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110%er [5669]
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Avg 401(k) Balances
Feb 4, 2021, 4:42 PM
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Got onto this after tigerdave2® posted about the stock markets.
These average balance figures seem low for people in their 50s and 60s. $174k and $195k. Are people investing in money market accounts or what? My 15-year return is close to 15%. At 15% you double your money in about 5 years. Nearly everyone should be maxing out at $18k/yr and $24k/yr (whatever the max is these days), and certainly maxing out their company contribution.
https://www.thestreet.com/retirement/401k/average-401k-balance?
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Lot o points [155799]
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psssssst.
Feb 4, 2021, 4:48 PM
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Almost no one maxes out. If they did, Dave Ramsey wouldn't have a job.
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All-In [40925]
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Max out your company match is what he is saying
Feb 4, 2021, 5:09 PM
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If you don't do that you are a moron. 100% return on investment tax free is the bomb.
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Lot o points [155799]
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No, I'm saying on a larger scale,
Feb 4, 2021, 5:18 PM
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If people were savvy enough with their money to max out the IRS contribution, presumably they wouldn't be calling him asking if they are ok with a $750/month lease payment on a $50k car while making $36k/year.
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All-In [46816]
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Why would anybody ask about that kind of car payment?
Feb 5, 2021, 8:09 AM
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of course it's ok
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All-TigerNet [13098]
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Re: Avg 401(k) Balances
Feb 4, 2021, 4:50 PM
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No one saves anymore. One bonus though; part of Biden’s retirement plan will decrease social security payments to those who contributed more into a 401k. Basically if you are responsible, you lose your social security. I really hate SS, and wish I could opt out.
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Hall of Famer [24474]
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In this case, the median is more important than the average.
Feb 4, 2021, 4:58 PM
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To further your point, the median 401 for the 60+ was only 62K. If you look up average and median net worth, you see the same issues, probably because too many people of that age still have mortgages.
With no mortgage, there is no reason for people to not survive with SS if they have decent savings. But that appears to not be the case. SS was probably wrongly conceived and even more badly communicated and executed, giving people a sense of "I will retire on SS". The last chance to privatize it - which would have required people to view it as theirs and to manage it, rather than assuming an endless monthly check - was lost during the GW admin. Had we done that, balances would be higher and a huge entitlement would be off the govt books. The same people who said that was the wrong thing to do now talk about cutting SS.
Anyway, yes, boomers are retiring unprepared. Some say the next generations are even more lacking in planning, some they they are better. Don't know.
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All-In [40925]
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you can't privatize it because the responsible people
Feb 4, 2021, 5:12 PM
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will pull out and invest and the irresponsible people will pull out and spend every dime and not have anything at all to retire on.
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Hall of Famer [24474]
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That was not the proposal. Contributions would still be
Feb 4, 2021, 5:17 PM
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required, and access still restricted, in much the same rules that apply today. I know at least one - maybe there were more - of the Scandinavian countries famously referred to as socialist have done exactly that, very successfully.
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All-TigerNet [12591]
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Re: In this case, the median is more important than the average.
Feb 4, 2021, 5:17 PM
[ in reply to In this case, the median is more important than the average. ] |
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I think younger people are figuring it out that they better start investing sooner and to not even count on Social Security. It is always shocking to me to hear someone in their early 60's talk about retiring with a very small 6 figure retirement account. They have definitely not
thought things through. even more amazing are the folks I hear talking about Medicare, not realizing that they are still on the hook for 20% of what Medicare Part A doesn't cover, still have to pay for Medicare Part B and need a supplement to cover that 20% not covered, along with the probable need to purchase Part D. to cover drugs. If ignorance is bliss, there are an awful lot of blissful people for now. That will change.
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All-In [40925]
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When I graduated in 1989 I was pretty sure SS was not
Feb 4, 2021, 5:31 PM
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going to be there for me. I hope it will be. It is actually significant. Sooner or later they will base SS on net worth they are already trying to tax it. To tax it, you have to evaluate it. If it is evaluated you can decide how much SS you deserve based on your net worth.
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Hall of Famer [24474]
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The good news is that the shortfall is not huge, at the
Feb 4, 2021, 5:34 PM
[ in reply to Re: In this case, the median is more important than the average. ] |
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individual budget level. My wife and I do a few minor things, which we enjoy, to bring in a few dollars each month, and those few dollars allow us to spend a little less than we bring in every month from all sources, so our position gets a little more secure each month. Let's say a couple piddles around and brings in $1000/mo. That doesn't sound like much, but added to other sources it can be huge: the difference between losing 500/mo and gaining 500/mo is ginormous. $12,000/year is the equivalent of about $250,000 in assets. No, a retired couple can't do that forever, but it's not quite as gloomy as we make out.
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All-In [26497]
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Oculus Spirit [81889]
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I'm 6 times that average and feel like I don't have enough
Feb 4, 2021, 5:14 PM
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at my age. That is scary, does it account for people with multiple 401(k)s in different accounts from moving companies (ie: is this just a snapshot of average 401(k)s of people in Fidelity)?
Granted for younger people, need to maxing out a Roth, and then putting the rest into 401(k) that you can afford (absolute bare minimum is what your company match is).
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Hall of Famer [24474]
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That is a great question, which is why I referred to net
Feb 4, 2021, 5:24 PM
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worth, which is similarly gloomy. I don't know your age, but if you are 6 times the average you are likely okay, depending on when you want to retire, at what level, etc.
If one considers "sufficient" as not needing either medicare or ss to live a decent life, all bets are off. That takes a lot of money. We consider it "a lot" because we didn't privatize required savings, and we thus developed a culture of complete independence from from family. Kids are basically supposed to never see their parents again except at Christmas, and no culture has ever pulled that off for the long term. If SS had been implemented in such a way as to incentivize savings and self reliance, much of this would have been taken care of, I think.
IE, if you present value my expected SS payments, and give me that amount, I'm probably okay. Had SS been privatized, I think my balance would be higher than that present value figure.
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All-In [40925]
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I drilled into my kids heads that the absolute minimum
Feb 4, 2021, 5:27 PM
[ in reply to I'm 6 times that average and feel like I don't have enough ] |
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that you put in is 10%. I don't care what you make, that is what you make. After that I recommend a taxable brokerage account. You might need some cash one day to start a business or you might lose a job or whatever. It might not grow as fast as a roth, but if you look at the difference between a tax account and a roth account it's less different than you might expect. If you have to cash out early and pay 10% it really makes no sense.
Most 401ks will let you invest in either a traditional or a roth.
I would also invest in property as well for diversity. Maybe a lot for a future house or rental property.
You can also get a 15 year loan and when it's time to upgrade, rent the first house and let someone else finish paying it off.
Whatever your salary is, after 10% min in retirement take 85% and that is what you live on. You might have to get an older car or a smaller place but that extra 15% is a cushion in case you have to take a job with a bit lower pay for awhile. Invest or save the other 15% and use that for nicer things after you have saved for awhile.
No matter what, make sure your house is paid off by age 60 or make sure you have a big enough house to sell and downsize if you have to.
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Oculus Spirit [81889]
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Solid advice, my dad was similar.***
Feb 4, 2021, 5:30 PM
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Hall of Famer [24474]
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Rock Defender [53]
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Hall of Famer [22940]
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HSAs also a good option for saving
Feb 5, 2021, 11:36 PM
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I like your order, but would rank an HSA better than super funding life insurance. Withdrawals for medical expenses are tax free.
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Rock Defender [53]
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Re: HSAs also a good option for saving
Feb 6, 2021, 12:27 AM
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Orange Blooded [4679]
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Re: I drilled into my kids heads that the absolute minimum
Feb 4, 2021, 8:31 PM
[ in reply to I drilled into my kids heads that the absolute minimum ] |
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Neal I have a question for you. You said you deal in some properties. I have an ongoing debate with my financial planner about investing in raw land. Do you have any experience or an opinion?
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Rock Defender [53]
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Re: I drilled into my kids heads that the absolute minimum
Feb 4, 2021, 9:42 PM
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All-In [40925]
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financial planners get paid on a percentage of the
Feb 5, 2021, 2:56 AM
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investment. They will never be in favor of taking large amounts of money out of investment accounts to invest in something else. In 2000 and again in 2007 the stock market took a dive and then took another 6 or 7 years to get back to even. Diversification is good. All investments have some risk.
If you are are retired or close to retiring and you have too much in equities and the market tanks and you still have to take money out while the market is tanking to live on it can really hurt. Likewise, if the property market is tanking you darn sure don't want to sell. Property is extremely non liquid. If you have many years to invest property, it can be good investment, they don't make more land.
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Orange Blooded [4679]
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Re: financial planners get paid on a percentage of the
Feb 5, 2021, 7:08 AM
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T3 and Neal thank you for your thoughts. Yeah, T3, I would definitely keep land on the speculative side of the portfolio. Neal, the fact that land is so nonliquid is the reason my planner hates it. He’s actually my best friend so I think he really hates the investment rather than just trying to keep my whole portfolio in his corner. But as you say, they don’t make more land. So, it’s at least interesting to me.
Neal, I know you are correct about properties that produce income but I really want hands off investments if I can. I guess I’ll just keep my eyes open. I’ve made just 3 real estate investments in the past 30 years and hit 3 home runs. I was a baseball player so my head says statistically it’s time fir me to strike out!! So, I’m cautious. Lol.
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Lot o points [155799]
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Nope, not always.
Feb 5, 2021, 8:03 AM
[ in reply to financial planners get paid on a percentage of the ] |
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I have a for-fee planner that I pay a lump sum every year....there's no commission or percent of money managed in play, and he has a legal fiduciary duty to offer advice that he genuinely believes is in my best interest. If there's an option outside of the market that makes sense, we'll discuss it honestly.
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Orange Blooded [4679]
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Re: Nope, not always.
Feb 5, 2021, 9:43 AM
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That makes a lot of sense!!
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Rock Defender [53]
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That is the correct statement
Feb 5, 2021, 12:25 PM
[ in reply to Nope, not always. ] |
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Orange Blooded [4679]
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Re: That is the correct statement
Feb 5, 2021, 12:51 PM
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Very good advice.
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Lot o points [155799]
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You'll be fine
Feb 4, 2021, 5:39 PM
[ in reply to I'm 6 times that average and feel like I don't have enough ] |
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Average historical market return is something like 10.5%, and there's been some serious catastrophes interwoven along the way.
Most advisors I've had were very comfortable with using a 6.5-7% return projection when calculating projected retirement-age balances, and my current guy, whom I really trust, is very conservative and calculated it at 5.5% to be safe.
Use those and you should have as good a chance at predicting the future financially as you're gonna have.
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All-In [34486]
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I'm 32 and have almost that much
Feb 4, 2021, 5:32 PM
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Those old people need to pull themselves up by their bootstraps if you ask me.
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All-TigerNet [13098]
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Re: I'm 32 and have almost that much
Feb 4, 2021, 6:51 PM
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Wait...wait...wait a minute. There are illegals that need healthcare, student loans that need paying, and you voted for higher taxes that you can send in now. Why are you hoarding that money?
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CU Medallion [73569]
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Best thing happened when i changed jobs
Feb 4, 2021, 6:31 PM
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Tranfered to ira and got 35 and 50% returns the last 2 yrs. Im looking pretty good for retirement now
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All-TigerNet [13098]
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Orange Blooded [4016]
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Re: Avg 401(k) Balances
Feb 4, 2021, 7:25 PM
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And yet Jimmy Carter did better with annual GDP growth. Is the stock market really an accurate measurement of economic success?
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Rock Defender [53]
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Re: Avg 401(k) Balances
Feb 4, 2021, 7:44 PM
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Orange Blooded [4679]
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Re: Avg 401(k) Balances
Feb 4, 2021, 7:56 PM
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Carter’s economy better than Trump? Ok Joe. Lol.
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Orange Blooded [4016]
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Re: Avg 401(k) Balances
Feb 4, 2021, 8:37 PM
[ in reply to Re: Avg 401(k) Balances ] |
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LOL. Your "numbers" did not take into account the amount of debt accumulated by each POTUS. How did Trump fare as far as National debt/deficit?
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Rock Defender [53]
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Re: Avg 401(k) Balances
Feb 4, 2021, 8:46 PM
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Orange Blooded [4016]
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Re: Avg 401(k) Balances
Feb 5, 2021, 6:40 AM
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Trump added 8T to the national debt. Pretty impressive for a "business man" who claims to have engineered the greatest economy ever. Eh?
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Lot o points [155799]
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Oh that sucks for sure.
Feb 5, 2021, 8:23 AM
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$1.9T before the first month is over is pretty darned impressive though, you've gotta admit.
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Rock Defender [53]
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110%er [6634]
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Orange Blooded [2079]
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Trump was incapable of doing anything right.
Feb 4, 2021, 10:14 PM
[ in reply to Re: Avg 401(k) Balances ] |
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Do you even CNN? If I learned anything since 2016, it’s that Trump was perfectly imperfect. He breathes in CO2 and exhales Oxygen. Not human.
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110%er [8982]
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Re: Avg 401(k) Balances
Feb 4, 2021, 8:41 PM
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doesnt matter, it will be confiscated one way or another, where do you think these reparations and stimulus checks gonna come from
all that you need to do is print ballots every couple years, weak Rs wont get in your way
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Orange Blooded [2079]
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I’ll be making two reparations requests:
Feb 4, 2021, 10:19 PM
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My wife of course as a descendant of slaves in Georgia, and a formal request to Rome as the descendant of slaves of the Roman Empire. It’s time to hold Italy accountable.
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Orange Blooded [2079]
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If I can trace my wife’s origins far enough Cairo is on deck
Feb 4, 2021, 10:26 PM
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Those pyramids weren’t built by unions.
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Hall of Famer [22940]
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Yes, these seem shockingly low for my current circle
Feb 4, 2021, 11:07 PM
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However there are plenty of folks where I grew up that may not hit these level or work at jobs where retirement is not offered.
I can only hope this doesn't solve for people with multiple accounts, investments outside retirement, pensioners that haven't bothered saving, or folks that work at jobs that don't offer retirement (and are hopefully saving elsewhere).
Net worth is the better measure, but those figures are also super low. There's lots of poor folks out there outside our bubble.
My wife hasn't worked in over 10 years and her balances are above these levels. Just riding the stock market gains.
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Rock Defender [53]
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Re: Yes, these seem shockingly low for my current circle
Feb 4, 2021, 11:34 PM
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Hall of Famer [22940]
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I do not work with investors
Feb 4, 2021, 11:52 PM
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Tons of poor folk experience in extended family and where I spent my childhood. My current circle are typically in very different circumstances.
It is very sad that folks are unable to save more for a variety of circumstances. They miss the feeling of safety and security.
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110%er [8982]
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Re: I do not work with investors
Feb 5, 2021, 9:49 AM
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i know a Guy who can help
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CU Medallion [55732]
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that's not much, but it's not surprising either.
Feb 5, 2021, 7:41 AM
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We're doing all we can to max out but also maintain a decent cash buffer.
Thing is, diversification is hard to achieve now. Yes, the market is up, but so much of it is tech stocks and there are no safe shelters for balance that make sense unless you want to pay for puts.
So a cash pile is a wise move. We do ahhite, but it's not like we can easily max out the savings and have huge cash cushion at the same time.
Regardless, I feel reasonably good about our nest egg.
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Lot o points [155799]
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Friend, I'd like to send you a pamphlet showing you
Feb 5, 2021, 8:26 AM
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how that nest egg can become a legacy for generations to come through the magic of cryptocurrency day trading. It's easy and risk free, and in a matter of minutes you can be working your way towards financial freedom.
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CU Medallion [55732]
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Too late. I'm way up in crypto, AMC, silver, GameStop, etc.***
Feb 5, 2021, 9:45 AM
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All-In [40656]
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Im right below that at 31
Feb 5, 2021, 8:55 AM
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and I am almost to the point of losing sleep over it. Had a massive change in financials with the baby coming along, so I stress about money now more than before.
But we also have that large of a nest egg in savings, so even though that money isn't working for us, we have nearly doubled up those values. Still don't feel good and should be doing more.
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CU Medallion [55732]
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Which brings up a point. Near 0 interest rates can't help us
Feb 5, 2021, 9:51 AM
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long term, but they are one of the few QE tools the Fed has to keep this house of cards standing.
Your cash can earn you almost nothing. OTOH, you can borrow money for almost nothing.
We all know fiat currency is based on, wait for it...nothing, but where we are now puts that concept on steroids.
Some people I respect like Mark Cuban say hey, let's goose the economy by giving people large amounts of cash but let's NOT do a long-term UBI. He argues the short-term goosing is sound monetary policy. I am not so sure, but I am sure when the Big Four tech companies have amounts of wealth that are unheard of, and the average person can't make any money other than by buying a piece of them in the market, that is not good in the long run.
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110%er [5669]
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Re: Avg 401(k) Balances
Feb 5, 2021, 9:04 AM
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Someone referenced a 15-year loan...I was lucky enough to do that on my first house. It was a huge shot in the arm as a new married couple starting out.
We lived in the house 5+ years and it appreciated decently. Between the appreciation and the equity we built up, the jump to the next larger house was not painful.
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50
