What value should my 401k be at age 54?

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PaunchyPirate
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What value should my 401k be at age 54?

Post by PaunchyPirate » Sat Dec 03, 2016 4:11 pm

I am age 54 and have been maxing out my 401k for many years. I honestly cannot recall if I have always maxed it out, but certainly for the last 20-25 years I have been. I'm wondering if there are any websites out there that allow you to see how a well-invested 401k could have/would have/should have performed through the years. For example, what is a typical current 401k balance for someone of various ages assuming you maxed it out along the way. Granted, the investments you chose through the years impact this as do employer matches. I know in my earlier years, I chased what appeared to be higher return options in my plan. But those also often had higher expense ratios and I didn't know much about that back then. Now, I focus my investments in very low cost Vanguard index options. I've found articles about what the average American has in their 401k. But are there any more advanced details out there? I'd love to know if I have done "good", "bad" or "ugly".

livesoft
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Re: What value should my 401k be at age 54?

Post by livesoft » Sat Dec 03, 2016 4:36 pm

Between $500,000 and $1,500,000 I would think. Also, matching can make a big difference.

My spouse and I have always contributed the same max amounts, but plan expenses and matches have been quite different, so our current total values are quite different.
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arcticpineapplecorp.
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Re: What value should my 401k be at age 54?

Post by arcticpineapplecorp. » Sat Dec 03, 2016 4:42 pm

Like you said there are many variables that affect what value a 401(k) has at age 54 (even assuming maxing it out yearly), some of which you've mentioned:

1. expense ratio
2. asset allocation (mix of stocks/bonds and any other assets like commodities, real estate, etc.)
3. employer match
4. time period

Any of these variables will change how one does vs. another even keeping the other variables constant. For instance assume two people max their 401(k)s each year. They will still end up with different account values if one pays higher expenses than the other, or if one had a higher rate of return due to asset mix than the other. If one got a higher employer match than the other and even the time period is very important. One who invested from 1980-1999 probably wound up with a much higher balance than someone who invested from some other 20 year period (in which either/or stock returns were not as generous or interest rates were lower). Time is the luck factor, nothing you can really do about that.

So what you have is a reflection on what you earned based on: 1. how much you invested (and what match you got), 2. how long you invested (over what time period), 3. what return you got on your investment over that time (mix of assets, chosen level of risk, and what expenses you paid along the way because costs are a drag on performance).

Not sure why you want to compare against someone else. The numbers will likely be different for very good reasons. And besides what's done is done. You got what you got. Could you have done better? Possibly, if you took more risk, or lowered your costs or started investing in a different time period. You see this line of thinking is not particularly useful.

You can go to http://www.portfoliovisualizer.com to see what asset classes earned over different time periods if you want. I think I'd focus on the future rather than the past. For instance, are you invested properly (asset allocation), are you keeping your fees the lowest you can, etc. Good luck. Hope that helps.
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

Minot
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Re: What value should my 401k be at age 54?

Post by Minot » Sat Dec 03, 2016 4:43 pm

Is this what you're looking for?

retire57
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Re: What value should my 401k be at age 54?

Post by retire57 » Sat Dec 03, 2016 4:48 pm

Great question and, as others have said, lots of variables to consider in the answer.

On a related note, if you want to compare your net worth with others, see NetWorthIQ: https://www.networthiq.com The site includes comparisons with parameters such as age, location, profession ...

You have to register, but it's free and you won't get spammed.

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arcticpineapplecorp.
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Re: What value should my 401k be at age 54?

Post by arcticpineapplecorp. » Sat Dec 03, 2016 4:54 pm

Minot wrote:Is this what you're looking for?
Nice site, but be the OP should be careful with this comparison. The website assumes maxing out 401(k) but also makes two important assumptions:

1. all monies invested were in the S&P500 (OP, is that how you invested?)
2. the graph assumes the end point was 12/2/15, which then assumes the starting point was 1988 (because the compounding is over 28 years time)...Did you start investing in 1998?

If the answer to either or both of these is "no" than the numbers on the graph are not going to match your account value. Yes the site does show what the account would be worth if you started in a different year, so that could be helpful, but again it doesn't take any additional matching money into account and we know that varies among employers. I just think the idea that someone is only invested in the S&P500 index fund solely the entire time (one's working life) is not reasonable. OP be careful with any comparisons you make. And don't be depressed if you don't have what you think you should just because some website says you'd have X amount (that's highly unlikely that anyone is 100% in U.S. stocks for decades, makes no changes whatsoever and never panics and sells at a loss).
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

sambb
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Re: What value should my 401k be at age 54?

Post by sambb » Sat Dec 03, 2016 5:00 pm

401k balance should be less important than total net worth, which is also dependent on lots of things.
I have read that about 5x-6x income is reasonable for net worth. It is highly variable though.

PaunchyPirate
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Re: What value should my 401k be at age 54?

Post by PaunchyPirate » Sat Dec 03, 2016 5:07 pm

OP here. Thanks for the input. I'm not one to overanalyze my current situation. I'm comfortable and happy with where I am. This was more of a curiosity type of question. The website article posted by Minot is pretty much what I was looking for, so thank you for that. I don't have quite as much as that timeline shows, but I'm also not 100% sure my first job (1985-1989) even had a 401k or if it did, did I contribute to it. Livesoft, thanks... I'm in the large ballpark you suggest. And I also have about twice as much in my taxable investment accounts than I do in my 401k.

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badbreath
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Re: What value should my 401k be at age 54?

Post by badbreath » Sat Dec 03, 2016 5:51 pm

“While money can’t buy happiness, it certainly lets you choose your own form of misery.” Groucho Marx

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smegal
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Re: What value should my 401k be at age 54?

Post by smegal » Sat Dec 03, 2016 5:54 pm

If you can get your net worth to 25X expenses then you will be financially independent using the 4% SWR rule. I think being financially independent is a good way to define 'should'. That is, I think it would be great if everyone was financially independent (not necessarily retired) by 54. So rather than just look at your 401k/net work you can look at both your numerator (net worth) and denominator (expenses). If you can make changes to your expenses that don't compromise your quality of life, that may be as fulfilling and motivating as increasing your net worth. Financial independence can be thought of as financial freedom and freedom is good. There are alot of resources out there for 1) increasing savings, 2) reducing tax burden, 3) reducing expenses, and 4) accessing tax deferred investments before age 59.5, and when combined the results can be amazing. Here are a few resources (I am not affiliated, but I am a big fan of these sites):

1) http://www.mrmoneymustache.com/2012/01/ ... etirement/

2) http://rootofgood.com/make-six-figure-i ... ay-no-tax/

3) http://www.mrmoneymustache.com/2015/01/ ... -spending/

4) http://rootofgood.com/roth-ira-conversi ... etirement/

Cheers :sharebeer

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blueblock
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Re: What value should my 401k be at age 54?

Post by blueblock » Sat Dec 03, 2016 8:26 pm

I turned 54 in 2006. While I don't remember my 401K value then, I was happy with it. What I certainly do remember, though, was its value two and a half years later. Suffice it to say, it qualified as "ugly."

More than anything else, I would say that I'm retired today because back then I had a well-considered asset allocation I knew I could sleep with, which allowed me to stay the course, which meant doing nothing except plowing in max contributions.

gwrvmd
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Re: What value should my 401k be at age 54?

Post by gwrvmd » Sat Dec 03, 2016 10:41 pm

If you want to retire with the same life style you have now, a general guideline is:
By 35 you should have saved an amount equal to your gross annual family income
By 45 ....3X family income
By 55.....6X family income
By 65.....10X family income
Another general guideline to see if you are on track.....By 55 the annual increase in the value of your saving should be more than your annual contribution...............Gordon
Disciple of John Neff

marcopolo
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Re: What value should my 401k be at age 54?

Post by marcopolo » Sun Dec 04, 2016 1:02 am

gwrvmd wrote:If you want to retire with the same life style you have now, a general guideline is:
By 35 you should have saved an amount equal to your gross annual family income
By 45 ....3X family income
By 55.....6X family income
By 65.....10X family income
Another general guideline to see if you are on track.....By 55 the annual increase in the value of your saving should be more than your annual contribution...............Gordon

Can you explain the rationale for thinking of needed saving as a multiple of income. The multiple you need is so dependent on your savings and tax rates. Someone makes $100k/yr, and saves $10k/yr needs very different multiple of income than someone who makes the same $100k/yr but saves $40k/yr. I have always viewed this as a multiple of annual spending.
Once in a while you get shown the light, in the strangest of places if you look at it right.

travellight
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Re: What value should my 401k be at age 54?

Post by travellight » Sun Dec 04, 2016 4:18 pm

I am underperforming according to the links provided. I am similar age to the op and I should be at 850k to 1.2 million and I am at around 770k. I have contributed the max for about 25 years.

Bkanneg
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Re: What value should my 401k be at age 54?

Post by Bkanneg » Sun Dec 04, 2016 6:00 pm

Just wondering, but is everyone including their spouses accounts as well in their calculations or is this just personal net worth? Our combined net worth is split basically 50/50 and seems to be in line with the recommendations here if combined.

randomguy
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Re: What value should my 401k be at age 54?

Post by randomguy » Sun Dec 04, 2016 6:40 pm

marcopolo wrote:
gwrvmd wrote:If you want to retire with the same life style you have now, a general guideline is:
By 35 you should have saved an amount equal to your gross annual family income
By 45 ....3X family income
By 55.....6X family income
By 65.....10X family income
Another general guideline to see if you are on track.....By 55 the annual increase in the value of your saving should be more than your annual contribution...............Gordon

Can you explain the rationale for thinking of needed saving as a multiple of income. The multiple you need is so dependent on your savings and tax rates. Someone makes $100k/yr, and saves $10k/yr needs very different multiple of income than someone who makes the same $100k/yr but saves $40k/yr. I have always viewed this as a multiple of annual spending.
People know what they make. They don't know what spend. For general audiences it is good enough. Obviously spending is better but if you don't know your spending it is useless.

Want to know what your 401(k) should be? Go back and look at how much you contributed and what you would have if you invested in something like a 70/30 portfolio (or whatever you think is reasonable) over the last 30 years and see how you are doing. The exact number will vary a lot depending on contributions (HCE, matches, income ,...) and when you could put the money in (i.e. a dollar invested in 1986 is worth a lot more than a dollar in 2006).

therub
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Re: What value should my 401k be at age 54?

Post by therub » Sun Dec 04, 2016 8:34 pm

marcopolo wrote:
gwrvmd wrote:If you want to retire with the same life style you have now, a general guideline is:
By 35 you should have saved an amount equal to your gross annual family income
By 45 ....3X family income
By 55.....6X family income
By 65.....10X family income
Another general guideline to see if you are on track.....By 55 the annual increase in the value of your saving should be more than your annual contribution...............Gordon

Can you explain the rationale for thinking of needed saving as a multiple of income. The multiple you need is so dependent on your savings and tax rates. Someone makes $100k/yr, and saves $10k/yr needs very different multiple of income than someone who makes the same $100k/yr but saves $40k/yr. I have always viewed this as a multiple of annual spending.
I can explain why it's useful to have a rule of thumb related to multiples of earnings.

Let's say I'm 35, as cited. I have zero idea what my spending level will be at the age of 55, or 65, when I may consider retirement. Also, retirement spending levels are usually different than working spending levels. For example - work related costs such as clothing, lunches, commuting, happy hours, keeping up with technology, etc, drop away. Things like debt service, mortgages, and even children-related costs may not exist in retirement.

I pay attention to this stuff, but most don't. Looking at multiples of spending simply isn't useful to most people in their prime working and family years, because it's just not relatable. However, I can directly relate to a multiple of earnings, and even though it's not as good of a metric, it is a number I know. I'd much rather have a less accurate rule of thumb for a number I know, than an accurate rule of thumb for a number that is unmeasurable.
Fees are the rub.

livesoft
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Re: What value should my 401k be at age 54?

Post by livesoft » Sun Dec 04, 2016 8:58 pm

Bkanneg wrote:Just wondering, but is everyone including their spouses accounts as well in their calculations or is this just personal net worth? Our combined net worth is split basically 50/50 and seems to be in line with the recommendations here if combined.
My numbers were for a single person, so would be double for a couple. Remember: This is about making maximum legal contributions every single year from the first job out of high school or college.
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PaunchyPirate
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Re: What value should my 401k be at age 54?

Post by PaunchyPirate » Mon Dec 05, 2016 3:44 pm

travellight wrote:I am underperforming according to the links provided. I am similar age to the op and I should be at 850k to 1.2 million and I am at around 770k. I have contributed the max for about 25 years.
Interesting. I'm the OP. I'm at 782k as of today. We'll be alright. :-)

MrDrinkingWater
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Re: What value should my 401k be at age 54?

Post by MrDrinkingWater » Thu Dec 08, 2016 6:01 pm

Sorry for chiming in late on this topic, but I was looking through topics I've missed recently. The OP might be interested in a book: Your Money Ratios, 8 simple tool for Financial Security, by Charles Farrell, published in 2009. I recall from when I read this book that the author had an equation or two for estimating how far ahead or behind one might be in saving for retirement. My local library has it on the shelf. Maybe your library does, too.

cherijoh
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Re: What value should my 401k be at age 54?

Post by cherijoh » Thu Dec 08, 2016 6:32 pm

marcopolo wrote:
gwrvmd wrote:If you want to retire with the same life style you have now, a general guideline is:
By 35 you should have saved an amount equal to your gross annual family income
By 45 ....3X family income
By 55.....6X family income
By 65.....10X family income
Another general guideline to see if you are on track.....By 55 the annual increase in the value of your saving should be more than your annual contribution...............Gordon

Can you explain the rationale for thinking of needed saving as a multiple of income. The multiple you need is so dependent on your savings and tax rates. Someone makes $100k/yr, and saves $10k/yr needs very different multiple of income than someone who makes the same $100k/yr but saves $40k/yr. I have always viewed this as a multiple of annual spending.
Rules of thumb based on income instead of expenses also can lead to ridiculous conclusions. If a couple has a child and one parent decides to stay at home, their family income may decrease significantly while their nest egg stays the same. They now have a higher multiplier of family income saved, but they certainly aren't closer to financial independence. On the other hand, if you switch jobs and get a bump up in salary, your multiplier will fall. But in this case you could be closer to financial independence if you decide to save more of your new, higher income.

KlangFool
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Re: What value should my 401k be at age 54?

Post by KlangFool » Thu Dec 08, 2016 6:39 pm

therub wrote:
marcopolo wrote:
gwrvmd wrote:If you want to retire with the same life style you have now, a general guideline is:
By 35 you should have saved an amount equal to your gross annual family income
By 45 ....3X family income
By 55.....6X family income
By 65.....10X family income
Another general guideline to see if you are on track.....By 55 the annual increase in the value of your saving should be more than your annual contribution...............Gordon

Can you explain the rationale for thinking of needed saving as a multiple of income. The multiple you need is so dependent on your savings and tax rates. Someone makes $100k/yr, and saves $10k/yr needs very different multiple of income than someone who makes the same $100k/yr but saves $40k/yr. I have always viewed this as a multiple of annual spending.
I can explain why it's useful to have a rule of thumb related to multiples of earnings.

Let's say I'm 35, as cited. I have zero idea what my spending level will be at the age of 55, or 65, when I may consider retirement. Also, retirement spending levels are usually different than working spending levels. For example - work related costs such as clothing, lunches, commuting, happy hours, keeping up with technology, etc, drop away. Things like debt service, mortgages, and even children-related costs may not exist in retirement.

I pay attention to this stuff, but most don't. Looking at multiples of spending simply isn't useful to most people in their prime working and family years, because it's just not relatable. However, I can directly relate to a multiple of earnings, and even though it's not as good of a metric, it is a number I know. I'd much rather have a less accurate rule of thumb for a number I know, than an accurate rule of thumb for a number that is unmeasurable.
therub,
<< Let's say I'm 35, as cited. I have zero idea what my spending level will be at the age of 55, or 65, when I may consider retirement.>>

<< I pay attention to this stuff, but most don't. Looking at multiples of spending simply isn't useful to most people in their prime working and family years, because it's just not relatable. >>

I disagree. You are assuming that a person can be fully employed all the way up to the retirement age. That is not a remotely possible outcome for many of us. Hence, a plan based on the current annual expense that we could use at any time if and when we are forced to early retire make a lot more sense.

KlangFool

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