401k millionaires

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BW1985
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Re: 401k millionaires

Post by BW1985 »

willthrill81 wrote: Thu Jan 25, 2018 11:11 am
Nate79 wrote: Thu Jan 25, 2018 10:43 am
onourway wrote: Thu Jan 25, 2018 10:11 am I wonder what percentage of people with access to a 401k are maxing it out though? It's got to be low single digits.
The median household income in the US is ~$55k. As a family income there is no way most people can max out a 401k.
Mr. Money Mustache, Justin from Root of Good, the 'Frugalwoods' family, and many others would dispute the validity of that statement.

Don't forget that millions of American households live on $35-$40k a year. If they can do it, a family making $55k can do it too.

The problem is that lifestyle inflation impacts people of all incomes, including those with very high incomes.
I just listened to Justin's interview on choose fi podcast, I really enjoyed it. Seems like a really bright guy, wish he had his own podcast.
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Smorgasbord
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Re: 401k millionaires

Post by Smorgasbord »

celia wrote: Fri Jan 26, 2018 11:25 am So this "statistic" is not useful unless they break it down by account owner age:
# owners with $1M under age 30
# owners with $1M age 30-39
# owners with $1M age 40-49
# owners with $1M age 50-59
# owners with $1M age 60-69
# owners with $1M age 70-79
# owners with $1M over 80

I would guess 70-79 would have the most since the account would compound as long as the withdrawals are less than the growth, but many will/should have a very conservative AA at the upper ages so the growth will then slow down. Those at younger ages could be Inherited.
I would guess that the 50-59 range would have the highest number of 401k millionaires, since that is the age range of people who started working in the late 70s / early 80s, which is around the time 401ks were introduced. The older demographics probably have a significant number of pensions.
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MnD
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Re: 401k millionaires

Post by MnD »

TSP (federal 457 plan) pioneer (1987 start) and recent TSP $1M club per below.
I did all sorts of things wrong, especially in the first 15 years or so. Undercontributed, too conservative AA, some marketing timing, mixed politics and investing - you name it and I did it. But it worked out. I did not "max out" TSP contributions until 2011 - 24 years in! But we have 6 other investment accounts - it seems like a lot of feds have retirement funds in TSP and that's it.

31-year TSP XIRR 7.08% - pretty mediocre thanks to my less than optimum decisions.

Year, TSP Balance, contribution
End of
1987 $1,257 5% plus 5% match
1997 $67,200 10% plus 5% match
2007 $317,619 15% plus 5% match
2017 $1,031,567 Max including catch up plus 5% match.
70/30 AA for life, Global market cap equity. Rebalance if fixed income <25% or >35%. Weighted ER< .10%. 5% of annual portfolio balance SWR, Proportional (to AA) withdrawals.
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whodidntante
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Re: 401k millionaires

Post by whodidntante »

IlliniDave wrote: Fri Jan 26, 2018 11:50 am Well, I am not a 401k millionaire but I've needed a pair of commas for net worth for over a year now a recently got a second for the total of all my investment accounts.

If I ever get to be a 401k millionaire it will be many years after I retire (planning on checking out at 55) and before RMDs start drawing me down. I think I could get there if I worked an extra 10 years to 65, and the financial markets treated me benignly.

Unfortunately "millionaire" is a loaded word. I graduated HS in 1982. $1M today is < $400K that year (the first of my legal adulthood). That's a decent sum, but not the million bucks I dreamed of.
You get used to your wealth. I think at least some of the 1982 millionaires didn't feel wealthy, and worried about money at times. The world seems turbulent all the time.
Grogs
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Re: 401k millionaires

Post by Grogs »

My plan administrator (Schwab) gives statistics for where my 401k ranks against my peers, defined as age +/- 2 year's and salary +/- 5%. For someone in their mid-40s with a salary in the $120ks, here are some rough numbers:

n = 3500

401k balance:

Median $95k
$150k balance: 60th percentile
$300k balance: 82nd percentile
$500k balance: 95th percentile
Max. Balance: $600k

I'm not sure if the max balance is really the max, or just the 99th percentile, but bottom line is that at my age there are (virtually) no 401k millionaires, even though some of these people have undoubtedly been able to max their 401k for a couple of decades.

For contribution rates as a percent of salary:

15%: 91st percentile
10%: 70th percentile
5%: 40th percentile

It's hard to put too much emphasis on the 15% number, since 14-15% will get someone in this salary range to the $18.5k limit. When I set my contributions to 14%, it shows me as 82nd percentile, so ~20% appear to be maxing the pretax or Roth. 30% are contributing $12k or more, 60% are contributing $6k or more, and 40% are contributing < $6k per year. Since 5% doesn't get the full match in most plans, I suspect a lot of the < 5% group is really 0%. Some could be orphan plans (i.e., no contributions allowed) though.
Stormbringer
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Re: 401k millionaires

Post by Stormbringer »

Grogs wrote: Sat Jan 27, 2018 9:57 am My plan administrator (Schwab) gives statistics for where my 401k ranks against my peers, defined as age +/- 2 year's and salary +/- 5%.
Is that on their website somewhere?
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Mitchell777
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Re: 401k millionaires

Post by Mitchell777 »

I did not quite make it although I always maxed out in my 401K's. I used the 401K's almost exclusively for fixed income and kept equities out side of my retirement plans.
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willthrill81
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Re: 401k millionaires

Post by willthrill81 »

BW1985 wrote: Sat Jan 27, 2018 5:17 am
willthrill81 wrote: Thu Jan 25, 2018 11:11 am
Nate79 wrote: Thu Jan 25, 2018 10:43 am
onourway wrote: Thu Jan 25, 2018 10:11 am I wonder what percentage of people with access to a 401k are maxing it out though? It's got to be low single digits.
The median household income in the US is ~$55k. As a family income there is no way most people can max out a 401k.
Mr. Money Mustache, Justin from Root of Good, the 'Frugalwoods' family, and many others would dispute the validity of that statement.

Don't forget that millions of American households live on $35-$40k a year. If they can do it, a family making $55k can do it too.

The problem is that lifestyle inflation impacts people of all incomes, including those with very high incomes.
I just listened to Justin's interview on choose fi podcast, I really enjoyed it. Seems like a really bright guy, wish he had his own podcast.
Yes, every time I've heard him speak, he comes across as a very intelligent but humble guy. Granted, he has no mortgage, but he's been cruising and globe trotting with his family for years on around $30k a year. He is proof that it is possible to make $55k a year, max out a 401k, and still enjoy life very much.
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bligh
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Re: 401k millionaires

Post by bligh »

Grt2bOutdoors wrote: Fri Jan 26, 2018 8:01 pm
Not in NYC. Not even close to upper middle class.
Sure if you live in Manhattan or Brooklyn you wont get very far, but if you go to the suburbs you'd be okay. Anyway the boundaries are always going to be fuzzy. It is very difficult to pin down the exact number, circumstance and location at which a person transitions from being middle class to upper middle class. As with many things it is not just black or white but along a spectrum in shades of gray. A DINK household on $140K living in the suburbs would look very different to a family with 3 kids trying to make it in the city. Certain circumstances pull you closer to the "middle class" end of the spectrum, and other circumstances closer to the 'upper middle class" end of the spectrum.

Having said all that, a quick Google Search says that the median household income in NYC is ~50K. If you consider that to even be on the "lower middle class" (though by definition it IS middle class) you would have to define a VERY large distribution in incomes as all being in the same "middle class". The truth is a middle class household in NYC making $80K (again, comfortably above the median) is going to be living VERY differently from their neighbor making $140K. They are in different socio economic brackets. However, a household making $140K (just $60K more) is not going to (in my experience) look very different from a household making $200K (another $60K more). Sure they might have a fewer number of branded items in the wardrobe, or take vacations in slightly less expensive hotels, eat out a little less often, but in general they will be able to live a very similar lifestyle, enjoy very similar hobbies, and have similar opportunities and limitations. In fact, you could go another 60K and you still wouldn't see all that big a variance in lifestyle between someone making $140K and $260K. I think the transition to "affluent" starts somewhere in the 250-350K annual income range. Though these affluent households aspire to be the upper class or rich so still feel they are middle class. Perhaps you and I are referring to the same socio economic bracket but with different labels (ie what I consider affluent is what you consider upper middle class)? These numbers I am stating come from my own experience living in a VHCOL area similar to NYC. I am sure there are those living in LCOL areas shaking their heads and thinking this is nuts. $140K in a low cost of living area is not upper middle class, it's probably affluent.
Last edited by bligh on Sat Jan 27, 2018 12:18 pm, edited 3 times in total.
oilrig
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Re: 401k millionaires

Post by oilrig »

My employer matches 8% in the 401k if the employee contributes 6%. Ive only started contributing within the past 3-4 years and only contributing 6% to get the full match. My 401k value is around 100k and Im in my early 30's. If I stay for another 30 years and start contributing the IRS max I should reach $1MM+ in the 401 by retirement age. I interviewed with another company recently that already had a generous 401k match and they had an additional pension that consists of the company adding additional funds to their 401k. I could see their employees being 401k millionaires as well.
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Re: 401k millionaires

Post by Yohanson »

deltaneutral83 wrote: Fri Jan 26, 2018 10:13 am You really shouldn't see too many 401k millionaires from a whole lot of folks because the chances of them staying at the same job more than 10 years are just slim these days. The day after you leave your company you should be rolling that to a traditional IRA. If you roll old 401ks into new 401k's, well that's just most likely not a great option, going to be hard to beat the <10 bps I pay in a tIRA or rIRA at Schwab/Fidelity/TDA/Merrill/Etrade/Scott/VG.
I disagree. Most of my 401K options are <20 bps and some are <10 bps. Also, if you don't roll your old 401K into your current 401K, you won't be able to touch that money penalty free as early as age 54 as long as your retire from the company. I will be able to do that as early as Jan.1, 2019 even though I won't turn 55 until November of that year. I plan on going until 58 but I'll still be able to withdraw from my 401K at that time with no penalty.
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Re: 401k millionaires

Post by Grogs »

Stormbringer wrote: Sat Jan 27, 2018 10:00 am
Grogs wrote: Sat Jan 27, 2018 9:57 am My plan administrator (Schwab) gives statistics for where my 401k ranks against my peers, defined as age +/- 2 year's and salary +/- 5%.
Is that on their website somewhere?
I access my plan on workplace.schwab.com and it's right on the main (account overview) page down at the bottom. It looks like a speedometer guage with three wheels for income replacement percentage, balance, and savings rate.

Also, unrelated I thought of another headwind against my 401k ever hitting $1MM. I keep all of my bonds in the 401k because I keep stocks in the Roth IRA to get the biggest gain and stocks in the taxable account for tax efficiency. As a result, my 401k is almost 50% bonds. That will cut the expected gains significantly over the next 15-20 years before I retire.
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Earl Lemongrab
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Re: 401k millionaires

Post by Earl Lemongrab »

I would have mostly likely made it if I had less money. Due to the amount of assets I have in Roth IRA and taxable that are all stocks, the past ten years have steadily squeezed the 401(k) until it's about 90% fixed-income these days.
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willthrill81
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Re: 401k millionaires

Post by willthrill81 »

bligh wrote: Sat Jan 27, 2018 11:15 am
Grt2bOutdoors wrote: Fri Jan 26, 2018 8:01 pm
Not in NYC. Not even close to upper middle class.
Sure if you live in Manhattan or Brooklyn you wont get very far, but if you go to the suburbs you'd be okay. Anyway the boundaries are always going to be fuzzy. It is very difficult to pin down the exact number, circumstance and location at which a person transitions from being middle class to upper middle class. As with many things it is not just black or white but along a spectrum in shades of gray. A DINK household on $140K living in the suburbs would look very different to a family with 3 kids trying to make it in the city. Certain circumstances pull you closer to the "middle class" end of the spectrum, and other circumstances closer to the 'upper middle class" end of the spectrum.

Having said all that, a quick Google Search says that the median household income in NYC is ~50K. If you consider that to even be on the "lower middle class" (though by definition it IS middle class) you would have to define a VERY large distribution in incomes as all being in the same "middle class". The truth is a middle class household in NYC making $80K (again, comfortably above the median) is going to be living VERY differently from their neighbor making $140K. They are in different socio economic brackets. However, a household making $140K (just $60K more) is not going to (in my experience) look very different from a household making $200K (another $60K more). Sure they might have a fewer number of branded items in the wardrobe, or take vacations in slightly less expensive hotels, eat out a little less often, but in general they will be able to live a very similar lifestyle, enjoy very similar hobbies, and have similar opportunities and limitations. In fact, you could go another 60K and you still wouldn't see all that big a variance in lifestyle between someone making $140K and $260K. I think the transition to "affluent" starts somewhere in the 250-350K annual income range. Though these affluent households aspire to be the upper class or rich so still feel they are middle class. Perhaps you and I are referring to the same socio economic bracket but with different labels (ie what I consider affluent is what you consider upper middle class)? These numbers I am stating come from my own experience living in a VHCOL area similar to NYC. I am sure there are those living in LCOL areas shaking their heads and thinking this is nuts. $140K in a low cost of living area is not upper middle class, it's probably affluent.
At least in the U.S., most sociologists believe that occupational prestige and education are bigger drivers and indicators of social class than income. For instance, an English professor is generally believed to be of higher social class than an Alaskan crab fisherman, even though the latter likely has a higher income. That being said, it seems that most households with an income between $30-$100k are considered to be 'middle class' of one flavor or another.

Personally, I think that net worth should be considered as the fourth factor underlying social class (the other being occupational prestige, education, and income).
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Archimedes
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Re: 401k millionaires

Post by Archimedes »

I am not a financial professional, just a guy who has worked hard and been well paid for many decades. I have been contributing (and investing in a Boglehead fashion) the max to my tax protected space each year since the 80's. After the current market melt up, I now have a balance in the tax deferred retirement account of just shy of 5MM.

How did I get to this ridiculous number? In past years I had access to more than one retirement account as I had a side gig, and there were both employee contributions and employer contributions for both jobs. I had to be careful not to go over the allowed amount for employee deferrals when coordinating between two employers.

If the growth of my investments continues at a guesstimate of 6% per year, and I continue to defer at the over 50 catch up max, along with ongoing employer contributions, my balance will be in the neighborhood of 11MM when RMDs become mandatory.

I am looking for options to reduce income and estate taxes. Charitable contributions? Rolling to a Roth and paying the tax (despite a marginal rate of >40% stretching to the horizon)? Other options?

Having too much in the tax deferred retirement plan is clearly a first world problem.
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tainted-meat
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Re: 401k millionaires

Post by tainted-meat »

You can retire now and reduce your tax liability :D
Archimedes wrote: Sat Jan 27, 2018 5:32 pm I am not a financial professional, just a guy who has worked hard and been well paid for many decades. I have been contributing (and investing in a Boglehead fashion) the max to my tax protected space each year since the 80's. After the current market melt up, I now have a balance in the tax deferred retirement account of just shy of 5MM.

How did I get to this ridiculous number? In past years I had access to more than one retirement account as I had a side gig, and there were both employee contributions and employer contributions for both jobs. I had to be careful not to go over the allowed amount for employee deferrals when coordinating between two employers.

If the growth of my investments continues at a guesstimate of 6% per year, and I continue to defer at the over 50 catch up max, along with ongoing employer contributions, my balance will be in the neighborhood of 11MM when RMDs become mandatory.

I am looking for options to reduce income and estate taxes. Charitable contributions? Rolling to a Roth and paying the tax (despite a marginal rate of >40% stretching to the horizon)? Other options?

Having too much in the tax deferred retirement plan is clearly a first world problem.
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Re: 401k millionaires

Post by Archimedes »

tainted-meat wrote: Sat Jan 27, 2018 5:39 pm You can retire now and reduce your tax liability :D
I am having too much fun at work to stop. We are creating some pretty great things and I am not working for the money. Plus I have full control of my part-time schedule and unlimited vacation whenever I want it.

But I do have to find a way to deal with the funds that keep building up in my checking and investment accounts. :wink:
island
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Re: 401k millionaires

Post by island »

livesoft wrote: Thu Jan 25, 2018 10:08 am I saw a similar report a few weeks ago. My thought then is the same as now: Anybody who was contributing the maximum legal contributions from about age 30 to age 60 will have 7-figures in the total of their 401(k)/403(b) (and derived rollovers from them).

Basically, it was just a matter of time, inflation, and the contribution rules changing.
Agree, even if that 30 year old started contributing almost 30 years ago when the contribution limit was much lower than now, % of salary allowed to contribute was lower, and salary was too low to reach the magic max out number for several years.
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Re: 401k millionaires

Post by Stormbringer »

Portfolio7 wrote: Thu Jan 25, 2018 3:28 pm I assume they grabbed only individual accounts > $1M? I imagine the number may be significantly higher if you include households and multiple accounts.
The Economic Policy Institute did a study in 2016 that looked at total retirement account savings by family. The threshold for the top 1% was $1,080,000.
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JoMoney
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Re: 401k millionaires

Post by JoMoney »

For anyone who wants to sift through the data, there's also the Fed Survey of Consumer Finances (SCF) https://www.federalreserve.gov/econres/scfindex.htm , which has details on size of retirement accounts grouped various ways.
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TravelforFun
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Re: 401k millionaires

Post by TravelforFun »

youdiditr2 wrote: Fri Jan 26, 2018 12:11 am
2Birds1Stone wrote: Thu Jan 25, 2018 8:02 pm I am about to hit $100k right before my 31st Birthday.

The only way I will ever see $1M in there is through compounding. Which over the course of 3 decades, should End up somewhere between $500-750k in today's dollars.
my 401(k) was $120k in 2009, after it dropped from $200k from 2008.

It's now $700k. Compounding is crazy!
May not be all compounding. Did you add a significant amount of money to your 401k? Since your money increased 5.8 times over a span of 8 years, you would have an atonishing 25% increase per year if no new contributions were added.

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Garco
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Re: 401k millionaires

Post by Garco »

Some posters here appear to assume that only the very high earners can contribute 15% to a 401k.

This doesn't take into account that some employers mandate 10-12% contributions, often including a partial employer match.

Back when I was early in my career in the 1970's, I took a position in which my starting salary was $17,000 (including bonus pay). (This would be $78,000 annual salary in 2017 dollars. Inflation==>A 2018 1-millionaire would only have $218,000 in 1975 dollars.)

My employer required that I contribute 5% of my gross salary to a 403b plan, while the employer match was 10%. So, between the mid-1970's and my retirement 3 years ago I always added the equivalent of 15% of my salary to the plan. Over 40 years, and with salary growth, at retirement my 403b was worth more than $2 million. I supplemented this with contributions to personal savings and supplementary retirement accounts (to get our kids through college without any debt on their part or ours).

I was very lucky to have: a) an employer with a commitment to the employees' future; b) an employer I liked and wanted to work for, and gave me good raises over the years; and c) good health and modest spending habits (1 house, 1 wonderful spouse, 1 car at a time, very few "toys" or extravagant vacations).
Last edited by Garco on Sun Jan 28, 2018 4:43 pm, edited 1 time in total.
am
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Re: 401k millionaires

Post by am »

Stormbringer wrote: Sun Jan 28, 2018 7:47 am
Portfolio7 wrote: Thu Jan 25, 2018 3:28 pm I assume they grabbed only individual accounts > $1M? I imagine the number may be significantly higher if you include households and multiple accounts.
The Economic Policy Institute did a study in 2016 that looked at total retirement account savings by family. The threshold for the top 1% was $1,080,000.
Is this 401ks, 457b, Roths or all investments to include taxable? In any case, were in such a bubble here on bogleheads it’s ridiculous :D
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Re: 401k millionaires

Post by texasdiver »

I'm not sure how useful it is to look at single account balances with a specific firm. My wife and I have been consolidating our accounts like mad and we still have 9 different tax advantaged accounts between us and can't get it further reduced from that. And this is after rolling 4 or 5 legacy accounts from previous jobs into our current accounts.

I have a TSP account legacy account, a current 457 account with the State of WA, a Roth with Vanguard, and an HSA.
My wife has a rollover IRA with Vanguard, a Roth with Vanguard, and current 401k with Fidelity, a cash balance plan, and an HSA.

There's no real good way to consolidate further without taking on unnecessary additional fees.

Put everything together and we cross into 7 figures but only one account exceeds $500K

What I'd really like to see is estimates of TOTAL tax-advantaged retirement savings by income level and age so that we could see how we compare apples to apples.

Also I'd like to see the average or median contribution amounts for different levels of income and age.

So that we could understand, for example, that the median 50 year old couple with annual income of say 150K is contributing X-amount to their retirement and has Y-amount saved for retirement.
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Re: 401k millionaires

Post by livesoft »

A place for statistics on retirement plans is

ICI.org

Although a quick look doesn't find what you are looking for, it may still be there somewhere.

Here is something: https://www.ici.org/pdf/per23-05.pdf
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Portfolio7
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Re: 401k millionaires

Post by Portfolio7 »

texasdiver wrote: Sun Jan 28, 2018 4:45 pm So that we could understand, for example, that the median 50 year old couple with annual income of say 150K is contributing X-amount to their retirement and has Y-amount saved for retirement.
This data is hard to come by, and it's rare that anyone puts it together in a comprehensive format that allows one to look at it this way.

I remember some data (because I had the same question, and your situation seems to corresponds with mine fairly closely) that among 45-49 year olds, earning about $150-200K (not sure if I got that range quite right), no more than 3% of the entire population have $1M in retirement assets saved, and if you move up to 50-54 year olds it jumps to 7% or so, though I may be +/- a percent or so. DW and I just hit all those thresholds - age 50, retirement assets $1M, total NW about $1.5M (there is a business in there, hard to value.)

I've always looked at those numbers and shook my head. I totally feel we're scrambling to save enough for retirement (let alone college etc), despite being in roughly the top 5% of savers at our age and income. BTW we're struggling to put away about 11% of our income (but we have special health needs in our family, and a trust we are trying to set up as a result, so we know that's part of the reason.) How do these people get by, let alone expect to retire? We recently hired a fee-only advisor (that specializes in families with long term health issues), and she said that's the most common thing she hears from clients.
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Flashes1
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Re: 401k millionaires

Post by Flashes1 »

wrongfunds wrote: Thu Jan 25, 2018 12:38 pm I recall when Mitt Romney had many millions in his 401K, some of us tried to figure out if it would be even possible to have vast amount in 401K account given the historical max limits on the annual contribution. I recall the conclusion was we needed to have FANG type equities purchased at pre-IPO prices in the retirement account to do that and it was not possible with total market indexed funds.

Anybody willing to unearth that discussion?
Not sure if anyone else responded, but it reached an "ungodly" value (I think it was over $25MM) by putting one of his, at the time, smaller private equity holdings in his Roth, which later greatly increased in value. Completely unfair, and I recall some talk that the gov. may try to one day tax it, but I'm sure it's been forgotten about to all but Mr. Romney's heirs.
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Re: 401k millionaires

Post by Sandi_k »

Portfolio7 wrote: Sun Jan 28, 2018 5:22 pm
This data is hard to come by, and it's rare that anyone puts it together in a comprehensive format that allows one to look at it this way.

I remember some data (because I had the same question, and your situation seems to corresponds with mine fairly closely) that among 45-49 year olds, earning about $150-200K (not sure if I got that range quite right), no more than 3% of the entire population have $1M in retirement assets saved, and if you move up to 50-54 year olds it jumps to 7% or so, though I may be +/- a percent or so. DW and I just hit all those thresholds - age 50, retirement assets $1M, total NW about $1.5M (there is a business in there, hard to value.)

I've always looked at those numbers and shook my head.... How do these people get by, let alone expect to retire?
Well, if they're anything like my brother-in-law or my sister, they plan to inherit from the previous generation, and use that as their retirement savings. :?
Tamales
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Re: 401k millionaires

Post by Tamales »

Article: If You Always Maxed Out Your 401(k) How Much Money Would You Have?

(curiously enough, it's dated tomorrow so I guess it just posted. maybe the author was inspired by this thread)

https://dqydj.com/always-maxed-out-your-401k/
TIAX
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Re: 401k millionaires

Post by TIAX »

onourway wrote: Thu Jan 25, 2018 10:11 am I wonder what percentage of people with access to a 401k are maxing it out though? It's got to be low single digits.
According to to Vanguard, in 401(k)s administered by it:
Maximum contributors
During 2016, only 10% of participants saved the statutory maximum dollar amount of $18,000 ($24,000 for participants age 50 or older) (Figure 36). Participants who contributed the maximum dollar amount tended to have higher incomes, were older, had longer tenures with their current employer, and had accumulated substantially higher account balances.

One-third of participants with incomes of more than $100,000 contributed the maximum allowed. Similarly, 4 in 10 participants with account balances of more than $250,000 contributed the maximum allowed in2016. One-sixth of participants older than 65 contributed the maximum.
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fire_rebel
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Re: 401k millionaires

Post by fire_rebel »

How Much Should People Have Saved In Their 401Ks At Different Ages -

https://www.financialsamurai.com/how-mu ... rent-ages/
Engineer250
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Re: 401k millionaires

Post by Engineer250 »

Sandi_k wrote: Sun Jan 28, 2018 7:36 pm
Portfolio7 wrote: Sun Jan 28, 2018 5:22 pm
This data is hard to come by, and it's rare that anyone puts it together in a comprehensive format that allows one to look at it this way.

I remember some data (because I had the same question, and your situation seems to corresponds with mine fairly closely) that among 45-49 year olds, earning about $150-200K (not sure if I got that range quite right), no more than 3% of the entire population have $1M in retirement assets saved, and if you move up to 50-54 year olds it jumps to 7% or so, though I may be +/- a percent or so. DW and I just hit all those thresholds - age 50, retirement assets $1M, total NW about $1.5M (there is a business in there, hard to value.)

I've always looked at those numbers and shook my head.... How do these people get by, let alone expect to retire?
Well, if they're anything like my brother-in-law or my sister, they plan to inherit from the previous generation, and use that as their retirement savings. :?
Friend of mine had to start living off his 401k when he got laid off in his 50s. He’s mid-60s now and he and has wife are definitely waiting for her father to die so they can inherit in order to make it through retirement. For the record, he could have easily gone back to work after a few years but has a difficult personality and not a great respect for authority so this isn’t entirely one of those sad “forced into early retirement” stories.
Where the tides of fortune take us, no man can know.
trueson1
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Re: 401k millionaires

Post by trueson1 »

Took me about 20 years to hit the $1M milestone with most coming after 50 YOA, maxing out 401K with 5% match and 5-8% profit sharing and mega back door Roth. Hoping to hit close to $2M by retirement.
CurlyDave
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Re: 401k millionaires

Post by CurlyDave »

FullYellowJacket wrote: Thu Jan 25, 2018 11:09 am ...To make this actionable for myself, is there a point where it doesn't make sense to save in a 401(k) anymore because I am going to be causing myself to have a very high income in retirement?
Until the marginal tax rate approaches 100% it is always better to have more income than less income. I can tell you from experience, that it is far, far better to have high income and high taxes than low income and low taxes.

While I do some big-picture tax optimization activities, my feeling is that absolutely minimizing my taxes would be bad for my overall well-being. What value do you put on your time? As a guy who retired a while ago, I can tell you that if I have a choice between spending 5 hours minimizing my taxes or 5 hours golfing, hunting, doing volunteer work, or any number of other things, that 5 hours minimizing taxes had better return more than $1k. A lot more.

I don't know how many days or hours I have left, but every day there are fewer. I suspect I have more $$ than I will ever spend, but my time is limited and not under my control.
Answering a question is easy -- asking the right question is the hard part.
Bacchus01
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Re: 401k millionaires

Post by Bacchus01 »

Age 44

Have always put in the max the plan allowed, but that hasn’t always been the max IRS limit. Early in my career the max plan level was like 20% of Pay, which did not meet the IRS limit. Matches have been roughly 40-50% of contributions.

In 21 years I have amassed about $915k in three 401k accounts.

My wife, who works full time from 1997 through 2004, but has worked very little since, has about $175K in her 401k.

Matches and compounding are huge
gwrvmd
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Re: 401k millionaires

Post by gwrvmd »

I definitely agree with CurlyDave's attitude in reference to higher taxes

If your taxes go up that means you made more money, or your spouse made more money, or your house went up in value, or your investments went up in value

If you are lucky, your taxes will go up again next year..............Gordon

Most of my assets are equities in tax deferred accounts. My taxes on RMDs are atrocious. If I am lucky, they will be even worse next year
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CyclingDuo
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Re: 401k millionaires

Post by CyclingDuo »

bligh wrote: Fri Jan 26, 2018 4:01 pm$140K household income is comfortably upper middle class. I would expect a household making $140K to be able to max out two 401Ks living in a high cost of living area with two kids. Even living on $100K pre tax they would be comfortably upper middle class.
As Dottie mentioned earlier in the thread, maximum contributions have climbed over the decades which needs to be factored into the equation.

We would agree, that if a household income of $140K is living in a LCOL area, and has not purchased too much house or too much transportation, keeps spending under control - maxing out the $18.5K for both, plus Roth IRA's for both should be doable on that salary. Emphasis being on the should. How many are able to pull that off with their lifestyle, kids, who knows?

Our household income was about $137K last year, will be about $141K this year. We live in a relatively LCOL area. Housing cost for principal/interest/insurance/taxes is only 11% of our gross income. No other debt.

What we have available for the two of us if we were able to take advantage of it all:

Spouse A
401a mandatory pension contribution of 7% of one salary which receives an employer 8% match
$24,500K Voluntary 403b pre-tax deduction
$24,500K Voluntary 457b pre-tax deduction
$6500 Roth IRA contribution

Spouse B
$24,500K 403b pre-tax deduction + 5% of salary match by employer
$6500 Roth IRA contribution

That's around $100K!

That's a lot of space to use and fill up for a household income of $140K, leaving not much of anything leftover thanks to the catch-up amounts for the 50+ age group. I would say that is not going to happen without a massive change in lifestyle on income alone.

The strategy for many people in their 50's and early 60's might involve having inherited some assets as that is the age many of us see parents pass on (especially in our 50's). In our case, inherited IRA's, and non-qualified annuities have to be taken each year. To cover the RMD's and gains on the annuities, maxing out the pre-tax space of everything that is available to us is a strategy to move funds from one tax deferred vehicle to another which is what we are doing this year by maxing out both 403b's, the 457b in addition to the required mandatory pension, required defined benefit plan, and both Roth IRA's. That's different, though, than the reason for responding to this post of a $140K household income being able to max out two 401K's. Regardless, felt it was worthy of mentioning since we see a lot of posts on the threads of couples our age inheriting some assets from the passing of parents.

Last year we both maxed out our 403b's ($24K each), plus the Roth IRA's as we began our empty nest years mid year. First year we were ever able to max them out thanks to the income jump and our now lower expenses. I don't think we could have done that prior to our mid 50's on salary alone. We were comfortable in our budget for many, many years with 15-20% going to retirement pre-tax, plus Roth IRA's prior to the empty nest on such a household income that slowly crawled its way up to the $118-130 range.

In short, there are a myriad of factors to consider for a $140K salary, age, cost of living, lifestyle, debt, kids/no-kids, absorbing taxable income or not, etc... as to being able to max out or not. Maxing out on a household income of $140K for two 401ks is 26% of gross for under age 50, and 35% for age 50+. The 25-26% range is solid FA for under age 50 couples. 15-20 years of doing that on a household income of $140K will go a long way to boosting that 401K balance. The 35% for over age 50 is also solid and doable for empty nesters to goose what they can with some catch-ups in their final years to perhaps decade of work.
"Save like a pessimist, invest like an optimist." - Morgan Housel | "Pick a bushel, save a peck!" - Grandpa
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fire_rebel
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Re: 401k millionaires

Post by fire_rebel »

The latest sign of investor euphoria: Sharing your 401(k) balance has become a thing

https://www.marketwatch.com/story/peopl ... 2018-01-29
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CyclingDuo
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Re: 401k millionaires

Post by CyclingDuo »

fire_rebel wrote: Tue Jan 30, 2018 12:29 pm The latest sign of investor euphoria: Sharing your 401(k) balance has become a thing

https://www.marketwatch.com/story/peopl ... 2018-01-29
Seems to have been a thing here on Bogleheads for over a decade...
"Save like a pessimist, invest like an optimist." - Morgan Housel | "Pick a bushel, save a peck!" - Grandpa
lazydavid
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Re: 401k millionaires

Post by lazydavid »

CyclingDuo wrote: Tue Jan 30, 2018 1:03 pm
fire_rebel wrote: Tue Jan 30, 2018 12:29 pm The latest sign of investor euphoria: Sharing your 401(k) balance has become a thing

https://www.marketwatch.com/story/peopl ... 2018-01-29
Seems to have been a thing here on Bogleheads for over a decade...
I think there's a bit of a distinction between sharing on a forum of like-minded investment-focused individuals who, for the most part, don't actually know each other; vs. posting it publicly on facebook under your real name for the world to see.
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CyclingDuo
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Re: 401k millionaires

Post by CyclingDuo »

lazydavid wrote: Wed Jan 31, 2018 5:29 am
CyclingDuo wrote: Tue Jan 30, 2018 1:03 pm
fire_rebel wrote: Tue Jan 30, 2018 12:29 pm The latest sign of investor euphoria: Sharing your 401(k) balance has become a thing

https://www.marketwatch.com/story/peopl ... 2018-01-29
Seems to have been a thing here on Bogleheads for over a decade...
I think there's a bit of a distinction between sharing on a forum of like-minded investment-focused individuals who, for the most part, don't actually know each other; vs. posting it publicly on facebook under your real name for the world to see.
Quote from the article linked...

Sharing financial information on Twitter, Reddit and Facebook FB, +1.11% may not be anything new -- there are many pages on Reddit dedicated to traders crowing about their latest trades and finance-oriented groups on Facebook where people post their money questions, concerns and goals (MarketWatch’s Moneyist group being one of them).


Those on Twitter, Reddit have username handles much like many do here at Boghleheads.org. The article said the Facebook postings were within finance-oriented groups where people may, like here, post questions, concerns and goals. Most of those are by invite or private groups you must join. Similar discussion groups to here, but I agree - using one's actual name - or a cute username - and doing that may not be the wisest choice on Facebook.

Regardless, similar behavior is displayed here including posts that have detailed figures of salary, tax bracket, amounts in every account displayed, posts about reaching two commas, and so on and so forth. Like the dedicated forums to finance, and the dedicated financial discussion groups on Facebook and other places including Motley Fool, Morningstar, etc... - I think we have to look at it in aggregate.
"Save like a pessimist, invest like an optimist." - Morgan Housel | "Pick a bushel, save a peck!" - Grandpa
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dziuniek
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Re: 401k millionaires

Post by dziuniek »

CryingHawaiian wrote: Thu Jan 25, 2018 6:39 pm
Nate79 wrote: Thu Jan 25, 2018 10:43 am
onourway wrote: Thu Jan 25, 2018 10:11 am I wonder what percentage of people with access to a 401k are maxing it out though? It's got to be low single digits.
The median household income in the US is ~$55k. As a family income there is no way most people can max out a 401k.
Just for fun:

Let's say that the median household is able to save 15% and put it towards a 401k. Let's say they didn't find out about bogleheads or sound investment strategies until later in life when they were 30 years old. They would need a 7.09% rate of return to be a 401k millionaire by the average U.S. retirement age of 62. There should be a lot more 401k millionaires in the U.S. than currently exist...

The issue is the saving rate is closer to 2% rather than 15%.
To get to a million bucks, the sort of return needed on the amount that the general population saves is difficult to achieve in one's lifespan.
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dziuniek
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Re: 401k millionaires

Post by dziuniek »

Grogs wrote: Sat Jan 27, 2018 9:57 am My plan administrator (Schwab) gives statistics for where my 401k ranks against my peers, defined as age +/- 2 year's and salary +/- 5%. For someone in their mid-40s with a salary in the $120ks, here are some rough numbers:

n = 3500

401k balance:

Median $95k
$150k balance: 60th percentile
$300k balance: 82nd percentile
$500k balance: 95th percentile
Max. Balance: $600k

I'm not sure if the max balance is really the max, or just the 99th percentile, but bottom line is that at my age there are (virtually) no 401k millionaires, even though some of these people have undoubtedly been able to max their 401k for a couple of decades.

For contribution rates as a percent of salary:

15%: 91st percentile
10%: 70th percentile
5%: 40th percentile

It's hard to put too much emphasis on the 15% number, since 14-15% will get someone in this salary range to the $18.5k limit. When I set my contributions to 14%, it shows me as 82nd percentile, so ~20% appear to be maxing the pretax or Roth. 30% are contributing $12k or more, 60% are contributing $6k or more, and 40% are contributing < $6k per year. Since 5% doesn't get the full match in most plans, I suspect a lot of the < 5% group is really 0%. Some could be orphan plans (i.e., no contributions allowed) though.
Here's another anecdotal reference point for everyone.

My wife's old 401k, where she currently works per diem has the following stats. (this is a hospital in a MCOL to HCOL area so most employees are decently compensated, I imagine)

Top 5% of Contributors contribution rate is - 13.28 % (could be due to high salaries, aka maxing it)

Average Contribution rate is - 7.99%

The employer match is 7% on top of that, so I guess that's not too shabby overall.

Edit: spelling.
Last edited by dziuniek on Wed Jan 31, 2018 8:31 am, edited 1 time in total.
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Ged
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Re: 401k millionaires

Post by Ged »

jackal wrote: Fri Jan 26, 2018 6:05 am
triceratop wrote: Thu Jan 25, 2018 10:12 am One can often roll over IRAs to 401(k). In fact if one wants to do Roth conversions this is recommended. I see too many other confounding variables to consider this stat much more than a curiosity.
Hmmm....
If one does that, is it considered a part of the 401k? Does the legal benefit of a 401k apply to the transferred ira? Any drawbacks of doing this?
I certainly did that. Now in retirement I have zero in 401(K)'s but am an IRA millionaire. I think for most people it doesn't make sense to keep money in an employer's 401(k) after leaving for a new employer.

The only potential downside to transferring a 401k to an IRA is that in some states it doesn't have protection from creditors.
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willthrill81
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Re: 401k millionaires

Post by willthrill81 »

Ged wrote: Wed Jan 31, 2018 8:21 amThe only potential downside to transferring a 401k to an IRA is that in some states it doesn't have protection from creditors.
Another is if your 401k has investment options not available in an IRA. The inverse is nearly always the case, but my 401k has a great SVF that I couldn't get elsewhere.
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lazydavid
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Re: 401k millionaires

Post by lazydavid »

Ged wrote: Wed Jan 31, 2018 8:21 am The only potential downside to transferring a 401k to an IRA is that in some states it doesn't have protection from creditors.
It also eliminates the option to contribute to a backdoor Roth IRA.
Exterous
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Re: 401k millionaires

Post by Exterous »

TIAX wrote: Sun Jan 28, 2018 10:34 pm
onourway wrote: Thu Jan 25, 2018 10:11 am I wonder what percentage of people with access to a 401k are maxing it out though? It's got to be low single digits.
According to to Vanguard, in 401(k)s administered by it:
Maximum contributors
During 2016, only 10% of participants saved the statutory maximum dollar amount of $18,000 ($24,000 for participants age 50 or older) (Figure 36). Participants who contributed the maximum dollar amount tended to have higher incomes, were older, had longer tenures with their current employer, and had accumulated substantially higher account balances.

One-third of participants with incomes of more than $100,000 contributed the maximum allowed. Similarly, 4 in 10 participants with account balances of more than $250,000 contributed the maximum allowed in2016. One-sixth of participants older than 65 contributed the maximum.
While a good answer to the question I wonder how many come close to it. I always come close but never exactly reach the max as my compensation varies and my employer requires at least part of your contribution be a % of wages. So I prefer to come in a little under than end up a little over
Tamales
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Re: 401k millionaires

Post by Tamales »

lazydavid wrote: Wed Jan 31, 2018 10:23 am
Ged wrote: Wed Jan 31, 2018 8:21 am The only potential downside to transferring a 401k to an IRA is that in some states it doesn't have protection from creditors.
It also eliminates the option to contribute to a backdoor Roth IRA.
I think it just adds a couple steps when doing your taxes (on form 8606 I think it is) rather than eliminating the option.
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Earl Lemongrab
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Re: 401k millionaires

Post by Earl Lemongrab »

Tamales wrote: Wed Jan 31, 2018 10:22 pm
lazydavid wrote: Wed Jan 31, 2018 10:23 am
Ged wrote: Wed Jan 31, 2018 8:21 am The only potential downside to transferring a 401k to an IRA is that in some states it doesn't have protection from creditors.
It also eliminates the option to contribute to a backdoor Roth IRA.
I think it just adds a couple steps when doing your taxes (on form 8606 I think it is) rather than eliminating the option.
No, it makes a pro-rated amount of the conversion taxable. If the 401(k) balance is significant, then the majority will be taxable.
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