Retirement account value vs. total contributions

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baw703916
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Retirement account value vs. total contributions

Post by baw703916 » Sat Feb 22, 2014 11:40 am

Having just received my annual TSP statement, I came up with an interesting number. What is the total current value of the investments based on my own contributions (I.e. neglecting the portion of the total account value which comes from the match) vs. the total amount that I have contributed?

The ratio turns out to be 1.45, meaning that every $100 I have put in has become $145. If the automatic and matching contributions are included, it becomes $198. About $16 of the $45 gain per $100 invested occurred in 2013.

This seems rather unimpressive. I have a nice account value, but this is actually more a result of contributing a lot rather than the investments giving great returns. And this is a retirement plan with minimal fees; a 1% expense ratio would have caused a dramatic reduction in the total gains over the 17 years since I started contributing. Nor did I do any ill-advised market timing. I kept funneling money into equities through the entire 2000-2003 and 2007-2009 downturns with never a second thought.

What I think this means is that if an investor doesn't have an low-cost plan and nearly perfect behavior, it's very difficult indeed to save an adequate amount in a 401(k) or equivalent.

Brad
Most of my posts assume no behavioral errors.

Louis Winthorpe III
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Re: Retirement account value vs. total contributions

Post by Louis Winthorpe III » Sat Feb 22, 2014 11:50 am

baw703916 wrote:Having just received my annual TSP statement, I came up with an interesting number. What is the total current value of the investments based on my own contributions (I.e. neglecting the portion of the total account value which comes from the match) vs. the total amount that I have contributed?

The ratio turns out to be 1.45, meaning that every $100 I have put in has become $145. If the automatic and matching contributions are included, it becomes $198. About $16 of the $45 gain per $100 invested occurred in 2013.

This seems rather unimpressive. I have a nice account value, but this is actually more a result of contributing a lot rather than the investments giving great returns. And this is a retirement plan with minimal fees; a 1% expense ratio would have caused a dramatic reduction in the total gains over the 17 years since I started contributing. Nor did I do any ill-advised market timing. I kept funneling money into equities through the entire 2000-2003 and 2007-2009 downturns with never a second thought.

What I think this means is that if an investor doesn't have an low-cost plan and nearly perfect behavior, it's very difficult indeed to save an adequate amount in a 401(k) or equivalent.

Brad


What percentage of your portfolio has been in equities throughout this period? Over 17 years, a 45% gain is pretty awful. You mentioned that $16 of the $45 came in 2013, but the market rose ~30% last year.

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Re: Retirement account value vs. total contributions

Post by 22twain » Sat Feb 22, 2014 12:11 pm

I've been in a TIAA-CREF 403(b) plan for nearly 30 years, with contributions always split 50/50 between their CREF Stock account and TIAA Tradtional account (similar to a stable-value fund). After 17 years, (total value / total contributions) was about 1.95. Now it's about 2.29. This includes both my contributions and my employer's contributions.

The 17-year point happened to be just after the peak of the dot-com boom. At the peak, the ratio was about 2.3. Then it fell to about 1.6, rose back to about 2.3 in 2007, and fell again to about 1.6 in 2009.
Last edited by 22twain on Sat Feb 22, 2014 12:26 pm, edited 3 times in total.

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Re: Retirement account value vs. total contributions

Post by baw703916 » Sat Feb 22, 2014 12:13 pm

Louis Winthorpe III wrote:

What percentage of your portfolio has been in equities throughout this period? Over 17 years, a 45% gain is pretty awful. You mentioned that $16 of the $45 came in 2013, but the market rose ~30% last year.


It was all equities, or nearly so, until about 2011. Now it's about 70% G Fund (roughly analogous to a stable value fund), but it was only in the last 6-8 months that I have put most of the account in that fund. My total portfolio is about 37% bonds; I moved money into the G Fund after equities had big gains last year.

It's also worth pointing out that the average length of time that the dollars I've contributed have been invested is much less than 17 years, probably it's something like 5 years. The first few years I contributed enough to get the full match (5% of salary), and for about the last 10 years I have maxed out contributions. There used to be both an absolute dollar limit and a 10% of salary limit to the contributions. Now the % salary limit has gone away. So both how much I have been able to contribute (after taking care of things like mortgage payments) and how much I'm allowed to contribute has gone up quite a lot over time (I'm now eligible for the catch-up contribution, which increases the limit another $5500).
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Re: Retirement account value vs. total contributions

Post by baw703916 » Sat Feb 22, 2014 12:23 pm

22twain wrote:I've been in a TIAA-CREF 403(b) plan for nearly 30 years, with contributions always split 50/50 between their CREF Stock account and TIAA Tradtional account (similar to a stable-value fund). After 17 years, (total value / total contributions) was about 1.95. Now it's about 2.29. This includes both my contributions and my employer's contributions.


Just curious if "total contributions" means both your own and the employer's? I get a similar number to the 1.95, but only by counting the employer's contributions as part of the total return. My statement doesn't actually give a lifetime total of all employer contributions, but I think that the ratio of

current account value/total contributions (self and employer)

would be pretty close to 1.45.
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Re: Retirement account value vs. total contributions

Post by 22twain » Sat Feb 22, 2014 12:37 pm

baw703916 wrote:Just curious if "total contributions" means both your own and the employer's?


Yes. My spreadsheet doesn't separate my contributions from employer contributions. I could probably do it, but I'd have to go back through all my quarterly statements again. :oops: As a guess, the total employer contributions are probably between 1/3 and 1/2 of my own.

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Re: Retirement account value vs. total contributions

Post by baw703916 » Sat Feb 22, 2014 1:05 pm

22twain wrote:
baw703916 wrote:Just curious if "total contributions" means both your own and the employer's?


Yes. My spreadsheet doesn't separate my contributions from employer contributions. I could probably do it, but I'd have to go back through all my quarterly statements again. :oops: As a guess, the total employer contributions are probably between 1/3 and 1/2 of my own.



Then I haven't done nearly as well as you did in the first 17 years...
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Re: Retirement account value vs. total contributions

Post by damjam » Sat Feb 22, 2014 1:15 pm

baw703916 wrote:What I think this means is that if an investor doesn't have an low-cost plan and nearly perfect behavior, it's very difficult indeed to save an adequate amount in a 401(k) or equivalent.

This is true. But the other important lesson is that you can't expect your returns to rescue you from not saving enough. (Whatsapp employees excepted)

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Re: Retirement account value vs. total contributions

Post by Five Scoop » Sat Feb 22, 2014 1:39 pm

The other important thing to consider in looking at your numbers is that you need to look at when contributions were made. If you did not invest the same amount in the early years of your career then you might not have had a large amount to compound over those 17 years.

For arguments' sake if your total contributions over 17 years are $17,000 dollars then it makes a difference if that $17,000 was put in $1,000 every year or if you put in $500 per year for 16 years then $9,000 the last year.

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Re: Retirement account value vs. total contributions

Post by placeholder » Sat Feb 22, 2014 1:45 pm

It would be difficult for me to even determine assuming I wanted to as I contributed significant amounts of after tax money which eventually got rolled out to Roth but in general the 401k has always been heavily in fixed income so I'd expect that the growth numbers would be moderate regardless.

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Re: Retirement account value vs. total contributions

Post by tigermilk » Sat Feb 22, 2014 3:24 pm

That does seem rather poor. For myself, it's been $100 turning into $267 over my nearly 20 years of contributions. I was in the C fund only until the S and I came into existence. I've not contributed to the G fund the last 20 years. Like you, I don't know how in ny account comes from the matching - I could get on the TSP site and dig through the data,

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Re: Retirement account value vs. total contributions

Post by sscritic » Sat Feb 22, 2014 3:34 pm

22twain wrote:
baw703916 wrote:Just curious if "total contributions" means both your own and the employer's?

Yes. My spreadsheet doesn't separate my contributions from employer contributions. I could probably do it, but I'd have to go back through all my quarterly statements again. :oops: As a guess, the total employer contributions are probably between 1/3 and 1/2 of my own.

TIAA can tell you the separate totals (Account Home tab; Account Summary, box in upper right - Life-To-Date Contributions). Right now, employer is 1.9% for me. Of course, this ignores my Rollover IRA.
We track how much you have contributed to each investment over the lifetime of your account. When you transfer money from one investment to another or make a withdrawal, the contribution amount is moved or withdrawn pro rata. Rollovers from another account are not included in the life-to-date contribution amount.

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Re: Retirement account value vs. total contributions

Post by baw703916 » Sat Feb 22, 2014 3:58 pm

tigermilk wrote:That does seem rather poor. For myself, it's been $100 turning into $267 over my nearly 20 years of contributions. I was in the C fund only until the S and I came into existence. I've not contributed to the G fund the last 20 years. Like you, I don't know how in ny account comes from the matching - I could get on the TSP site and dig through the data,


If you look at your account value, the default display is balance by fund. If you click on the balance by contribution tab, it will show how much of the current value comes from your own contributions (traditional and Roth) and how much is agency automatic and matching.
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Re: Retirement account value vs. total contributions

Post by tigermilk » Sat Feb 22, 2014 4:12 pm

baw703916 wrote:
tigermilk wrote:That does seem rather poor. For myself, it's been $100 turning into $267 over my nearly 20 years of contributions. I was in the C fund only until the S and I came into existence. I've not contributed to the G fund the last 20 years. Like you, I don't know how in ny account comes from the matching - I could get on the TSP site and dig through the data,


If you look at your account value, the default display is balance by fund. If you click on the balance by contribution tab, it will show how much of the current value comes from your own contributions (traditional and Roth) and how much is agency automatic and matching.

Yes, but that is contribution with growth included. I have no idea how much $ was matched every paycheck or year. That is, in 2013 I know how much extra was put in there. !999? I don't want to dig through data to see what the 5% total contribution in baseline $ was.

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Re: Retirement account value vs. total contributions

Post by baw703916 » Sat Feb 22, 2014 4:24 pm

tigermilk wrote:
Yes, but that is contribution with growth included. I have no idea how much $ was matched every paycheck or year. That is, in 2013 I know how much extra was put in there. !999? I don't want to dig through data to see what the 5% total contribution in baseline $ was.


Right, I don't know that number either. Although since all dollars are allocated the same way, the return should be similar for your contributions and the employer contributions. It could be a little different to the extent that the ratio of the two has changed over the years.
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Re: Retirement account value vs. total contributions

Post by jimb_fromATL » Sat Feb 22, 2014 5:15 pm

baw703916 wrote:Having just received my annual TSP statement, I came up with an interesting number. What is the total current value of the investments based on my own contributions (I.e. neglecting the portion of the total account value which comes from the match) vs. the total amount that I have contributed?

The ratio turns out to be 1.45, meaning that every $100 I have put in has become $145. If the automatic and matching contributions are included, it becomes $198. About $16 of the $45 gain per $100 invested occurred in 2013.

This seems rather unimpressive. I have a nice account value, but this is actually more a result of contributing a lot rather than the investments giving great returns. And this is a retirement plan with minimal fees; a 1% expense ratio would have caused a dramatic reduction in the total gains over the 17 years since I started contributing. Nor did I do any ill-advised market timing. I kept funneling money into equities through the entire 2000-2003 and 2007-2009 downturns with never a second thought.

What I think this means is that if an investor doesn't have an low-cost plan and nearly perfect behavior, it's very difficult indeed to save an adequate amount in a 401(k) or equivalent.

Brad


Maybe I'm not following you but according to a quick calcuation using averages, it seems to me that:

If you contributed $100 per month for 17 years and your $20,400 contributions resulted in $20,400 x 1.45 you'd have $29,585. That's an annual average APY of 4.121%. I'll grant that is not very impressive, since the S&P 500 averaged better than 7% for the last 17 years through 2013.

But If your match resulted in having 20400 x 1.98 = $40,392 that's an average APY of 7.28%. You match increased your average annual earnings by 3.16%, which is an average annual return that was 76.76% better every year. A 76.76% better return for free every year seems pretty impressive to me.

You'd need to use the IRR function or probably a spreadsheet table with goalseek to determine the true rate of return if you were contributing a lot less in the early years.

jimb

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