are retiring in 6-7 years. Here is my calculations for you:
      Assuming you max out your 401k and get no company match you will have 1,268,793.77 in 7 years at age 53. If you let it sit there until you turn 59.5 and it earns a modest 6% return your balance will be 1,817,055.27 and you will safely be able to withdrawl 80k per year without risking running out of money.

      That will bring you and your husband to a combined income of about 175k per year without factoring social security, the ESPP or home equity. You can always downsize to a smaller house and tap some of that equity. You are on the right track, congrats!

      1. You think an 8% return on a retirement investment is “modest”?!!!!

        Hopefully no one follows your retirement advice. 8% is a pretty aggressive estimated return given that a retirement investment may span 30 or more years of ups and downs in the U.S. economy.

  27. I’m 45 years old. I started working at age 28 with the starting salary of $38,000. I did not contribute to 401k the first 4 years of my working career – BIG regret guys. I started maxing out my 401k about 8 years ago. My company matches 100% of the first 3%. My company also contributes roughly 6% of profit sharing to my account yearly. My current salary+bonus is about $145K. I have been investing aggressively which is 100% in mostly large and small cap funds. About 6 years ago I started putting all of my money in large and small cap index funds. My current 401k balance is $463K. Here is my contribution summary is as follow:

    * Total employee contribution since joining: $194,488
    * Total employer contribution since joining: $82,645

    I’m at the low end of your bracket for my age but that was because I started late and did not contribute the first 4 years of my career. It’s totally possible for one to get to the high end of the potential 401k saving.

  28. I think for me the most important thought is that the most luxurious thing I will ever buy is my own freedom…and the freedom of my children.
    With that perspective there should be nothing more important than saving for your future.
    If you can take vacations and drive a nice car that’s great but short of that if you need to scrimp what are you missing in the mean time? Driving a car with leather seats and a V8 engine the same speed behind the slower car in traffic in front of you on the way to work? Seeing Paris?
    It’s always possible to save. And really the point of this article, the take home point, is it doesn’t take much compounded to make a big difference. To afford you free time and the power to direct your time in the future. That’s the real luxury. Would you rather see London twice and Paris 3 times or every one of your kids dance recitals? Rather have a BMW or have the financial stability to tell your boss “screw you, I’m going to my kids soccer game”.
    That’s the issue. What matters. People don’t look at it as an either-or but it really is for most. Some are fortunate enough to do both but it’s not a comparison if you can. The more nice stuff you get I think, the more you realize it’s not that important. Freedom is and that comes with saving and making the purchase of your freedom.
    I wish I could convey this point more clearly since many don’t get it, even close friends. They drive great Mercedes SUVs they can’t afford to impress who? Me? I’m not impressed. The valet at the nice restaurant that makes half what you make? I don’t know. But someone. It’s not luxury. It’s a trap. I’d rather wake up when I feel well rested than wake up at 6 so I can afford to drive to work again in a nice “luxury” car. And waking by up whenever you want is FAR more luxurious and far more expensive than any car my friends have…and some drive Maseratis.
    Bottom line save money like you’re buying a Louis Vuitton because it’s far more impressive and will make you far happier,

  29. $150K as a VP at an investment bank in San Francisco? Try again. That’s practically minimum wage.

    I won’t dispute the advice to max out a 401k, but this article is excruciating. The median age is 35? Well, you can’t legally participate in a 401k plan until you are 21, so the median age of a 401k account holder is probably in the 50s. 150K “Vice President” in San Francisco? $150K is what they pay janitors in San Francisco (not joking, look it up).

  30. Dan Scavetta

    Does your suggested 401K balance at retirement age consider other income sources such as pension and social security ?

  31. One word: DOWNSIZING.

    If I had NOT been downsized in my early 40’s, I would probably have twice as much retirement savings. The problem wasn’t me saving, because I saved like hell.
    If you’re removed from your well paying job, survive three years of off-and-on unemployment, and just get the best job you can after that? You will NOT be “on track”.

  32. The one thing you overlooked is that many of us were downsized at the peak of our careers, and couldn’t find an equivalent job after that. So saving became much harder to do on a smaller income.

  33. One thing is glaringly missing here. Medical debt!
    I have tried to “max out” the 401k whenever I could, and never ever went below saving 15% of my salary. I am on the low end of the scale–saving $550,000 at age 51. I have a rare disease and nearly died (which means time in the ICU, operations, and 1 – 6 month recovery where I work part time or not at all) in 1995, 97, 99, 02, 03, 05, 06, and 07. Then I met the love of my life, who had ovarian cancer and passed away after 4 painful years. Because she was the wrong gender, we could not legally get married, so her insurance and medical costs were in the hundred of thousands of dollars. Medical debt on top of not being able to work is a huge factor that needs to be considered. After 10 years, I have just finished paying off both of our medical debt.

    I live on 20% of my salary (spending about $18,000 a year on everything). The rest goes to medical debt and my 401k.

  34. It’s really interesting all this writing and many of your comments… Like we are living in two completely different worlds.. Some example are taken here with 75, 100, and 120.000 salaries… While average salary is about $28.000 (a mortgage and expenses out of this???)… And average machine engineer salary is about 50-55.000 (senior one)… Am I on the wrong place? Or all this is just b.s.?

  35. I thought all I have to do is vote for a p o s for president and he will bully people into taking care of everyone else.?

  36. Pingback: Should I Contribute To My 401K Or Invest In An After-Tax Brokerage Account? | Financial Samurai

  37. What is misleading as to why many 401ks are half or less what they should be is one word…DIVORCE. I am currently 44 yrs old. 7 years ago at age 37 I had $125,000 in my 401k and then….boom..stock market crash and my 401 was worth $80,000. Yea not fun. 7 years later it has now recovered but that’s lost years and now my 401k is worth $130,000 and I’m getting divorced and half goes to my wife. Now I’m bald to $65,000. Ridiculous. Over 50% of married couples get divorced and many men are paying Child Support and Alimony and aside from losing half our retirment we now have nothing for years to invest…but I digress.

    I have less in my 401k now than maybe others would have after the crash and recovery because after the crash I swore I would never invest in target date funds again..ever. I’ve got 70% of my retirment and future funds in a Target Retirment fund. I’ll never make more than 5-6% interest but I’ll never lose more than 2-3% during a crash either. Tired of watching my retirment grow and then every 6-8 years losing half due to Wall Street greed. Never again.

    1. Hi Kevin, thanks for sharing your situation. Good point about divorce. Was your wife not contributing to her 401k? If so, couldn’t you get half as well?

      I’m at a stage where I’m targeting 2-4X the risk-free rate of return, so 4%-8%. I’m all about conservative growth and capital preservation now.

  38. One thing you are not considering is the cost of children. Some have none, some have 1. For those that have 4 or more children you are not going to be able to provide everything they need while following your advice. So you have all of this retirement money in your old age, but no one to keep you company….no grand kids, young married off spring to brighten your old age days. The problem with your articles is they are unrealistic given the dynamics of life. Sure put all your money in retirement when it should be spent on camp fees, new clothes, education and family trips. You are only young once with a family and the time you spend together will last a lifetime and is more valuable then all your saved money. Between my pension, 401k and social security I will generate $60,000 a year and that does not include my part-time online business which will still be going. Hopefully 13 more years of 401k will get me up from 100,000 to perhaps 250-350k.

  39. I have a question, when your looking at what would be good 401k savings, is that based on one income or two incomes, so should my wife and I who are 47/51 have 1.2m each or 2.4m saved. I think that is somewhat crazy. We have about 1m between the two of us today and max our 401k and have very generous company matches. It makes me sick with all we save that were so far off from the mark. We also have another 100k in investments. If all this is true to be good we need 7m at 65 to retire, which I really don’t think will happen. So, what does this mean?

  40. Some of those 50 year olds that only have 150K in the 401 own 3 million dollars worth of cash flow generating real estate :) It’s a pretty bad idea to put more into your 401K than needed to a) maximize your employer match and or B) to shelter income from the IRS. Once you’ve done that, their is no benefit to the 401 and plenty of negatives. Diversify out of equities too! Real estate, precious metals, etc.. or if you love the stock market, at least open up a Roth instead of pigeon holing yourself into a 401 for *everything*.. The 401k is cool, but their is so much more to a real portfolio than one account that you can’t even touch until you are ‘officially’ able to retire per the government age requirement. What if you lose your job at 52 years old and you have nothing except your 401k? Time to eat cat food for a while? Diversify out of the 401 as soon as you hit the match.

  41. This site is good and bad… Not everyone is capable of making 70k or more… Like myself! Intellectual ability has a lot to do with the equation. My family has struggled to save every bit of the way and have done pretty good considering. I hope the end result will be gratifying.

    1. How do you not know you are incapable of making $70,000 Jerry? Have you tried starting a business, working another job, improving your education, finding something to leverage? There’s hope!

      1. With all due respect – why would I want to pickup a second job and work 60+ hour weeks during the best years of my life? It’s not like retirement funds are 100% guaranteed to be there when we retire anyway. Like many folks here who lost tens of thousands of dollars in the blink of an eye, that could happen in the future.
        Rather than working two and three jobs in my 30’s, I’d rather do the things I enjoy doing while I am healthy and work on reducing my expenses. That way, when I retire, even if don’t have the money to buy one of the Florida Keys, at least I have 35 years of wonderful memories instead of having regrets of how my best, healthier years were spent working.

        1. Dennis Conway

          Javier sounds like he just wants to light up another funny looking cigarette,who could imagine working 60 plus hours a week .they have a word for this Javier its called lazy i hope those wonderful memories are able to put food on your table when you retire, only you can secure your future by working and saving my friend

  42. Your examples by age assumes that the maximum amount one could contribute to a 401K plan over the last 20 odd years was $17,500. That’s not true. When I started working, the maximum was a little over $9,000. Just recently (about 2 years ago) has the number moved to $17,500. Therefore, the charts gives a good approximation for someone just starting out…they have at least a road map of where they should be (or aspire) financially regarding their 401k.

    Do you have charts with the historical caps on 401k amounts:

    2006 $15,000
    2005 $14,000
    2004 $13,000
    2003 $12,000
    2002 $11,000
    2001 $10,500
    2000 $10,500
    1999 $10,000
    1998 $10,000
    1997 $ 9,500
    1996 $ 9,500
    1995 $ 9,240
    1994 $ 9,240
    1993 $ 8,994
    1992 $ 8,728
    1991 $ 8,475
    1990 $ 7,979
    1989 $ 7,627
    1988 $ 7,313
    1987 $ 7,000

    I think I am do ok even according to your charts. However, it would be a little skewed for a person who is say 50 years old that capped out annually and is no where near your number because in the 80’s and early 90’s we couldn’t put in as much.

    Thanks. Great information….read your stuff all the time!

    1. One other point: In many companies, one’s ability to contribute the “maximum allowable” is SEVERELY limited by some asinine Fed rule called “highly compensated employee”. We’re not talking CEO here…schmucks in the $100k range (maybe even less) are considered to be this. When this happens, poor you are limited to a MUCH lower figure that is calculated by the average % that the rest of the company workforce is contributing. Its a REAL “gotcha”! I was an engineer in an assy plant. I made a bit over $100k…but most of the workforce were young inner-city assy line people earning about $10-$15/hr. Guess how much THEY contributed to their 401Ks?v Not much. I was limited to about $5000 a year! Even after I maxed my Roth, I was still way below what I could have saved in a tax-advantaged account. So, I paid off my mortgage instead…and retired early, to their “shock”.

      1. Interesting dichotomy of workforce you have there. Government loved to make everybody earn the same.

        The good thing is that you can always save the after tax money too.

  43. The author notes, “Something happens between ages 35-60 where one accumulates only $30,000 more until retirement. Clearly statistics are playing tricks on us again …” Here’s one place the statistics will play tricks:

    “Fidelity came out on 2/14/2013 highlighting the average of their 12 million 401(k) plan participants is up 12% to $77,300.”

    I am age 51, changed jobs a few years ago, and have a 401k with Fidelity with a balance of about $90,000. Pretty close to the Fidelity average, right? And my balance of $90k is way too low for someone age 50-55, right?

    I know it is recommended to consolidate all our retirement funds in one place, but many of us are lazy and leave the money in the old company’s plan when we change jobs. I have funds (IRA, SEP, 401k) from previous employers, spread over different mutual fund companies. My total retirement balance is about $450,000, but no one mutual fund company will see me with a balance of much over $100,000. In this case, the statistics of having my money spread in different places will be misleading compared to the true value of my total retirement funds.

    1. I agree. I also like to keep my past several 401ks separate, even though Fidelity calls me to consolidate.

    2. “In this case, the statistics of having my money spread in different places will be misleading compared to the true value of my total retirement funds.”
      This also means fewer people are actually participating in these plans than 12 million individuals. In fact, proper to use the term as 12 million accounts.
      Statistics doesn’t mislead if the definitions are labeled correctly.

      If half of the people are in the same boat with spread out 401K accounts than that 12 million turns into others have them all over, than the numbers of 12 million accounts mean there are only 9 million with 401k accounts. Possibly less individuals are actually participating if people are really spread out like yourself. Just lots of accounts to a few owners.
      That’s speaks very poorly of the practicality of the 401K system. Especially considering pensions are virtually non-existent in private employment. And quickly becoming non-existent in public employment.

  44. Michael Crundell

    “The base case assumption is the typical American after 13 years of working has roughly $100,000 in their 401(k) accounts at age 35.”

    People are so out of touch with the economic realities of this country. People who went to school, did the right things, are working 60 hours just to pay bills, and not splurging.

  45. Nightvid Cole

    Surely one should be allowed to count the present value of any vested pension plan benefit streams and whole life insurance, etc.? How about a growing family business?

    It’s quite common for middle-agers to have only $200,000 in retirement plans but also have $100,000 in present-discounted pensions, $100,000 in whole life or home equity, or perhaps a $250,000 family farm or business, or rental property.

    If you have a $250,000 business, farm, or property with no debt, a $100,000 whole life policy, and “only” $200,000 in your 401k, in your early 50s, you’re really not doing too bad. To say otherwise is, in a word, alarmist.

    1. George Roberts

      Cost of health c are is the killer. my husband and I are 63 and 62 respectively. We have six hundred and twenty thousand in assets. Our health insurance premiums and out of pocket will exceed $34,000 a year. That with neither one of us having anything particularly serious wrong with us. All along I had assumed 1500 a month would cover it nicely. Do the math. It doesn’t. I realize this is an old post that I am replying to. None the less we sacrifice and never made more than 90,000 a year combined and did not start saving until we were 39 years old. We put two children through college, tithe 10 percent minimum. with inflation I see no way we can live on anything less than 4000 dollars a month and that does not include health insurance or tithing. and of course our 401 K is pre tax so every dollar we take out we are looking at sending between 15 and 25 percent to the government and about 8 percent to the state. You need at least 1.2 million according to my math. We just did our best but it wasn’t enough. specifically I would like to have back the $55,000 we spent on weddings which both ended in divorce within 3 years. I have often wondered if the children might have worked a little harder at the marriage had they had an investment in it. A little off topic I realize but somehow I felt led to reply

  46. Digger Phelps

    I am 36, single income family (wife stays at home currently) with 300k in 401k. I max out 401k (plus a 3% match up to 6k which I always get cuz I max out), and try to max out Traditional IRA (then convert to Roth at the end of each year because of salara restrictions). Our company just went IPO and I’m a Director so I got about 250k in company options that will vest over the next three years. I’m hoping if I continue to max out 401k, continue to try and max out both mine and my wife’s IRA, we will be on a good path to retirement. I also do a couple hundred per month to the kids (two kids) 529 to try and help as much as I can.

  47. First, great article! I’m 49, current salary is $90K and have $90K in my 401K (contribute 10% currently but plan to bump up to 14% over next 4 years – company match is .5 up to 6%). I’m estimating 401K balance of $700K when I retire at 67. I have military pension that will earn $684K after taxes over a 20 year period and estimate worse case for SS to earn $480K over same 20 year period. So, total ‘potential’ is $1.8M (if I croak at 87) at age 67. Wife and I decided we’d foot the bill for our three kids college so we’ll be paying student loans for them as we don’t want to saddle them with debt starting out (est. total college for them will be $80K of which we’ve saved $45K so we’ll be paying $35K of loan debt). I think this plan is “ok” according to your chart but would like your opinion.

  48. One item that may impact statistical analysis. I am 35 years old. My first job out of college (age 22) was with a medium/small company of 5,000 employees. The company did not offer a 401K program until I was 26 years old. Prior to that there was only a poor performing pension plan. While I have always been active in my retirement planning, when I was younger I never strayed far from the safety net / hand-holding offered by my employer.

    I don’t believe my situation is unique and offer my experience as a suggestion as to why there may be some statistical anomalies in the older generations.

    1. Tad, thanks for sharing your experience. Hopefully folks with no 401(k) program will therefore save their after tax income at the same percentage amounts. Unfortunately, I think once money hits our bank account we have a propensity to spend instead of save.

      Welcome to my site! If you get a chance, I would sign up for Personal Capital and run your 401(k) and other portfolios through their 401k Fee Analyzer under the Investments tab in the top right. I ran my through and discovered $1,700 a year in portfolio fees I had no idea I was paying! If you aggregate all your assets, it will give you a networth pictures and help you see where you can optimize. It’s free and only takes a couple minutes to sign up.



  49. I’m 42 and have been maxing out my 401K since I was 22. I’ve made over 100K since I was 28. My employers have always matched it at least 50% and for several years 100%. I spread out my investments between bonds & stock, but the stock market crash of 2000 and again in 2006 really took it’s toll on my account as it did everyone I know. I’m now sitting on a total of $244,000 in an IRA and a 401K with my current employer. How is it possible to get to the numbers you state above? I watch my accounts and re-balance when necessary, but I’m not an investor. We live in a modest house, drive old cars, don’t take fancy vacations or own any jewelry. We don’t have expensive hobbies and we definitely don’t have any designer clothes. We have finished saving for our children’s college funds and have $30,000 in emergency fund. How do we do any better than that? I’m so frustrated when I read articles like this. The lack of funds in my account are not due to lack of saving.

    1. Ann,

      I’m concerned too given you mentioned you’ve maxed out your 401(k) for the past 20 years. Let’s take an average max out contribution of $12,000 a year, that’s $264,000 right there with no growth and no contribution match. Even just a 3% contribution match puts you well over $300,000 during this time frame. Do you think this is the case of selling at the bottom and not getting back in? I’ve been there before, so I understand.

      What I do recommend you do is get a firm grasp on your finances by signing up with Personal Capital. They are a free online wealth management tool I’ve been using to keep a hawkeye on my net worth and my investments. They have a 401(k) Fee Analyzer which I ran my portfolio through that revealed I’m paying $1,700 in fees I had no idea I was paying! Because of Personal Capital, I’m saving money, honed in on my risk, and have steadily grown my net worth in less stressful way. Signing up and uploading your accounts to keep track is simple. I highly recommend you run your IRA and 401k through their free tool. Once you have your accounts uploaded, click the Investment Tab and 401k Fee Analyzer link on top.

      The main goal is to know where your money is and prevent leakage.



  50. You do not know what you are talking about and need to check the true facts about people living on retirement income. There is more to retired people then just paying the rent. They have other obligations to self and family just like the others that are not yet retired. Give me a break who in the real working class engineers are not the norm an for the working class. You live in a false world. Wake up get real.

  51. Sorry i forgot to add the funds are split between company stock, a 2020 plan and a 2045 plan


  52. Hi all, i live in the northeast and make close to 60,000 a year. For the past two years i have been putting 25% in my 401k, my employer matches 3%…i currently have 61,000 in there and i am 34 years old. Any estimates of what i will have if i keep this up for another 10 years


    1. What does 25% of your salary equate to in dollar terms?

      In 10 years, my 401(k) grew to around $250,000, but I maxed it out and have a different match than you. After 13 years (since 2nd half of 1999), my 401k topped out at $400,000 and I’ve since rolled it over to an IRA to invest in other securities.

  53. Great article Sam!

    Unfortunately, I am a poster child of the issues you bring up in this article. I thought I was being “above average” and purchased a number of single family homes to rent out between 2004 and 2006. By 2008, I had lost them all, along with a majority of my savings.

    My wife and I (creeping up on age 40) are now finally back to even from a net worth standpoint, but are quite aprehensive around how to make up for lost time and on a limited income ($100K between us – as compared to income levels of many of your readers).

    I know I may have to settle for shooting for just “average”, but what path would you suggest I use to get started again?

    1. Hi Kevin,

      Always good to have a new reader on board. Sorry about the homes. I experienced your pain as well, and have one property that is sucking wind, but I was able to do a loan mod this past January, so I’m holding on forever.

      When you say your net worth is back to even, does that mean 0, or back to where it was before 2008? My suggestion are several fold:

      * Raise your savings rate as much as you can until it HURTS. If it doesn’t hurt, then you aren’t saving enough. Thankfully, we all get used to the pain. Once we do, raise the savings rate more.

      * Stay on top of your finances more than ever before by signing up with Personal Capital. It’s a free online wealth management tool I use that tracks my finances (ins and outs), net worth, and checks portfolio fees for my 401(k). To grow your wealth, you need to know where your wealth is! It only takes a minute to sign up.

      * Mentally plan to work for 20 more years or longer. I don’t know how much you planned to work in the past, but have this mindset and do everything you can to beat it (retire earlier).



  54. My retirement consists of a pension (40 – 50% of high 3), social security (fingers crossed), and my 401(k). I didn’t see anything is this highly informative article which addresses savings in addition to pension and social security benefits. Tax liability is a big concern for me come retirement, so I am always looking for solutions to keep the IRS away from my door. Are there strategies I can put you work given my retirement outlook?

  55. Hi, thanks so much for this information.
    I’m nearly 27, I am a college graduate with no more student debt (PHEW!!), but I also don’t make a lot of money.
    I live in a small 1 bedroom apartment 30 minutes outside the more expensive area where I work, with my husband. We both make $26,000 (gross), and over my income goes to non-negotiables (modest living, car payment, gas, insurance of all types (renters, health, car) and monthly medication (not covered by insurance)).

    What I am wondering is how can I save enough to ever live comfortably? Your case studies above are all for people who make well over the median American income of around $45k — and if that’s the median, then you know where 1/2 of us lay (lie? I always screw that one up). :(

    Thanks for your help. I don’t want us to end up working at 80 years old. I work for a global company with a lot of room for growth (just got a promotion and a raise, but it only increase my gross by $2500/yr), so it is only a matter of time until I am closer to the average American’s yearly wage. But I don’t want to have the average American’s savings, I want more, and think starting early is key. I have $780 put away, started contributing in July 2012. What can I do NOW to help me save more money? To help my 401k grow? To help me be able to buy a house and build equity while I grow my 401k? I should really get a financial advisor, but how much money would that cost? HAHA

  56. Victor The Cleaner

    Hello Sam:

    I have a coworker (age 48) who believes that all he needs to retire in the Bay Area is around $500K. I’ve tried to explain it to him, and point him to any number of sites that explain why not, but he doesn’t buy it. Hence, he doesn’t, contribute that much to his 401(k). He is an engineer making, I estimate, $120-130K/year. Fairly financially sound, just remarried to an experienced teacher (who despite the hype, make good salaries even in the Bay Area).

    His new wife is over 10 years younger, so I say that he’s probably all right as he can count her her pension, too. He rents his old condo, almost paid off, generating a little positive income. He and his wife also bought a new house. He says his personal monthly expenses are around $1700, not counting mortgage which he is on track to pay off by the time he reaches retirement. I get that his commute expenses will decrease by a few hundred dollars per month (in today’s dollars), but he says that he should be able to live fine on $25-30K/year net. He also counts on not paying that much more per month for supplemental Medicare. Any advice on convincing him?

    1. Hmmm, if he’s convinced, it’s hard to change his mind. When does he plan to retire?

      With a spouse 10 years his junior, he can count on her for at least another 10 more years as she “catches up” to him. If he really is going to pay off his mortgage by the time he retires and has done the math, he can probably retire just fine based on his desired lifestyle.

      Here’s a post you guys might like: https://www.financialsamurai.com/2013/03/19/what-does-early-retirement-feel-like-the-positives-and-negatives/

  57. I was searching for answers and came across your site. I, unfortunately, did not get started with my 401K till late in my life. My husband has a wonder retirement plan and doing very well right now. I however, need help to understand what it happening with my 401K plan.

    I am trying to roll my small 401K (which I setup to nest egg for my grandchildren’s college education. I am no longer working, decided to get a higher education, and now looking at the best way to invest my small fund.

    Looking over my summary, I see that for the year of 2012 I earned less than $1.00. I have over $7,000.00 in my 401K. In 2011, I earned less than $30.00. The summary states that there was no funds spend for administrative purposes, but money spent to pay out other employees who have retired. Could you explain to me why I am paying other employees retirement funds to them?

    I have never been able to move this money into high or low, can’t even look at where my money is being invested, and my ex-employer stopped funding in 2011. All I know about this plan is that it is a “Safe Harbor.”

    Thanks for the help.

  58. @Newbie: If you are doing what I think you are, be advised that I know several people who did this and all were audited and all were told that this was not correct.

    That said, the only issue I take with the artical is with the percentage return. I agree that using 5% might be a good lower bound as many people are not aggressive in their youth, nor their older years. However, simply changing this to 8% and you get nearly US$8m. This is the power of compound interest and why it’s critical to start saving the max as early as possible. If you reduce this in half (still at 8%) you still end up with a ton of money (even in 40 years inflation adjusted).

  59. Sam, I like how you show people that they need more money for retirement. I did think that the minimum amounts are a little off. With a BS in engineering, my first real job in 1999 only paid 28k a year. The initial 8k and the subsequent maximum 17k to my 401 would have left me a little poor in the rent and food department.

    Given that the first three years of my first two jobs netted pretax of only 100k, the 42k to my 401k you suggest, but first take out $7500 for welfare/SS that I will never see, and I only have 16k a year to live on. throw in a few taxes to uncle sam, and it hard to pay for parking downtown at the new job.

    I prefer to think that I am able to make up with aggressively paying down mortgages, paying the max into 401k, investing in mutual funds, stocks, and savings. the magic 401k levels you speak of are only for people that hit the ball out the park for their first jobs making 50k a year or more.

    1. Hi Heath,

      Thanks for your perspective.
      The numbers are definitely tougher to swallow in one’a 20s, but are easier to match later on. Perhaps with today’s salaries, these numbers are even more feasible.


  60. How did you see 25K in company match when the max you are allowed to contribute to 401K at 35 is 17.5K??????

  61. Hi Sam,

    I am so sad I never knew about your blog until today as I am an avid follower of Susie Orman, Robert Kioysaki, Dave ramsey when time permits. Just so luck that today i found this blog accidentally. I promise to be a follower from now on. I have some questions for you Sam. Do you have an article or blog that discussed what to do if you are in DCP (no 401K to speak of) and 403b? Here are some details: I am 43 (just turned today), and sadly I do not have enough saved. Here is what I want to known. I work for a company that only offers 403b (no 401k), have been working for them for 16 years and currently make 81k in salary. I own a rental property (valued currently at 215K), which has $200 in monthly positive cash flow. I also own my primary residence (valued at 450K). Networth is around 130K after calculation of all debts. My company provides a defined benefits pension and if I work for another 10 year with reciprocity agreement from a prior agreement I would have 30 years of service credit. I am a father of 2 young kids (7 & 9 yrs) and a wife who is stay home as she has not been able to find any job but saves us a lot on child care expenses. In our 403b currently we have 107K saved. Based on your calculations, what would you suggest for us as we don’t have the 401k option. I look forward to your response. Thank you.

    1. Hi Steve,

      Welcome to Financial Samurai! Happy birthday!

      Your position is the envy of many given the defined pension plan. If you get credit for 30 years of work, I figure your pension will set you for life given your other savings and rental income. Definitely work those next 10 years and if you can, max out your 403b. Take your estimated annual pension income, divide it by 4% to estimate what it’s capitalized value is. That is your true savings! You will be shocked by how much you have.

      Also, take a look at this page on a free wealth management tool I use to keep track of my finances. I feel some relief that I no longer have to manually track my 28 accounts anymore and just have them all in one place. Your current situation and net worth is ideal for taking advantage.

      Look forward to seeing you around my site!



  62. True. Health insurance is a big one… disaster health insurance more specifically so one doesn’t have to pay $ 1million worth! Perhaps Obamacare can help by the time we’re really old yes?

  63. Just started reading your site and I must say I like it very much. Here is where you and I may differ however. I am beginning to worry very much about 401Ks, Roths, IRAs etc. Why? There is legislation right now floating in congress to push some of the money invested in these plans in government bonds. I am sure the wonderful government of ours will “suggest” to do so in order to guarantee a “return” and will write laws to make sure we have no choice about it. Mathematically our country is broke, especially if one considers future unfunded liabilities which conservatively are around 80 trillion. You think the government will not target the only money left to most Americans somehow to “help” with their promises to people that think they are entitled to free food, free, health care, and free ride?

    Its also a mathematical certainty debt base money will be inflated away to nothing and judging from history this happens to the strongest of currencies unbaked by precious metals every 40 or so years. Considering Nixon got us off the gold standard in 71 we are in that window right now, with massive amounts of paper being created not only by the Fed but the ECB, and Japanese center banks. Its a situation where the financial world has never faced before so who knows how its going to end. Unless someone here wants to argue we will cut entitlements by a wide margin this can’t be more clear. So what is a 25-35 year old to do?

    No matter what people save, the asset class and vehicle they save in is as important.

  64. Ristlin, one thing to note.. the expensive properties today generally always seemed expensive yesterday. I’ve kept track for the past 20 years, and things never really change. In fact, the expensive properties get even more expensive relative to everything else.

      1. Because everything I read – especially your blog – tells me I have abysmally ‘failed’ to save enough, and I’d like to know exactly how much do these people expect me to have saved.

  65. So I’m sort of skewed towards the lower end for my age…a little above but not much (I’m 42), is that just an anomaly of the five year stretch it took the market to get back to 2008 levels, or am I just a slight under achiever in the 401k dept.? I’ve always maxed out to the best of my memory. On the bright side, I’m significantly ahead of schedule on the savings/net worth similar charts you’ve discussed in previous posts.

    1. Not sure without knowing more about your other assets. Do you have other after tax savings? I’m using my charts as a catch-all for retirement savings to make it more relatable.

      1. My 401K respresents about 3% of my net worth so yes I have other retirement savings. I was just curious as it seems like the expect rate of return might be a little high for your chart…but I understand its just a guideline and the anomalies of down markets like in ’08 smooth out over extended periods of time. So are you assuming 10 or 11% historical returns?

  66. Hi Sam,

    Always enjoy reading your posts. I am 24 and am sitting right at your high end range, but I started work a year early. For the past couple years I have been back and forth between 0% contributions and my current 12%. I’ve always struggled to increase my % because I feel like I can make a better return through real estate. I have saved aggressively and put a lot of my money into 5 rental properties.

    I always see you recommending maxing out 401k so I’m curious to get your thoughts on this. 401k is nice because it saves me 23-26% in effective tax and will have compounding effects. However, there’s still taxes on withdrawal with no certainty on future tax rates while real estate cash flow is essentially tax free due to depreciation. Of course I’d like to max my 401k AND do real estate, but my goal is to reach 3000-3500/mo in after tax passive income as quickly as possible rather than maximize my net worth.

    1. Jonathan, I’m impressed you have amassed 5 rental properties by the age of 24! Can you share how you came up with the downpayment to do so? Indeed I recommend maxing out the 401k and investing in real estate, which is why I scratch my head when I see folks no max out their 401k or IRA and aren’t willing to save to invest in real estate. Real estate really is my favorite investment class.

      401k tax can be managed by moving to a lower tax state and through smaller distributions. The point is to not give up now and pay taxes up front like with the ROTH.

      1. Sam, thanks for the reply!

        I got lucky in that I happened to graduate with a petroleum engineering degree while the oil and gas industry was hot (still is). Starting starting salaries are about 90k with 10-20% annual bonuses. After 2.5 yrs, salary is about 105k. I was also very lucky to start reading about personal finance and blogs such as yours almost as soon as I began working, so much credit to the PF blog community.

        I followed after you to keep expenses low and saved about 60-65% of after tax income. The rental homes were acquired using hard money loans (12% interest) to buy the houses in cash and renovate to create equity. With the equity, I could then take the newly appraised home and get conventional financing (4-5%) to pay off the hard money loan. Property is cheap in Texas and avg price of these homes after renovation is 100 – 130k with good cash flow. The actual out of pocket cost for each home averages around 15k. Appraisals I’ve found are a crapshoot and some were very good (only 10k out of pocket) while some were not so good (25k out of pocket).

        I purchased 4 investment homes while I was in a small apartment and the 5th “rental” is actually a primary residence. The reason for this is that lending requirements get much stricter after your 4th mortgage unless it is a primary residence. Since I was capital constrained (low reserves), I decided to buy a primary residence to more easily obtain a loan, put less money down, and also get a lower interest rate. Plan is to live here for at least a year and build capital again and then rent it out while I find another apartment or another primary residence!

        I remember you mentioning getting some backlash for your recommendations on how much wealth younger people should be able to obtain. I don’t really have any inclination towards blogging (I just like reading) but if you have any interest, I would love to help share my story via guest post or something like that to help convey that it is possible!

        1. Sure Jonathan. I welcome a guest post from you sharing your story on how you landed your gig, how you saved and bought your property, and your views on your generation of why so many still live at home and complain why they can’t get ahead.

          I’m fascinated by the mindset of different generations and people’s beliefs about money. Feel free to shoot me an email with your post.

  67. Kim@Eyesonthedollar

    I could make a case for your #4 couple, but I suspect they bought a nice house and some other things, while still paying off debt, but not contributing the full amount to retirement. I have not maxed out my IRA every year, but did buy into a business and commercial and residential real estate that will hopefully get me to where I want to be withing the next 10-12 years. I also spent way too much on other things instead of saving, but that’s hindsight at this point and I am trying to make up for past mistakes.

    1. Well, hopefully those things you spent money on brought you pleasure, memories, and some are still around. Furthermore, you have your business which you are selling that will free up equity so that’s exciting!

  68. Points well taken. Most of us in the US need to be saving more for retirement. Your posts have influenced our decision to increase our retirement savings over the last year.

    Since you like numbers, consider this. Current retirees withdrawing 4% of 228,000 each year get $9000 plus $36000/year in social security checks for a married couple. This gives a total income of $45000/year in retirement. It’s not travel the world income, but it is a livable income for most of the country especially in a fully paid for home.

    1. Glad I’ve motivated you to save more.

      $45,000 a year in retirement might be OK for one person, but for two people it’s tight if you want to live a comfortable life. Hopefully this couple has a paid off mortgage and their health care expenses under control. Goodness forbid the person is single and has to live off $20,000-$25,000 a year.

  69. I’m definitely behind in my 401k retirement balance based on your standard. I’m 29 years old and having 110k in my 401k, still 17k under your low end expectation.

  70. I didn’t start working until 24, but I have maxed out my 401k and Roth IRA every year that I have worked (6 years now). Combined they are a little over $150k, and they make up ~60% of my net worth. The remainder is a combination of cash on-hand and taxable investments. At this point I’ll probably still max them out for another year or two, but I’m going to start tapering down my retirement savings and ramping up my taxable savings. For those of us that plan to leave the workforce a few decades before the withdrawl period, taxable investements will need to be a sizeable portion of the total portfolio.

    If you have some recommendations on a good taxable / retirement account ratio for early retirees (let’s say at 40), I’d love to see how they fit in with my plans.

    For the record, I’m a 30 year old engineer making $110k per year who rents an apartment in Chicago with total yearly expenses (including rent) coming in at ~$30k. The remainder goes to Uncle Sam and investments.

    1. Sure, I’ll think about a recommend net worth mix in a future post. When I was 30, my 401K made up less than 1/5th of my net worth, but that’s because I was aggressively investing in other assets b/c I mentally wrote off my 401K even though I was maxing it out.

  71. Two years ago my husband’s company was bought by another company and they suspended the 401(K) match. We stopped contributing (we fully max two Roth IRAs and contributed 6.45% into my employer’s plan). However, we just learned last week that they are reinstituting a matching contribution of 3%! Hurrah! I can’t wait to get us signed back up to reap the benefit.

  72. I wonder if everybody is worries about everybody else, but never themselves?

    In which case, America is in actually much better shape because everybody is fine. We just like to worry about others when there really is no need.

  73. You have to also be able to take into mind that you have to earn more than a minimum wage job or find a way to reduce costs to be able to take advantage of these options. But I do agree with the process of investing and how that can be a major benefit for individuals seeking to having that compounded effect on the earnings when it comes down to retirement.

  74. Add me to your case studies… 39 years old and only $165K in my 401k. Of course, I have been in Asia the last 7 years so have stopped contributions to my 401k and Social Security… definitely a big hole that is being filled with high after tax savings…!

    The upside is I am not sitting on a big pile of assets with unrealized taxes!


      1. After tax savings are about 60% of gross salary or a savings of 80% of after tax income…

        I plan to come back to the USA… although it may be tough to buy that house in CA!


        1. Buy on the big island of Hawaii. I just saw a show, Hawaii Life, where my friend and their two kids bought a 3/2, 1,900 square foot house for only $699,000 on a Resort! 65% cheaper than SF!

    1. This is a good point… access to a 401k skewing the averages/medians lower. The other is folks rolling over to an IRA, hence I’ve assumed my 401k charts can be used as a barometer for all savings.

  75. Yes, I’m worried about not having enough in my 401k/retirement savings. Very worried. Esp since my boyfriend / future husband to be has saved $0 and he is 31.

    I just highlighted my investment account savings in a post tonight:

    If you include my traditional and Roth IRAs in addition to my 401k(s), I have $88.9k put away at 29. I also have $97.8k in taxable stock/etf accounts and $20k in my company stock options that is already exercised (so I’m not sure how that should count, but nonetheless is in my portfolio.) I’m not sure where I fit on your chart – ahead, behind or otherwise.

    I’ve maxed out my 401k every year I had access to a 401k. Most of my jobs did not offer a 401k. (I’ve only had access to one for two full years thus far, going on my third year now.) Since my first year of work out of college I maxed out my Roth IRA. I’m trying to catch up now. I’ll max out both my 401k and Roth IRA again this year, knock on food. I put $6k into my 401k in January and am trying to get that out of the way with as fast as possible to clear up cash for later in the year.

    One important piece here is that many people do not have access to a 401k, and the limit for Roth IRA investment is $5k per year. That’s not much. I’ve saved in my taxable stock accounts, but most people wouldn’t necessarily think to do that (if a Roth IRA has a max of $5k per year, then isn’t that “enough” for retirement?) Of course not, but shouldn’t the government encourage the right amount of savings – esp since so few people have access to a 401k these days?

    1. Looks like you are about $20,000 ahead at least to me. Well done! My charts are really a reflection of all money earmarked towards retirement savings/investments, not just 401k.

      Folk should look to your example given you’re doing well and started with random low income jobs for the first several years. There is so much pushback for why folks can’t save the amounts recommended in their 20s.

      1. Thanks. This money may currently be in the retirement bucket, but it’s also my savings for a home purchase, a car purchase, and my emergency account. So I’m not sure I would agree that I’m ahead, but I do like to think of my savings as a lesson that people can do this on a lower income earlier on, like you said. My only caveat to that is I was very, very fortunate to have my parents pay for my undergraduate education, so I did not have student debt when I started. To be completely transparent, I also had $15k which I received in a lawsuit at a young age — this helped me get on my feet after college, buy my first ($8k) car that I’m still driving, and pay my super-cheap rent (with a lot of roommates) so I could get an unpaid internship, work a PT job, and get on my feet. The first 6 months after college before I landed my first FT editorial job were rough, to say the least. I imagine it’s harder for anyone who has debt. That said, many people who have debt choose to move back with their families, yet still don’t pay down the debt as fast as they could or start investing in an IRA. I really appreciated – in hindsight – how moving out and having rent to pay forced me to push myself along in my career, even if it was painful at times. It really felt for a while like I’d never save more than a couple thousand dollars, but as my income grew so did my ability to put more away. I also decided to reduce my living expenses again, moving from a studio apt and reducing rent costs 50% by adding back two roommates. If I had student debt, however, I wouldn’t be “ahead” in this picture, but I’d likely have saved even more to make up for it.

        1. Sounds good. Good points about earmarking the funds for a house, etc.

          Perhaps you want to write a detailed guest post about how even after you started off in a low paying job that had nothing to do with your major, you’ve still managed to build up $200,000+ by the age of 29 and tie this post into it?

          The goal is to share real stories to help break down the self-defeating mentality that one can’t save because of whatever reason.

  76. We have saved the best we can and don’t come close to this chart. We are saving the max in my husbands 401k and I work a part time job with a pension, and most of my pay goes into
    the pension plan. There is just something comforting about the small print on the pension that says..”money for life”. When I have a yucky day at work I come home and look at that
    statement for the 403b and boy do I feel better! Yeah, we are on a limited budget, and can’t always go out on a friday night, but we are saving for retirement.

    I think there will be a crisis in my generation (the 40 somethings). Almost no one in our peer group saves the way they should be for retirement. If they save at all. My brother for instance, has nothing saved at 41. I ask him what he thinks he will do, and his answer is,”I don’t know”. It will be a rude awakening for some.

    1. Don’t worry, the 30-somethings and under will help you guys out. We’ve come to expect it.

      That is interesting about your brother. Maybe it’s because he loves to work and has other secret financial means he’s not telling you?

  77. “My last year of work saw over $25,000 in company 401(k) match that I’m starting to miss.”

    ?? Since the 401K employee contributions were capped at 17K in 2012 (with lower limits on some of the previous years), does this mean that your employer was giving you a > 100% match on all of your 401K deposits? Really? Is that actually true? I’ve never heard of a 401K match being that generous.

  78. Umm. Didnt 401ks not exist until around 1980? So saving in one for 40 years means you’d have had to gotten started in 1980 and not retire until 2020 if my math is right. Might be why the accounts of those who are 65 are not what you would expect.

    Also you mix and match the words median and average a lot. Too much for me to be entirely sure this is a clear picture.

    1. I highlight median balances because that is what’s available datawise. I then highlight the AARP picture that shows the average to provide more perspective. Hopefully you and other readers are able to use the different perspectives to come up with some logical thinking. Hopefully you and other readers understand the difference between median and average as well. I think providing both is helpful.

      The 401K retirement savings chart can be used for retirement savings in general.

      1. Haha sorry I have a thing with numbers getting thrown around. Things like median age of American vs median age of American who has a 401k drives me nuts. I need to relax a bit.

        With people 50+ years old I have to believe the drop-off in growth has to be mostly because the ability to fund a 401 has only existed 33 years at most. I wasn’t even born yet in 1980 so this is an assumption but it probably took most companies a while to adopt it and for employees to be aware of it like they are now. Say most people of age started their accounts around 1983 it wouldn’t really matter if you’re 65 and started your account when you were 35 vs if you’re 55 and started your account at 25 you’d have roughly the same amount in it. Move the first year of heavy adoption to the late 80’s meaning people over 50 have only been saving 25-30 years instead of 40+ and the average balances in the graphic line up with your second chart.

  79. Colley and Colley

    Right now I am 22 and I work in a multinational company. And from now on I am working 401k and besides this I am saving to open new business for myself. Moreover, I have to maintain my small family with my mom. So, that is why I think everyone should or must think about their after retirement

  80. Enough is an interesting word! If you want a luxurious lifestyle, you may never havve enough. Although I never feel deprived, I have a reasonable lifestyle and I expect to support reasonably in retirement. I will use my fixed portion (Social Security & pensio) to take care of my basics and let my other investments support the wants such as travel and such. One of the advantages of of a pension and Social Security is the cola increases and lifetime medical. A little planning does work!

  81. Out of curiosity, do your guideline charts include 401ks and IRAs? Whenever I switch jobs I always roll my 401k into my IRA for lower fees and more investment options. so my actual 401k balance is quite behind by these metrics (though its’ plenty healthy, given that I’ve only been in my job for 3 years) but my overall balance is only barely short. I’ve also saved tons in taxable accounts which may make up for the variance.

    Also, like many readers here, I wasn’t able to start saving aggressively until later. I realize you got into the financial services industry — where salaries are great — early, but many of us who live in expensive cities had to fumble about in sub-optimal jobs for 2-3 years, THEN find our entry-level footing, and then work our way up to the point where we started to see the payoff of a six-figure salary. I didn’t crack 30k in income until I was 25 and I didn’t crack 50k until I was 28… just simple cost of living meant that I couldn’t max out my 401k until a ways later, even though I always, always contributed enough to get the match. I don’t see how you can realistically max out your 401k contributions on a $25k a year salary without moving to a much less expensive region (and I don’t mean less expensive apartment/neighborhood, because I did that) where you might not be open to the opportunities of the upside down the road.

    1. Jason, good question. My 401(k) charts include ALL pre-tax retirement savings amounts (including IRA). I’d like the charts to also be a reflection of RRSP’s in Canada and any other country where the cost of living is similar to the US.

      I wouldn’t be able to max out my 401K with a $25K salary either. The beginning amounts are also a little tougher as many commenters have voiced. However, many more readers have commented the after 35 amounts are very inline. Because I was able to contribute more than $10,000 in my 401K my first year out of college making $40,000 in New York City, I strongly feel that contributing more to a 401(k) is a choice.

      This article tries to address what is going on in American and how come the trend towards the median 401(k) of $100,000 at 35 doesn’t continue until one is 60.

  82. I recently started a new job but I can’t contribute to a 401k till after one year here because a majority of the company are hourly workers and therefore, not likely to invest in a 401k long term. Major blow to my savings. In addition, at my previous job, high income earners (>100k) were capped to contributing only 5-6% in the company 401k annually due to tax rules since the hourly workers did not contribute at all. I don’t think I have been able to max my 401k contributions since I started working at companies that have a very heavy manufacturing /blue collar base that do not enroll in 401k’s. They didn’t mention this in grad school or at any of my personal finance classes and it’s worth considering when deciding on a job offer in case one company has less restrictions on 401k’s.

    1. Becky, thanks for the insights. I’ve never heard of a company limiting the amount one can contribute to their 401k. A match yes, contribution of your own money no. Do you kind double checking with HR to ask for specifics? I find it very hard to believe a company can prevent an employee from saving their own money in a federally mandated retirement vehicle.

      1. Sam,
        It sounds like they had rules in place to make sure they passed non-discrimination tests. There is more about it on Wikipedia:

        My company makes a 4% flat distribution to everyone, which allows it to be exempt from Average Deferral Percentage (ADP) testing. So, it is avoidable, at a cost.

        1. I’m so glad that you brought up the health consideration in one of your scenarios. 25% of us will get sick/injured/ill/laid up for a stretch of time before retirement. I’m a planner by trade and income protection is one of the first conversations I have with folks on the risk mitigation side.

          I also wanted to let you know that I appreciate you, appreciate this article, and wish you well. ~Bill

      2. I have run into the same problem with contributing to a 401k. I have always contributed 17% since I started working, which is about 12 years. About 2 years ago, I switched to a different company in the same profession and discovered last month that the company dropped my 17% to 7% and will drop again in July to 0%. From what I understand, if you are considered a highly compensated employee, which makes more than 110K, you are limited to the amount you can contribute so as there are not more highly compensated employees contributing than lower compensated. This is supposed to be a law set up for lower paid employees to be offered the same benefit as higher wage earners. However, it seems in my case, the high school worker not currently worried about a retirement is affecting mine. Seems unfair.

        1. I read another commenter have a similar issue. I’m wondering if you guys or I am confusing a company match vs. how much you can contribute? I can’t imagine an employer not allowing everybody to max out their 401k if they want, unless the employee has such low income that it would be hazardous to do so.

      3. Hi Sam,

        I am in the 401(k) industry. Technically, every employee can put the maximum employee deferrals into their 401(k) account each year. However, the plan cannot discriminate in favor of highly compensated employees, who are better able to max out while the non-highly compensated employees can’t (or won’t). If the plan fails ADP testing (as referenced above), highly compensated individuals may be required to take a refund in the amount needed in order to get the deferral levels for highly comps more in line with non-highly comps.

        In some instances, plan sponsors (employers) will place a limit on the deferral percent a highly compensated individual can put into the plan to avoid the refund process entirely.

        1. Thanks for the insight Kevin! Are you saying that it is possible to have a situation where a “high compensated employee” is not allowed to max out at $17,500 in 2013 if there are too many non-highly compensated employees who cannot due to a ADP test?

          1. alison farrin

            Exactly. The HCE limit is currently $115,000 in income and most 401(k) plans look back at the prior year to see if your salary exceeded that limit in the look back year. That makes you an HCE this year. There are3 possible versions of the ADP test, but generally, the HCE average of all cannot exceed 2% of the average of all Non-HCE participants. Where the original poster gets hurt, is that the eligible person who defers nothing – is counted in the test at a zero. So if 4 NHCE’s are contributing 0, 2%, 6% and 15%, the average is 5.75% and the HCE participants will be limited to a deferral rate of 7.75%. Unfortunately, the plan often ends up with 0%, 0%, 0% and 2% and the average is .5% in a lot of plans where hourly workers are eventually eligible and contribute nothing. There are Safe Harbors available to the Employer – one of the other contributors mention the 10% to 4% of contribution match, but that can get expensive for an Employer who does not have a large fund pool with which to make contributions.

            If you work for a small company where you can discuss your compensation agreement with the business owner, re-work your compensation package to a salary that is Below $115K, then as part of your agreement the Employer will contribute the difference as a QNEC contribution. Say you make $125K, negotiate $114K salary and in the following year, you will be back to being able to put in the whole $17,500 as you will no longer BE an HCE and your Employer will put in $10,000 as a QNEC contribution to your account. Those have to be 100% vested, so it’s the same as doing deferrals – actually it’s even better as neither you nor your employer are paying the total 2.9% Medicare tax on that QNEC money. Even better, you are raising the NHCE bar, so your fellow HCE’s will be able to defer more.

  83. What I’ve never liked about that statistic is that it only looks at 401k accounts. The average worker changes jobs 10 times in their career, so 9 out of 10 of those 401k accounts are now IRA accounts.

    1. Don’t assume that… There’s nothing *forcing* folks to rollover 401k accounts into IRA accounts when they change jobs. You are completely free to leave your 401k where it is when you leave your employer, if it makes financial sense to do so. And it often does.

  84. The First Million is the Hardest

    I’m behind your recommended guide for a number of reasons. I’m not worried too much about my retirement prospects because I still have the majority of my career ahead of me & have made it a focus to save more in order to make up for time I lost at the start.

  85. Strangely, I’m not worried at all. I rolled over my 401k to an IRA and I found out that I’m an investing genius! My IRA increased 8% over just 2 months. At this rate, I’ll be a billionaire soon. Well, I guess it’s easy when the market is blowing up like a balloon.
    In all seriousness, I’m not too worried. I’ll stop contributing to the 401k(IRA) in 2013 since I retired from my job last year, but I’m sure I’ll be able to pick it up again at some point.

    Mrs. RB40 is still maxing out her 401k contribution. She is below the low end of your guide. She went to Peace Corps for 2 years and it took a while for her to find a good job when she got back. She also went back to get her MBA. Hopefully she’ll get in line with your guide soon.

  86. I am below your suggested target for my age but I’m not giving up or complaining. I agree that saving has to be somewhat painful to really test yourself and minimize unnecessary spending. I keep increasing my 401k contributions and also put aside all my extra after tax income into savings or investments every month. We have to really want to be better than average to break out and keep momentum going to be financially independent and to keep building wealth.

  87. Retirement crisis in 30 years – don’t we have one now – some people are retiring now with very little savings and carrying a mortgage and credit card debt!

    I’m not worried about having enough $ in retirement – I have funded my 401K to the max for over 20 years and will continue to do this. I also have been funding a Roth IRA to the max for the last 10 years or so. I also have other savings and investments outside of my retirement accounts. Additionally, I have a home that will be paid off – well before retirement – that if necessary – I would sell.

    I think the readers of this blog are going to be in MUCH better shape than the average American. Those with little to no savings – are much less likely to read a blog like this.

    They could learn a lot from this blog BUT they do not know that!

  88. HI Sam,

    I’m happy to say I’ve opened up a 401k with my company and am at the moment contributing 17% to see how much that affects my take home pay and will increase if it does’nt “hurt” enough. Unfortunately my company does not match :\ At the moment I’m using a “moderate” plan of 40% bonds 60% stocks in my 401k. After further research I plan to open an IRA an start with atleast $1k a year till I can eventually max out both 401k/IRA (I’m 24 and hope to meet the max by 28).

    I have an accountant of mine that has recommended I open a traditional IRA and after 8 months or so convert it into a Roth IRA. Apparently by doing this I keep the higher interest gained from a traditional IRA while having a Roth. (at least i think this is what i was being told, I’m still figuring this all out)

    Is this accurate? What would you recommend?

    Great article btw!

    1. Not exactly sure what your accountant was trying to do regarding opening up a traditional IRA and then converting to a Roth later on. What it will do is give you taxable income. However, income earned inside a Roth – is tax free, if taken at 59 1/2 or later. I think you should go back to your accountant for a clarification.

      At your age – I would recommend you being more agressive with your split – I think you should be 100% in stocks – certainly more than 60%.

      Putting in 17% of your income – That is GREAT! Keep up the good work!!!!!!!

      1. alison farrin

        Your accountant is aware that your IRA contribution is not “pre-Tax” or deductible due to your 401(k) participation and your income, nor, also likely due to your income is it eligible for it to be contributed directly as a Roth IRA. So, the loophole is that you put the $1000 (post tax) in your IRA and a few months down the road, convert it to a Roth account by paying the taxes on the account value at that time. So, let’s say it’s now worth $1005 dollars. Your basis is $1000, and the “tax conversion cost” is income tax on $5. Now you have a Roth account growing tax free forever.
        You have a good accountant!

      1. After going over both articles I’ve changed my contributions to 5% bonds and 95% stocks and will only look into traditional IRA’s!

        Thanks for all the amazing info. On that note I’m also trying to get my parents to max out their 401k’s as they are only putting in 5% (company’s max match)

        In my mothers 401k she has about $300k with a conservative investment plan and my step dad has about $150k with a conservative investment plan as well. They both started saving a bit late and both plan to retire in only 6 years.

        After reading several of your articles it Does not look like they will have much to retire on.

        1. No problemo. I’m sure your parents can save much more than 5% too.

          It’s a great way to help them help you, for guess who will be helping your parents if they get into a financial bind?

          Best of luck and remember, nobody knows the future. You can’t really control your investing returns. What you can control is how much you save and where you asset allocate based on your risk tolerance.

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