401k

The Average 401k Balance By Age

February 5, 2015 in Financial Planning, Retirement Planning by

The 401k does a woeful job in replacing a pension. Furthermore, only about 31% of the labor force participates in a 401k due to lack of access or a lack of foresight. But we must make do with what we have, which is why we’ve provided some 401k savings guidelines in order to motivate you to save more for retirement.

Below is a 401k retirement savings chart that first appeared in the post, “Can I Contribute To A 401k An An IRA“. Before I explain the assumptions behind the chart, please take a look to see whether you think the amounts are too high or too low and why. There should be plenty of opinions because everybody has different life circumstances. The initial feedback is negative for folks up to age 35, and much more agreeable for folks over 35.

401(k) Savings Guidance Chart

The chart assumes a number of things:

* The chart is more forward looking instead of backward looking since 401k contribution limits were lower in the past.

* You start full-time employment at age 22 after college or vocational school.

* You join a company that provides a 401k.

* You contribute $8,000 to your 401k after the first year.

* From the second year onward you contribute the maximum amount to your 401k of $17,500.

* The Low End column calculates what you could potentially have in your 401k after so many years with a constant $17,500 a year contribution, zero company match, and no growth.

* The High End column calculates similar levels of contributions, but includes anywhere from 5-10% growth compounded over the next 43 years. Numbers have been rounded up to make the numbers easier to remember. There still is no company match.

* The chart can be used as a guide for your total savings amounts, including your IRA, Roth IRA, and after-tax savings.

* The chart is for one person, but can also be used as a guide for a married couple if one spouse decides to no longer work.

* There is no average by age because the largest 401k administrators generally only throw out what number: the average 401k balance across all their user accounts. My chart is the suggested balances by age for a healthy retirement not dependent on others.

LET’S DISCUSS THE 401k ASSUMPTIONS

Based on my chart, we can make an assumption that the majority of us will all retire as millionaires by the age of 65. This might sound absurd given less than 3% of the American population are millionaires. But we are different from the rest of the country because we’re reading an article on 401k savings and we likely leverage technology to manage our finances – Personal Capital being the most obvious choice.

If you are 22 years old and reading this post today, the numbers shouldn’t look too daunting because a million dollars in 43 years will probably have one third the purchasing power as it has today thanks to inflation. The biggest challenge of a 22 year old is to not develop wanderlust too early and maintain discipline in saving as aggressively and consistently as possible.

If you are a 50 year old reading this post today, then your support for my 401k savings assumptions will depend on whether you are within the Low / High range or whether you are below the Low range. If you are below the Low range, then it is likely you think the chart is unobtainable for most Americans. Valid excuses such as going to graduate school, being unemployed for a year, not finding a job with a 401k plan, paying for your child’s college tuition, and medical emergencies all serve to disrupt the assumptions in this chart. Life happens to us all. But if you are to be completely honest with yourself, you know you could have probably saved more if you absolutely had to.

Finally, let’s assume you are 65 years old and no longer want to save. You realize the median life expectancy is 80 years old for men and 82 years old for women. It’s time to start spending your money because you don’t want your reckless kids to spend your fortune! There’s a good chance you won’t even live until 80 because you’ve spent a lifetime eating bacon and not working out thanks to your job. But to be conservative, take the the Low and High amounts in the chart, divide the number by 17 and you get $43,705 – $205,800 a year to spend for the rest of your life.

If you add on the maximum Social Security benefits one can take for the year of $31,704, you’re living a pretty good life with $75,409 – $237,504 a year. The numbers are aggressive because maximum contribution amounts were lower in the past. But humor me anyway as this is just an exercise of what could be. Remember, I haven’t included any company match or growth over the years so hopefully that will appease any naysayer.

LET’S COMPARE THE 401k ASSUMPTIONS TO REALITY

401k-average

Every source available says that Americans are not saving enough for retirement. Vanguard recently reported the average 401k balance at year end 2013 reached a record high of $101,650. Not bad, but still much lower than my chart’s guidance of $218,000 to $350,000 for the Low and High End for a 35 year old (the average age of an American).

Meanwhile, other reports show the median retirement account balance is $3,000 for all working-age households and $12,000 for near-retirement households. Supposedly two-thirds of working households age 55-64 with at least one earner have retirement savings less than one times their annual income. Given the median household income is roughly $52,000, that’s not a good sign.

Finally, more than 38 million working-age households (45 percent) do not own any retirement account assets, whether in an employer-sponsored 401k type plan or an IRA. Hopefully these households are diligently saving their money in after-tax accounts and not solely depending on Social Security.

Suffice it to say that we’ve got a retirement problem on our hand.

WHAT ARE THE SOLUTIONS?

It’s tricky to prescribe blanket solutions given everybody faces different circumstances. But the below solutions should at least help:

1) Start saving early and often. As you can see from the High End column, compounding really does do wonders when there is a positive annual return. Even with no compounding, you will end up with 14X – 63X more than the median household. As soon as you can uncomfortably start maxing out your 401k, go for it. If your monthly savings doesn’t hurt a little bit, you aren’t saving enough.

2) Remind yourself that nobody will save you. If the retirement age for withdrawal is not lifted or the Social Security tax is not raised, Social Security can only pay about 72% of scheduled benefits starting in 2035 through 2087. It’s better to get in the mindset of completely writing off Social Security to motivate yourself to save more for retirement.

3) Ask yourself whether you really want to work forever. Extending work life is one way to solve the retirement gap. But sometimes you might get laid off, or nobody wants to hire you. Do you really want to be beholden to a job for money when you’re over 65 years old? Every single dollar you save now is one dollar you’re saving for retirement.

4) Develop alternative income streams. Besides withdrawing from your retirement funds and collecting Social Security, think about developing other sources of income to support your lifestyle. Other sources of income can be in the form of creating an after tax dividend portfolio, building a CD ladder, or investing in peer-to-peer lending to name a few.

5) Stay on top of your finances. The more you can track your finances, the better you will be able to grow your net worth. The clients who I speak to who need the most help with their finances have never bothered to calculate their net worth or track their cash flow. Practice the habit of knowing exactly how much you have in each account, your average total monthly expenses, and your average total monthly income to start. Sticking to a consistent process over time does wonders.

CONCLUSION – TAKE ACTION!

Now that you’ve seen how much you can potentially save in your lifetime, what’s stopping you?

Join Personal Capital and run your 401k through our free 401k Fee Analyzer. To do so, simply:

1) Log onto the Personal Capital Dashboard.

2) Go to the Investing tab on the top right.

3) Click the 401k Fee Analyzer to see the results of how much you’re paying in fees.

4) Adjust your contribution, employer match, fee percentages, and return estimates to calculate what you’ll have by your target retirement age.

I ran my 401k through the system and discovered $1,700 a year in portfolio fees I had no idea I was paying. Thanks to Personal Capital, I switched out of several expensive mutual funds and into lower cost funds in my 401k that should allow me to reach retirement two years sooner than planned.

Reduce Your 401k Fees With Personal Capital today

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Financial Samurai

Sam is the Managing Editor of the Daily Capital blog. He worked in finance from 1999-2012 before deciding to focus full-time on his online endeavors - FinancialSamurai.com and the Yakezie Network. Sam is an avid tennis fan who loves to travel. He received his BA from William & Mary and his MBA from UC Berkeley.

396 comments

  1. Untemplater

    I didn’t have access to a 401k early on in my career. Once I did get access to one later, it took me many years before I started maxing it out. I’m not sure many people will actually be able to stay disciplined enough to max out their contributions in their early 20s while they are still paying off school debt but it really is an important goal to achieve as early as possible. The younger we start saving, the better.

    Reply
    • Financial Samurai

      Hopefully by spreading the word of saving and saving early, more people will end up saving more.

      The goal of the chart is to provide a REALISTIC picture of what could be and motivate folks to save.

      Reply
      • Anonymous

        The data on this article is on the dot.I started contributing at 22 years old with $ 2000 and never stop since with inflation and all the purchasing power kept it at the same value not amount of money whats important is it’s not the amount of money you put in the question is are you saving regardless enough or not

        Reply
      • Anonny

        ‘* From the second year onward you contribute the maximum amount to your 401k of $17,500.’

        That is absurd. 2nd year out of college many are making between $35k – 60k. To put 18,000 (!) into a 401k plan each year is crazy. People can’t afford it. Your chart is definitely not painting a a REALISTIC picture of what could be for most recent grads.

        Reply
        • Financial Samurai

          When I made $40,000 in expensive Manhattan in 1999, I contributed the max $10,000 then and saved another $6,000 after tax. How? Sacrifice. I rented a studio with a buddy, as we figured it was like a more luxurious dorm room. I also took advantage of the free stuff.

          It’s not easy to save, but it’s a choice to make and a habit to cultivate if you want to reach financial independence sooner, rather than later.

          Reply
          • Anonymous

            That’s great to live with a buddy in a glorified dorm room. I don’t think most people’s spouses and 3 children would be willing to live that way.

          • Anonymous

            seems absurd. I remember making 40K a year, and living with a buddy ( my working wife ). I scrimpt and saved. Was no where near the 16K you are talking about. I just don’t believe, lets see your budget.

          • peggym

            There can be a salary percentage cap, determined by your company’s 401-k rules. It gets worse if you’re considered a “highly compensated employee”. In that circumstance your allowed contributions can become almost non-existent. This was designed to keep the plans from becoming top-heavy , with only the big earners benefitting, but it backfired. One year my husband, who was not what I considered highly compensated, could only contribute 2%.

          • Lying bastard

            I don’t believe you.

          • Elmer

            When junior high age my grandmother had a serious discussion with me, the gist of which is that it you had less, you would do things differently to survive, meaning spending less is always an option, and you can always save. Spending less is a religion and is heresy to most, the government included. Why spend less when you might die with your credit maxed out and never have to repay, or live and have political processes transfer the value of your savings to indebted others? Freedom of religion gives each of us some wiggle room, but wiggling away from living beyond your means requires very deliberate action often not complimented by main street culture. Livings in “a more luxurious dorm room” and other thrifty behaviors aren’t glorified by advertising and calls to “Be patriotic, go buy something.”
            Personally, minimum wage was a starting place, then military service when beginning pay was $68 per month plus a barracks and chow hall, very not fancy. College next with a full-time union job that rotated thru each shift every week found me living modestly while making more than ever before and able to pay for everything out of current income while saving about half my pay. That generally meant living on less than 4 hours of sleep, but being young, healthy and motivated is pleasant.
            Long story short, as my income increased to an average level, my workaholic lifestyle remained modest, and I retired to a secure and higher standard of living at almost age 54, free to spend my time volunteering , hiking, cross country skiing, and traveling and not feeling even a little guilty that I never “owned” a McMansion or had it repossessed and that my assets will last longer than I will. Admittedly, I never had to reduce my standard of living in order to be living modestly, and some difficult sacrifices were made.
            I think many young people today have grown up in a much more prosperous environment and have a very different idea of what living modestly means; paying cash for everything including a car or paying with credit cards only when having savings to pay each off every billing cycle, buying a house as a business decision and only after becoming informed by doing your homework about the investment, potential expenses and return on investment, routinely think of every expenditure, even the most petty, as having to be justified. (Talk about heresy!)
            Inspiring examples include refugees who were professionals in their country before they were forced to move, often empty handed and with credentials that aren’t recognized here. Neighbors, a family from SE Asia with 5 young children and both parents being physicians in their country come to mind. The parents took jobs here cleaning floors and on that income they and their children purchased a home and put each of the children through school, college, and graduate school. That takes discipline. If you travel in a different circle, get out of that box.

          • Connor

            Try doing that today, you would barely make enough to pay rent. Classic, tell everyone how you did it when tuition and rent were affordable, when rent and tuition today make that impossible. Most people I know went to grad school or moved back in with their parents. Living in manhattan on the average college graduate salary is laughable.

        • Anony Reply

          Agree. Even if you had the money to make the max contribution, you would be limited by the percent of salary cap.

          Reply
          • doug

            There is no percent of salary cap, that’s just something that people who don’t want to save concoct in their head to justify not saving. Contribution limits are dollar limits, period. The percent of salary cap is 100% up to those dollar limits.

        • B FITZ

          Had I known then what I know now(assuming the government doesn’t gut its value through inflation), I would have borrowed to max out my 401k in my early years..

          Reply
          • Anonymous

            Not true. My employer limits my 401k contributions to 25% max. I doubt I am alone.

        • Chris

          I wan’t 22 but when I started my first real job (at 29) at around 50K/yr, I put away the maximum of $12K in my 401k. Being married and having a dual income helps, obviously, but to say that it’s impossible or unrealistic means you aren’t very imaginative. I’m not saying everyone can do it, if you have large student loan payments or live in a high cost area, but you can certainly aspire to save that much and get close.

          Reply
        • Lindaem

          You got that right Buddy!

          Reply
        • George

          I completely agree these ‘assumptions’ are completely ridiculous, there is no way the vast majority of post college grads, outside of the rare Ivy Leaguer working for McKinsey & Co. are going to be able to put away $17,000 per year just a few years out of college. Your article loses all credibility if you aren’t slightly realistic, what is the average post 4 year college graduate’s salary? Did you even bother punching in census numbers to come up with your chart? What about percent of salary going into home mortgage, average age when having children and costs associated? Revise your data to meet reality for the first 10 years post college (career building, first home purchase, starting a family), then you might be able to ‘assume’ a person can then maximize their retirement contributions….

          Reply
        • Anonymous

          I would agree – even after being out of college for 10 years – I still can’t contribute the $17,500; management at my company can b/c they’re paid a lot more than the rest – nearly double what others make – hence the continued wealth gap in America – Corporate America is driving the continued wealth gap in this country. My raise has never been greater than 3% while management continues to get between 8-15% annual merit increases.

          Reply
          • Anonymous

            Lets not blame the upper management. 10% of their income is probably not invested either. My employer will match half up to 3%. So if I could do 6% they would do 3% for a total of 9%. I too cannot afford that with bills accrued before a good job (house, cars, loans, etc.). This also assumes no one has any bills or student loans after college and a job that pays well over what they may have in debt. Most corporations are not giving huge raises. They may however give big bonuses. I do not look down on that. If your upper management has put things into place and people in place to do better then they should get a bonus for doing a good job and producing. As too the employees doing the work if they are going over and beyond to do more.

        • Janet

          I totally agree. Most people would not be able to afford $17k a year. That is unrealistic for most people. That is y the rich get richer.

          Reply
          • Anonymous

            That, and using why instead of y.

        • Neal Kluge

          U got it Anon., people are willing to save $ 2,000 a month as they can have a nicer car….

          Reply
        • Anonymous

          I 2nd that!

          Reply
        • Anonymous

          I second this.

          Student loans, years of paying for life expenses while attending University…doesn’t really leave you with much in your bank. So once you finally get a job paying $35k – 60k you need to start saving for an emergency fund and you’re lucky if you can begin putting SOME money towards the 401k.

          Once you’ve settled in, saved up an emergency fund, then you can start contributing heavily to the 401k. But maxing out is absurd.

          Reply
      • Derpface

        Realistic? You’re a ***** idiot. You think contributing $18,000 / year to a 401k at age 23 constitutes someone on the “low end” ? Typical income for that age is about $30,000/yr.

        Reply
    • Jonathan

      It’s not about staying “disciplined” — it’s more about being able to save. Me for instance, after car, student loans, food, etc, I can barely do 5% of my income. This is unrealistic for 99% of savers.

      Reply
      • Financial Samurai

        Have you checked out the 1/10th Rule For Car Buying? (link) If you can barely save 5% of your income, I worry that you might be overspending on superfluous items such as a car.

        Reply
        • Eric Skeems

          In what world is a car a superfluous item?

          Reply
          • Financial Samurai

            When you’re spending a lot of your take home pay on a car payment or lease on a depreciating asset, that is quite superfluous. Follow the 1/10th rule for car buying. I believe it will save you a lot of financial regret in the future.

            When the government came out with the Clash For Clunkers program, I was amazed. Why trade in a perfectly fine sub $10,000 used car for the median household income of $51,000 and pay $25,000-$30,000 for a new car? That is a personal finance KILLER.

          • John

            Never finance a car, or live with car payments for the rest of your life. I can’t believe people actually think having debt and a recent car is reasonable. It’s a total waste of capital, and the entire auto industry lives off interest payments. They make more on fools financing than on the cars themselves.

          • Brian Smith

            Well, what kind of car, year, make, moldel…..do you drive? There IS a difference between getting to work….and GETTING to work.

          • VanVan

            To the “GETTING to work.” guy: Really it’s “There IS a difference between your car working for you….and you WORKING for your car.”

          • RH3

            You don’t ever really need to buy a new car. I bought my car 17 yrs ago new. Every part on a car can be replaced or rebuilt unless it’s been in a flood or a fire…or maybe totaled. You can save a lot of money by just repairing yours. But I do agree that 17000 to 401K is way too high for most people.

        • Ron

          I agree, this chart is ridiculous. My first year out of college I made $27,000 and that was in the brunt of the economic fiasco in 2010. I maxed out my employers contribution and came nowhere close to saving $8,000 my first year…I’m currently making $33,000 approximately so if I were to save $17,000 that’s 50% of my salary! You can say what you want but that just isn’t realistic and I’m all about sacrificing luxuries to get ahead. Just because you did something doesn’t mean that’s reality. Bill Gates didn’t go to college and became a billionaire, not exactly realistic for 99.999999999999% of people out there.

          Reply
          • Financial Samurai

            Give it some time Ron. I think you’ll surprise yourself as you make more.

            I’ve never been compared to Bill Gates before. Thanks!

            I’ve provided the reality of how much Americans do save in their 401k in the second chart. I hope less people face this reality as time goes on, because the reality is scary.

          • Anonymous

            not to mention that of your yearly gross,is 33k you are taking home more like 25k in spendable/savable income.

          • Paul Doherty

            “Never finance a car, or live with car payments for the rest of your life. I can’t believe people actually think having debt and a recent car is reasonable. It’s a total waste of capital, and the entire auto industry lives off interest payments. They make more on fools financing than on the cars themselves.”

            That’s just silly and flat-out wrong. A $20,000 car entirely financed at 4% for four years will cost only $21,249.12 a “whopping” $1,249.12 in interest over 48 months. Car companies are not making more on financing than the cars, unless margins on cars are a lot lower than I think they are (or rates are a lot higher).

        • bp cuff

          I found that an average new car payment ($350/month) is a perfect amount to go into retirement savings for me. I don’t have the sweetest ride on the 405 freeway but I’ll have the last laugh when my toes are in the sand…

          Reply
          • Financial Samurai

            I love it! I see great fortune and a nice retirement in your future!

          • James

            Wow! That’s the right attitude. Good for you.

        • RickG

          The 1/10th rule is too limiting as well. It doesn’t factor much into the decision, like, age of car, expected life of car, and area driven. I know it is meant to be a simple guideline, but buying a very cheap car have higher maintenance and fuel costs that lower insurance rates and licensing fees don’t cover. I use a different formula that still keeps car expenses low, but is more realistic. When shopping for a car, use the formula CarPrice = YrIncome X CarLIfe/50. So, say you find a used car with 100,000 miles on it. Figure the expected life of the car is about 10 years (most cars within the last 15 years will make 200,000 miles and 10,000 miles per year is typical). If you make $40,000 a year, the car price is 40,000 x 10/50 or $8000. Note that the car cost comes out to $4000 (as your 1/10 rule suggests) for a car with 150,000 miles (5 years expected life), because 40,000 x 5/50 = $4000. A $4000 car is going to have a lot of miles on it. You could look at a new car that costs $16000 or less and it makes a more attractive option than the $4000 car does because the service life improves so much.

          That said, none of these make any sense if a loan is necessary. Making payments on cars must be the most sure way to losing good financial stability. Too many people don’t understand how much more a premium that is paid when buying a car on time. If that isn’t unavoidable, then an older less-expensive car is an absolute must.

          Reply
      • John

        Financing a car is not wise, it’s a depreciating asset. Student loan debt can be avoided by working while in school. People spend way too much today compared to 30 years ago. I’ve actually seen people go to Starbucks, buy a $5 coffee in stead of making it at home for .25c, and discuss how they are going to save money. Advice like cutting back on eating out or going to the movies, are you kidding me? Until you have no debt anything you buy is basically financed because the $ did not go towards the debt. Look at the migrant workers saving for homes bought in cash, driving 20 year old cars in cash, all on tiny incomes. The modern american seems to be able to whine about having debt and no money, but appears unwilling to do anything about it. YOLO will not end well.

        Reply
        • The Joker

          I contribute the maximum $18,000 to my 401k every year so I will be able to purchase a fancy coffin once I die.

          Reply
          • Anonymous

            Love it

      • Anonymous

        Totally agree with you folks. NOT realistic to expect most to be able to contribute these huge amounts. I am older and still can not get even close his recommended amount, unless my wife and I would sell our house and move to an apt. We actually did down size to a smaller house too.

        Reply
        • Anonymous

          I think this can be more realistic than many people realize. I have maxed out my 401k since my 30’s and contribute a healthy amount in my 20’s. Believe it or not I worked a second job to allow myself to contribute what I did to my 401k and used the PT job as my spending money. People talk about what they make and what their bills are but they don’t often talk about what is behind the bills. I see what people drive all the while knowing someone making 40,50,60 even 70 a year can’t afford. If toyr making 60-70k a year you should be driving a basic car or a decent premium used car–not brand new luxury cars. You should be living in affordable homes and not looking for completely up to date homes. People don’t want to accept what they can’t afford. If you contribute to your retirement plan the way you should and reduce your take home pay accordingly many of the things you have you wouldn’t have but you’d have your savings. Truth be told I make a very good salary now–well above average (but I didn’t always) and I see people who make half of what I do allowing themselves a budget for specific things many times the budget I would allow for myself and I just scratch my head. They could have basic cable service but thy don’t. They could have basic cell service but they don’t. They could have basic cars but they don’t and the list go’s on and on…..

          Reply
          • Elmer

            It would be un-American to not live beyond your means.

    • Chris

      It’s not discipline that’s lacking, it’s actual numbers of dollars. I’d be HAPPY to max out my 401k (28 years old) however I live in the Bay Area where cost of living is sky high, and I simply do not make enough money to put more than 10% in. I feel like I’m playing a loser’s game with no alternative. Oh, I do have a Roth IRA too.

      Reply
      • Anonymous

        Agreed the chart is laughable. If you’re median income of $51K, how do you possibly contribute $17K and save up 6 months emergency fund and save for house down paymwnt/car/vacation/food/clothes and all the rest? Only a minuscule few could do that from age 22.

        Reply
        • Kevin

          I am 22 yrs old, make $47,000, bought a $157,000 home, and have about $14,200 in my 401k. I know that I cant afford to own this house or rent and contribute to my 401k in the way I’d like to so I rented out two of the rooms for $500 each which COVER my $1000 mortgage payment leaving me with the ability to contribute $12,000 of after tax money and 6% ($2820) before tax. So yes, I’m sure that I could find other areas to contribute $2680 more, however I don’t think it is entirely realistic for the average person who DOESNT own their own home with the ability to offset their cost of having a roof over their head by renting out rooms to contribute $17,500.

          Reply
          • Friend

            good for you Kevin. It is not how much you make – it is what you do with the money!

          • DougJ

            Kevin
            If you can do this at the age of 22, you are well on your way. Continue to think outside the box. I’d like to see you leading this generation of pessimism and naysayers. Great job and continued success.

          • Anonymous

            The use of money is the only advantage of having money. Ben Franklin

          • Anonymous

            Did you report to the IRS your rental income ?

        • Anonymous

          I think you’re nuts. I’m 28, making just under 50k, and last year I maxed out my 401k and IRA. last year. The difference that I see between myself and most people is they don’t know how to live cheaply. I still commute, buy tailored clothing, own a couple of pairs of $300+ shoes, eat out, drink excessively, have 6 months living expenses(easy to do as it’s less than 10k), all in a median COL area. I feel like I live in luxury, but I spend less than 20k a year. It took me over 10 a while to develop a lifestyle and earn enough to do it. It can be done pretty easily.

          Reply
      • Another Chris

        I live in the Bay Area too and it is expensive. If you want to save more money, think about getting a roommate/sharing a place. There are ways to reduce to cost of housing, eating out, etc. to save more of your income. Plus don’t forget that as you put away pretax money, you save in taxes so putting away X dollars in a 401K means your paycheck is reduced by less than X.

        Reply
      • NVJ

        If you live in the Bay Area you don’t need a car. There is $6,000 more toward your retirement right there.

        Reply
        • phil

          “If you live in the Bay Area you don’t need a car. There is $6,000 more toward your retirement right there.”………………
          that may be true if you live in san francisco proper but try that in any one of the bay area ‘burbs and see how easy it is to live without a car!

          Reply
    • Anonymous

      Who is making $60k their second year out of college? What careers? Is everyone living in Manhattan or a Swiss banker in this article? I’m in my 13th year teaching high school students and making $65k a year.

      Reply
        • Paul Doherty

          “The average salary for an engineer at age 22 makes $65,000 a year.”

          I doubt that as the average for engineers nationwide is 75k – and that includes ALL engineers with any number of years of experience. Seems unlikely a fresh graduate would make within 10k of the average in their first year.

          http://www.glassdoor.com/Salaries/engineer-salary-SRCH_KO0,8.htm

          Reply
          • Kevin

            You’re right, $65,000 is too high. As an engineer right out of school in 2011 I was making $60,000. Many of my close college friends were engineers as well and my salary was on the higher side. I would guess most engineers right out of school is about $55,000 depending on location and degree…I know chemical or petroleum engineers make in the high 70k-80k range off the bat and electrical makes in the mid-70k range to start.

          • Ryan

            I graduated as an Electrical Engineer in ’11 and went to work for GE. Made 77k my first year so it’s not just petroleum guys. Location is key, if you work near Houston or anywhere on the gulf coast as an engineer you will be paid at least 75K. I’m at 120K now by switching jobs and marketing my skill set.

        • Derpface

          “The average salary for an engineer at age 22 makes $65,000 a year.”

          Bullshit.

          For someone who calls themselves the “Financial Samurai” you are surprisingly innumerate.

          Reply
      • Jerry

        Well, my daughter graduated college a year ago and is a social worker and she is making more than me and very close to 60k a year. So, if you want it, it can be done. Oh by the way she paid off her $10k car in a year and is cruising to paying off her college debt. She also has a ROTH IRA which I helped her set up and she contributes weekly to that. If my little girl can do it, sacrifices and all, just about anybody who WANTS to do it can.

        Reply
        • Katie

          Hm … what about the little girls who didn’t get decent work right out of college? or who had a lot of college debt? or who don’t have daddies to teach them and help them set up retirement funds? Not saying your little girl isn’t special, but she’s not disadvantaged … so saying anyone can do it if she can is pretty silly.

          Reply
          • SmalIIvy

            You know, you can spend your time complaining about your situation, or you can do something about it. Don’t get your dream job? Take what you can, work to make yourself better, and move up the ladder. Still can’t find a good job? Start your own business and make your own job. Don’t want to come out of college with a lot of debt? Go to a cheap college, live with six other people on Top Ramen, work your way through, and get out as fast as you can. Want to learn how to invest for retirement? Come to my website and learn how for free: http://smallivy.wordpress.com/category/retirement-investing/ . Or buy a copy of my book – I lay out how to retire a millionaire, step-by-step.

            No, anyone can’t do it. Nine out of ten people can’t do it, but it’s not because they’re disadvantaged. The can’t do it because they sit around, whining and moaning and saying “Poor me, I’m disadvantaged.” The tenth person takes whatever life gives them and deals with it.

          • Noah Juan

            I do think that the assumption was that the saver has a job. Obviously, without a job contributing to a 401k is impossible.

        • ray

          is she paying rent utilities or linving at home

          Reply
      • Will

        I’m 27 and a Drilling Engineer in Houston and make $115,000. My starting salary out of University of Miami with them was $72,000. Six figure jobs are all over Houston. Most of my friends aged 25-30 make over 100k for different oil & gas companies. But I can tell you that 115k doesnt go as far as you’d think.

        Reply
        • Noah Juan

          “Six figure jobs are all over Houston.”
          I’m sure there are – for engineers.

          “But I can tell you that 115k doesnt go as far as you’d think.”
          See folks, everyone’s got it tough.
          If you aren’t maxing out your 401k, Roth IRA, and some taxable, then you aren’t trying.

          Congrats though, on your career choice, hard work, and landing a good job. Well done!

          Reply
          • Carlito

            I wouldn’t live in Houston for six figures.

          • Jorgito

            And for that, Carlito, the rest of us on the Houston highways thank you.

          • Anonymous

            We Houstonians work here for the money. Very true, there are six figure jobs all over Houston, in many different fields. We live large, enjoy an overall low cost of living, eat great food, enjoy great museums, and have a lot left over to invest. At the end of the game, I for one will retire early, take those earnings and live practically anywhere I want to.

      • Chris

        Though I graduated in my late 20’s (I had work experience before going back to school), my 2nd year out of school was closer to $70,000.
        “The world will largely pay you what they think you’re worth.”

        Reply
        • DougJ

          I’ve been reading a number of comments on this site and hear a defeated mentality. I’m just turning 50 in one week, and wanted to reply. In the past 23 years of investing and saving with a low salary of $26,000 per year at 27 years old, to now making $95,000 working in Sales. I currently have a net worth of $1,300,000, with a total balance sheet of $1,700,000. Think outside the box people. I started out making $13 an hour as a Diesel Tech (not an engineer) and purchased my first duplex for $75,000 (first year rent at $375 per month, living in the other side). My wife and I saved to purchase our first home for $140,000 without selling the rental. Sold that house after many improvements (sweat equity) over 6 years and make a profit of $60,000 (sold $200,00). Reinvested the money into our next house purchase of $215,000. Again, many improvements after 11 years and sold for $100,000 more ($350,000). During that 11 years, saved and build another duplex for $300,000 (rent collection $1100 per unit). Reinvested into our new home of 2 1/2 years now worth $700,000 with a mortgage that will be paid for in 10 years at the age of 60. During this same 23 year period I’ve also built a retirement account currently worth $435,000 (now, contributing 23% of my total income) that will be near $1,100,00 when I retire at 60.
          At retirement (net work with no mortgage) House worth $700,000 , Duplex 1 worth $350,000 / Second duplex worth $250,000 (paid off at 60), I’ll have amassed a total net worth of $2,400,000, plus rental income pulling in $50,000 per year (all paid). STOP complaining and get started. Anything is achievable with some sacrifice and proper investment. It’s not what you make, it’s how you spend and what you’re spending on in the early years. I’ve had the boats, motorcycles etc…so you can still live a life without living in a small dorm. As stated to my two daughters, I don’t want to hear CAN’T.

          Reply
          • Lying bastard

            Be glad you rode the tidal wave of increasing asset prices.

            Today’s young people don’t have the luxury of $75,000 duplexes

          • Colin

            Best response I’ve seen in this stream of comments…

            And congrats.

      • DJ

        As a *perm. disabled single parent, I was so proud when my daughter graduated Nursing School 4 yrs ago. *Please note- I didn’t become disabled ’til 2005 & my daughter was in High School.
        Fortunately, my parents always stressed the importance of a good Education- they also knew something I didn’t learn ’til yrs later…the sad reality that where you live ‘matters’.
        All I knew when I was a school-age kid, was that we lived in a nice Long Island home, & I went to a good school. I didn’t care how the opportunity became available. It just did.
        Now as a parent, I wanted the same for my child. There is nothing I wouldn’t do to make her life better & give her every opportunity life has to offer. Being disabled makes things very hard. I don’t get any financial support at all. But everyone has situations in their life & there’s plenty of people in more difficult spots than I am. If there’s a will, there’s a way.
        I always say – “if someone told you that they left a bag with a million dollars in a certain locker at Penn Station for you – no strings attached – free & clear – all you have to do to keep it is to be at that locker in exactly 90 minutes….you would find a way to be there on time. There wouldn’t be excuses.
        So, to respond to Anonymous – my daughter graduated Nursing School, got an RN job & made $84k + full benefits & matching plan since graduation. Maybe you should consider a change in occupation.

        Reply
    • Dawgbiscuit

      “I didn’t have access to a 401k early on in my career” I’m 60 years old, 401k contributions started in 1985 with max contribution of $5000 with very limited investment choices. I will also receive defined retirement benefits from my employer….this chart is very subjective

      Reply
      • bcl1

        If you 401k had very limited investment choices, you may be able to sue your employer (this has been done successfully before). Given the poor returns on my 401k here at Tyco (which is probably getting kickbacks from the fund administrator), that my dream. . .

        Reply
      • peggym

        But not every employer sets up a 401-k. Many people do not have the opportunity to invest in one.

        Reply
    • Anonymous

      I agree

      Reply
    • Humbolt

      Most people are busy being doo doo eatin fools.

      Reply
    • an experienced american

      true
      but remember we live in a world of computerized algorithmic trading.
      so while your at work maxing out your contributions
      a computer is trading against you and stealing your money legally.
      big banks, big insurance, big government, big media
      it is all a rigged game and we will all eventually become the
      bag holders.
      why do you think the bank borrows from the government
      at low to zero pct interest, then makes student loans at 5-7%?
      because your government allows it!
      universities have bogus classes and degrees and rake in the dough
      WAKE UP!
      you are being fleeced

      Reply
  2. Justin @ Root of Good

    Sam, that chart is great to illustrate just how powerful starting your savings early can be.

    I’m sure you’ll get some naysayers that think it impossible for a 20-something to contribute $8,000 per year, let alone $17,500 per year. But if you have the means to do so, do it! Your 55 year old self will thank you!

    And as for the average 401k stats I’ve seen thrown around, they often don’t account for previous 401k rollovers to IRAs. Between my wife and I, the largest 401k balance we have ever had is $250,000. That represents a smallish proportion of our total investment portfolio. The rest of the money is in other retirement savings accounts and taxable brokerage accounts (in my name or her name).

    Oddly enough, the $250,000 401k balance does fit into the range of balances for a 35 year old, so here’s at least one data point corroborating your chart (and we tended to max out that account each year).

    Reply
    • Financial Samurai

      Thanks for corroborating Justin. Our older selves will thank us indeed.

      Reply
      • Glenn

        I enjoyed the article. I am mostly in agreement. I am way behind the curve as I am a late bloomer. Graduated college at 31 after years of screwing off and not saving. Over the last 6 years I have been increasing my percentage that I save. Along with raises and such, I will finally be maxing out for the first time this year. I am paying for school loans, living with a used car that I just have a few thousand left to pay it off. I can see how it is difficult to start this trend, however, now that I have the ball rolling, it is not at all unrealistic. I won’t have what the chart says by retirement, but judging from the averages of reality, I am way ahead already and I’m only 37 (or already 37, as it were… I can seem to slow that down).

        Reply
    • KM

      Ermm, actually your data point does NOT corroborate his chart. The $250,000 balance is for one person contributing to their 401K. If that is the combined 401K balance for you and your wife, your combined 401K balance should be $436,000. I agree Americans are not saving enough but the chart makes very unrealistic assumptions.

      Reply
    • Another Chris

      My wife and I are in our 11th year of working and we have contributed to our 401Ks the whole time, though not always maxing it out completely, but are close.
      After 11 years (starting in 2003), our retirement savings is $500,000 and that includes the dark years of 2008-2010.

      We are however, older than 22+11 as we started working a bit later. However, we do live in the Bay Area so housing costs are higher than most places.

      Reply
    • petee

      I don’t believe that these stories of over 5o percent savings of take-home pay are more than tripe, self delusional comments. The average US citizen saves what, around 10 percent (probably much less) of “take home pay”, of course it is possible, but most unlikely.

      Reply
      • Danny

        You don’t have to believe it to be true.

        Reply
    • bcl1

      I am a 48 year old and my 401K balance fits into the range in the article, so that’s a second point.

      Reply
  3. Suba @ Wealth Informatics

    Technically our 401k balance is $0 right now but that is because both my husband and I are self employed right now and moved everything to an IRA. We are planning to open a solo 401k this year. If we consider all the “retirement” balance, not just 401k (this is one of my pet peeves with 401k balance statistics. Unless someone stays at the same job for decades I don’t see 401k balance going beyond a couple hundred thousand dollars) we exceed the range for 30-35 yrs in your chart. Hopefully if we keep doing that we will be in a good position for all that we want to do after our retirement.

    Reply
    • Financial Samurai

      Sounds good to me Suba. I did mention in the post one can use these statistics as a guide for an overall savings rate. But as you say, the 401k balance statistics can be skewed b/c of different circumstances.

      Reply
    • Mayank Kapoor

      If your self employed you should really consider a 401k/Profit share arrangement. Much higher contribution limits and lots of added perks and benefits, I help my clients set them up all the time.

      Reply
  4. John @ Frugal Rules

    Good article Sam! Having spoken with investors in my previous life, I think so much of it comes down to #2 & #3. Essentially, in my opinion, much of it comes down to priorities and the unwillingness or lack of desire to see how present actions will impact the future. That said, starting early and making it a priority is key. If you don’t have access to a 401k, then look to open some kind of an IRA and max out if possible. If you can’t max it in the beginning, don’t let that hold you back but put all you can in. That will begin to develop that discipline that will help you n the long run.

    Reply
    • Financial Samurai

      Thanks John. Perhaps this is why those “Your Brain On Drugs” and the before and after Lungs for anti-cigarettes were so impactful.

      Another thing is, we really do have a GREAT gov’t safety net. We see a lot going to welfare, so I think we mentally think, worse case, we can just go on welfare.

      Reply
      • Paul Doherty

        You think the “This is your brain on drugs” ads were impactful? They were ridiculous nonsense that most people laughed at (try googling it). Same as that recent ad about a girl who smokes pot and her dog talks to her. People are wising up to the lies the government has been foisting about pot especially.

        Reply
  5. Nathan

    Great article. However the math for me doesn’t work very well. My annual income of 27,000 – 17,500 max contribution = 9,500 for the year. With a wife and child, I just can’t make it work. I do contribute 12% with an employer match. I’m 42 and only have 17,000 but as we get our debt paid down I’ll try for more. That chart can be daunting because I’m in a job where I am already at the top of my pay scale and will maybe see cost of living increases; if I’m lucky. I enjoy reading articles on personal finance and saving but would like to see more examples of how to meet those goals for people who make less than 30,000 a year.

    Reply
    • Financial Samurai

      Hi Nathan,

      Thanks for sharing your situation. I agree it is practically impossible to max out the 401k with a $27,000 income with a wife and child. Does your wife work to help boost household income? Are there any other income making opportunities?

      One of the things I did when I was working about 50-60 hours a week in finance was to work on my writing hobby online. After three years of writing online for nothing, I decided to take a leap of faith and focus on it full-time. The income is not as much, but it is enough to support a family of three or four in SF. If I decided to make money from my hobby during work, I could have, but I didn’t b/c I didn’t want to violate my work agreement.

      The #1 solution has to be for you to try and boost income.

      Reply
      • J-Bones

        I think the income aspect is an important facet to assess. Let’s put this post aside for the time being and just focus on the average college graduate salary of roughly $45k. Factoring in external circumstances like geographical costs of living (graduates are likely to be concentrated in higher density areas like NYC, Chicago, San Fran- aka the most expensive places to live) and debt service (average graduate has over $30k- which I believe is actually very low), while it CAN be done, I find it hard to believe that 22/23 year olds will make it a point to sock away the extra $1,450/mo to live on $27k a year.

        Particularly in these urban centers I think 2k/mo in expenses is difficult to get down to, even if you are frugally-minded. Figure roughly 1k for shared living expenses (~700 rent, and a few hundred for internet, power, water, etc), cell phone, food… then add let’s say $250/mo in debt service. It all gets earmarked fairly quickly.

        I just think there needs to be some perspective about what can pragmatically be done. There is a trade off in just about everything, but assessing where the floor is is important.

        Reply
        • Financial Samurai

          My goal of the chart is to show POTENTIAL savings. I remember when I was making $40,000 base in 1999, I put away $10,000 b/c I worked all day, didn’t spend too much money, and shared a studio with another dude for $800.

          I firmly believe a lot has to do with the choices we make. Making ANY money after college makes one feel absolutely richer b/c we had no money in college, at least most people I know since we’re students.

          Reply
          • mrkillagram

            so in other words, work to death and have no life.. the job is the relationship working 50-60 hrs/wk in finance.. that’s unrealistic for the majority of Americans..

        • KW

          While I don’t disagree with your point that most 22/23 year olds will not be socking away money, don’t include all of us in that! I am 23 years old, making $46K, and currently contributing 11% a year to my 401k., and I still think that’s incredibly low. However, I am concentrating on completely paying off my $22K student loan balance this year, while still contributing to the 401K. Once the loans are eliminated, you bet I will be maxing that sucker out. I also have several side hustles that should bring in an extra $5K at least this year, and working to increase that.

          As for spending, I have worked to get my costs on the big 3 (food, shelter, transportation) down as low as possible. I work in NYC, but live on the Jersey side and pay only $850 for my own apartment, all utilities included. I buy in bulk at Costco, make all my own meals/bring my own lunch to work every day instead of getting a $10+ meal like everyone else, bought my car for $1,500 with my graduation money and pay only $50 a month insurance, among other things. Does everybody live frugally and save? Obviously not. But don’t say that no one my age does!

          Seems to me like most people here complaining that this is unrealistic just don’t want to make those hard choices/sacrifices. No one needs a $30K car or a fancy apartment or new clothes every month. On a salary of $45K, it’s totally doable to max out a 401K at the very least, and contribute to other accounts as well.

          Reply
          • Katrina

            Congrats, KW! You’re doing great. My financial situation at graduation was very similar to yours. I am now 33 and have been able to achieve the target on this chart. It all started with putting away 10% on a 50K per year job (while paying off loans and saving for grad school), and now I have ~230K in my 401K. I think I took it for granted when I was younger that saving was “just something you do,” but now I look at my savings and am incredibly proud that minor sacrifices early on (it amazes me how many 20-somethings are walking around in Tory Burch shoes and driving BMWs) helped me develop a strong retirement base. With your smart attitude, you’ll be amazed at how much other (non-401K) wealth you end up accumulating over the next 10 years. Keep it going!

          • C

            We did the same – my first car was 300 DM, around 150 $ and lasted almost 2 years.
            Even today we only drive modest cars, bought around 3 years old – by the time, they are around 10 years old… it’s time to look for something newer.
            We always lived frugally – no major vacations (we try to fly to Germany every second year… 4 persons). We hardly go out for dinner, no fast food, lunch bag from home, but still trying to eat very healthy. etc.
            We just moved here (Florida) 16 years ago and we are doing fairly well on this scale (on one income). 2 Kids go to College close by and still live at home – another savings aspect. (The 3d one comes in about 2 years). My husband started contributing to 401 K as soon as possible and we are maxing it out each year.
            We started putting away money, as soon as my husband started working after finishing Grad School and military in Germany. (He needed to pay back student loans, too.) Within a few years we were able to buy our apartment (to stop paying rent) in a fairly expensive area in Bavaria…. still have it and it’s a nice rental income (but you have to invest now and then, so please don’t spend your extra-income). We are not expecting to get any social security or Rente from Germany – so our retirement funds need to be as high as possible, to have a decent live after retirement. KW – you are doing the right steps – congrats

  6. mark

    One potential flaw in your chart…assuming that your hypothetical 35 year old entered the workforce in 2000 or so, the 401k limit was only around 10k at that point not 17.5k. So the low end number is probably off by 20k or so.

    Reply
    • Financial Samurai

      Mark – You’re exactly right. This chart is better suited for younger folks or folks who have many more years of work. That said, I don’t include growth or matching to try and make up for things such as lower max contribution in earlier days.

      Here’s another post you might like on the IRA and how much someone should have by age. I should consider doing the same for the 401(k).

      Reply
    • Paul

      I was going to point out the very same thing. If I remember correctly, back in 1991 when I started working for my first company that offered a 401k plan, the 401k limit was less than half what it is today. Plus, many young people aren’t able to max out early on because their salary is too low to contribute more than a few thousand.

      Reply
      • Financial Samurai

        Indeed you are correct. The limit was $10,000 back in 1999 when I first started. This chart is more forward looking, but it also doesn’t include company match or growth to make up for the lower limits.

        Reply
  7. Sean Cooper

    When Albert Einstein said compound interest was the most powerful force, he wasn’t kidding! This is a great chart for young workers to make retirement relevant. A lot of people are fixated on rate of return, when it’s actually the amount you contribute that matters more, especially when you’re young.

    Reply
    • Financial Samurai

      Contributing more early on definitely is much more impactful than old b/c hopefully our financial nuts will grow to the point where the returns are greater than our contributions.

      Save early and save often!

      Reply
  8. Hank

    What would this picture look like for those that max out after-tax 401k contributions? I see both sides of doing so; deferring taxes’ potentially receiving a company match and with decent choices, low fees. Conversely, investing above/beyond pre-tax limits in a taxable account eliminates RMD, earnings taxed at cap gains rate and access to the $ at any time with no penalty.

    I have been doing the former but am concerned about the tax hit on the earnings, at ordinary tax rates.

    In the end, did I err all these years? My 401k savings are considerable. How do I dig out?

    Reply
    • Financial Samurai

      Tough to say because everybody would contribute a different amount past the pre-tax 401k contribution max.

      If you are within the above range, and say you have considerable 401k savings plus after-tax 401k contributions, then I think you’re doing just fine!

      Reply
  9. Dan

    “The retirement savings crisis can be solved if everybody follows the above 401k chart”

    The crisis might have been avoided or lessened if business and government had continue to invest in the worker through pensions or set aside retirement monies rather than focus on profits.

    Life happens. How many Americans will be able to save enough for 40 years to make your saving range? My wife and I have had good paying jobs for 35 years and are within 10 years of retirement. Four of the seven companies we’ve worked for have closed/shut down. We’ve been lucky to have our health, education, family and employment. Our savings balance is in the range but toward the low end. When I look at our friends and family I see very, very few who have managed to do as well and avoid the many pitfalls that life throws at all of us.

    The 401K saving experiment is a myth. Companies that wanted to save profits promoted it as a pension replacement. Now the results are made clear. I agree with you that we should have gone to or go to a mandatory contribution plan. Follow Australia. Now it’s too late for most of America.

    Reply
    • Financial Samurai

      Life is unpredictable indeed. Anyone who can still draw a pension has won the lottery compared to the 401k savings program. But, we’ve got to accept and utilize what we have.

      Australia leads the world in inheritance per individual at $500,000 thanks to its Superannuation system vs. $180,000 here in the US. We should probably go their route. But we Americans value our freedom to choose, so it will never happen.

      Reply
  10. Married

    Does this chart represent “household” savings, or “individual” savings? Should a married couple double the numbers?

    Reply
    • Financial Samurai

      Good questions. The chart can represent household savings if you wish, as we should view married couples as a team. Although I do always recommend each individual spouse continuously focus on building their own nest egg as bad things do happen in marriages.

      You might enjoy, “The Average Net Worth For The Above Average Married Couple” for a further discussion on the subject.

      Reply
  11. Jane

    Great article! Those are some good targets to shoot for. I’m in the middle-lower end for a 35 year old.

    I’m not sure how people are going to survive a decent retirement with those figures in the second chart. I suspect people have more than that through IRAs, outside savings etc. Otherwise, there’s going to be a lot of parsimonious people in retirement!

    Reply
  12. harold

    The idea of rolling a 401(k) to an IRA doesn’t make sense.

    -Both have Required Minimum Distribution.
    -Both have hidden fees.
    -Both penalize you for early withdrawal prior to 59 1/2 years of age even if you start very young.
    -Both only offer tax deferred, not tax free retirement.
    -Both invest in vehicles that put your investment directly in market risk an offer no floor to keep against market loss.

    Who are the geniuses with this idea…Suze Ormen and Dave Ramsay?

    Reply
    • rofo

      It might make sense.
      – There is no penalty or downside to a rollover.
      – 401k plans typically have a small set of fund options, you will have far more options in an IRA

      Reply
      • harold

        @Rofo…

        You miss the point. Both 401(k) and IRA have no floor against market loss. Why, in light of what happened in 2008, would a retiree lean on vehicles that don’t offer a 0% floor in a losing condition?

        Real simple: do you like losing money or not?

        Reply
        • rofo

          I understand why RMD can be a problem in a declining market but not sure what you suggest as an alternative.

          Reply
        • Noah Juan

          What vehicle offers any actual floor? Even annuities and pensions have some risk tied to the company. In addition, the less risk of loss the less the chance of keeping up with inflation.

          Reply
  13. PIM

    I recently started using Personal Capital and really love the tools. It shows a nice chart plotting growth of the assets with time, along with expenses.

    On my blog, I have one of challenging 2014 goal is to maximize my 401K and Personal Capital may help me how to optimize it.

    Great tool and highly recommended!

    Passive Income Mavericks

    Reply
  14. Joel

    I didn’t pay much attention to my 401k options when I first started with my company 17 years ago. One of our training deparment employee’s took some of us aside and showed us how we could have $1 mill+ by retirement and how easy it was. His therum was to start with $200 per month and everytime you get a raise push up your 401k deduction by half of the raise amount before taxes. It took me a couple of years but now I am maxed out and I don’t really feel it because I never really had it in my hands.

    Reply
    • Financial Samurai

      That’s the thing. We adjust to our 401k contributions very quickly because it is pre-tax, and we never see it in the first place. Wake up 10 years later, and it’s amazing how much can be accumulated.

      Reply
  15. Joe

    The dollar amounts in here look ok, but is it really 700K – 3.5M? How do you account for future taxes? What if tax rates are at 50% then those numbers are significantly reduced. Not sure why so many financial advisers fail to account for the embedded tax on these dollars. That is my biggest issue and concern.

    Reply
  16. Terry

    One of the best ways in my opinion to grow your IRA, is by converting it to a Self Directed IRA and investing in real estate and or houses.

    Many people dont know about this angle because their financial advisor doesnt get to “sell” their investment products.

    But you can take your IRA and create mortgage notes and more earning 6-10% interest easily on real estate deals.

    This is a technique not to be used by people who have no self control or good spending habits, but if you are savy and strict, this is a great way to create wealth.

    If anyone has questions you can visit our website FindFundandFlipDeals.com or email at troyce1 at gmail dot com.

    We have done many of these types of investments with investors.

    Some of the companies that do them are Equity Trust, and Security Trust to name a few.
    Id be interested to hear what others have to say.

    Reply
  17. Aces

    I think you may be focusing on the wrong thing here. The amount of money I need in my combination of 401k, IRS’s, & other investments, need to match what I will need to live on in my retirement years. Looking only at the 401k limitsimplies whoever set those limits must know what we each need to live on.

    If someone has paid off there mortgage and any other debts by the time they retire, they may not need as much income as someone who will be still paying on those debts. And the realitiy is that those who set aside more money, will be able to do more “fun things” in there retirement years. I would like to travel. But if the money isn’t there I won’t. If there’s plenty, I may do an anual vacation involving air travel. But I could just as easily do that every 5 years and go car camping in the in-between years.

    So what I’d really like to see is info on how to gage what I will need based on my current lifestyle. Let me clarify that. If I am putting 25% of my income into a 401k, and I am paying off my mortgage at an accelerated rate (so I’ll be debt free at retirement), Then I should be looking at an adjusted income, that removes the money I’m paying out for these things. Then I need to look at what higher expenses I may see. What jumps tyo mind is if i have more time on my hands, would i do activities that cost more then what I pay out now? and there’s always the question of health care and insurance.

    It should be possible to make some charts where we can adjust what we make now, by the factors I mentioned above, and then display what I’d need saved to continue to live that lifestyle.

    Reply
    • Financial Samurai

      I welcome your attempt to create a chart to fit your needs and what you think is right. Just shoot me an e-mail.

      Personal finance is personal. There’s no one size fits all. This post is just trying to provide some guidance for those wondering how much they should save or whether they think they are on track or not.

      Reply
  18. DellStator

    As some said
    90% of Americans can’t max out savings
    50% of Americans earn the median or less, 50G a yr, which has been dropping yearly for years now, and can’t save even 5% of their income – espeically if they have a family or help care for parents.
    Anyone with more than $200,000 in savings is in the top 10%, so stop boasting how good you are at saving, you are in the top 10% of earners, that makes it easy.
    Anyone who thinks you can live anyplace in the US and not have a car (except NYC, with a 24 extensive mass transit system) is delusional – how would you get to work!
    Saving it great, but not a reality for most Americans.
    Saving enough for retirement, meaning 500G or more, is possible only for the top 10% of Americans.
    Lets stop beating up people for not doing what is impossible.

    Reply
      • mrkillagram

        wow.. so according to your chart I’m supposed to ride a bike to work 30 miles one way.. you are definitely entertaining if not delusional..

        Reply
        • Financial Samurai

          What’s wrong with a bus, train, or scooter? Or how about car pooling? Why not live closer to where you work?

          Reply
          • Bernie

            One word (and it is one word):

            ExxonMobil

            My AVERAGE salary over 23.5 years employment there was only $46,000. Their stock, with dividends reinvested, 6-10% of my own contributions over 23.5 years, plus 7% Company Match, had me over $500,000 in 2007 (at age 43), before the crash.

            The price per share is now slightly over $100 per share, and if I did not have to sell some shares ($123,000 worth) to stay financially “afloat” for 3 years while unemployed; my 5,400 shares would now be back to $545,000.

            With the “Rule of 72” as a guide, by the time I am 64, in 14 years, at 10% AVERAGE growth, those shares would turn into over $2.1 million dollars.

            I now get the opportunity to invest my money (in lesser amounts) on stocks that return a higher annual yield, so I should be able to make up the REAL, not paper, losses and maybe end up with MORE for retirement.

            NOTHING IS GUARANTEED but death and taxes (and maybe Obamacare…).

            Of course, I will retire by then, but you get the drift. One always SHOULD diversify, but I believe if something bad happens to ExxonMobil stock, you have got much more serious issues to deal with than retirement.

            I BET that “mrkillagram” also can’t wait for his paltry social security handout, because he believed leftists who told him that the stock market is “too risky”.

            WHERE DO YOU THINK MANY PENSIONS WERE INVESTED? It’s just that much of the gains were skimmed off the top from the employees’ accounts before they were told how much they WOULD GET as DECIDED by somebody UNKNOWN to the deserving WORKER.

            No thanks, I want to be IN CHARGE of my money, GAIN or LOSS…

    • Billy

      “Saving it great, but not a reality for most Americans.Saving enough for retirement, meaning 500G or more, is possible only for the top 10% of Americans.Lets stop beating up people for not doing what is impossible.”

      It doesn’t have anything to do with beating people up or doing the impossible. When you have no other choices, you do it. If you have to take a 2-hr bus ride to work each way and eat boxed macaroni and use the internet at the library and give up your cell phone, you do it. If you don’t do it, you’re going to be very poor when you’re old and working at a menial job until you can’t physically do it any more, then live off of the charity of others. It’s your choice. Either save now or pay later. Nobody is going to help you. You have to help yourself, and the sooner the better. That’s life.

      Reply
      • Financial Samurai

        “Nobody is going to help you” and “Nobody is going to save you” is the mentality I’ve taken ever since graduating from college.

        I knew I couldn’t last in finance forever, so I saved like a mad man in my 20s (50%+). My first year in Manhattan I made $40,000 and shared a studio with my HS friend. I didn’t care b/c I was working all day, and it was just like being back in college.

        Save now or pay later indeed. Or save now and enjoy financial freedom later.

        Reply
    • jp

      we have well above $200K in our 401k and we are so absolutely not even close to the top 10% earners. We started early, blue collar worker but we sacrificed thru the years. We drive 10+ year old cars, budget for extras that we want rather than charging, live in an affordable home and keep our furniture rather than always updating. We save first and live off of what’s left. Sometimes have to pinch pennies and can’t go out for that nice dinner but now that we’re in our 50’s we know that we’ll be able to enjoy retirement while a lot of our friends who’ve been living the high life all these years, will be struggling on their SS and retirement savings. If you have a 401k available start utilizing it right away and max out…it’s a wonderful saving tool.

      Reply
    • Paul Doherty

      “50% of Americans earn the median or less, 50G a yr”

      Exactly – and remember that 51K median is HOUSEHOLD income, which is usually two earners. Which implies that the median individual income may be around 23k-30k a year. So 50% of earners are below that amount.

      Reply
  19. Ben

    and now I feel behind

    Reply
    • Financial Samurai

      Hope it gives you motivation to get ahead!

      Reply
  20. GJ

    “only about 31% of the labor force participates in a 401k”… so what are the other 69% of us supposed to do? I’m 31 years old and have only had one employer who offered any type of 401k and the matching was pretty minimal. Unless you work for a major corporation who still offers this stuff or are bringing in 70k+/year we’re all screwed.

    Reply
    • Financial Samurai

      Save after tax money, consider a IRA, a ROTH IRA, or other investments.

      You can’t believe you are screwed. Because if you do, then you are.

      Reply
  21. AN

    Is it possible some (many) individuals have multiple 401ks (with different employers) over a lifetime. Therefore i wonder whether the average 401k balance reported here may be misleading.
    Do you know of any survey that examines the average 35/50-year olds balance?

    Reply
    • Financial Samurai

      That is definitely a possibility that multiple 401k accounts serve to LOWER the average 401k balance.

      I think this is probably true, which therefore makes me more bullish about our retirement finances b/c it means Americans have a whole probably have much more than statistics like the chart at the bottom of this post says.

      Reply
  22. Hong Nguyen

    Thanks much for a very useful article.
    I agree with many comments above given parents with one child making 30-33k a year fresh out of college, with student loan debts plus expenses. It takes a lot of spending discipline to put away some money in either ESOP or 401K plan. As we mature further into our life, career, our children education, retirement etc…..ones must reevaluate their spending versus saving with goals set in mind.
    I have also learned, just putting your hard earned money away and hope for the best may not work out so well. We must learn how to manage in term of risks taking while at young ages and smart diversification as we get older.
    With commitment to raise and to provide our three
    boys with at least a Bechelor degree or 22 years each (now 26, 21 and 16) it takes not just hard work but serious money management, investing, investing.
    I’m so happy to see we are in line with the suggest chart. I have planned to retire at 56 or 57 post our youngest had obtained Bachelor degree. Let’s hope for the continuing BULL market!
    Great article! This will give our oldest Son some additional ammos to save and invest.

    Reply
  23. MS

    Charts like this don’t inspire me, they freak me out a little. I’m 40, have been working and contributing to my 401k since age 25. Wife is 38 and entered workforce later. Together, we have about 330k saved.

    I thought we were doing well but all the comments/posts about people maxing out their 401ks and IRAs blows my mind. There’s no chance we can do that. Our combined income is probably 145k. No credit card debt or anything like that. But wife has significant (40k) student loans and I live in an expensive part of the country. We live very modestly. Our home is very small and our 30 yr fixed is 3.375. You’d think we could both drop over $17k a year into 401ks. No way. After mortgage, student loans, day care (we have a two year old)… it’s way too risky for us to try to live off what’s left if we put away that much.
    The reality is, I put away about 10% into my 401k and get a match on 5%. I put another 2-3% away biweekly into a Roth. My wife stocks 6% away and gets maybe a 3% match. She also maxes out a Roth. And then there’s the 529 we put money into weekly.

    My job situation is tenuous so I’m always worried I could be unemployed a year from now. We’re sitting on a lot of cash but this isn’t money that we can just lock away for 30 years. Our home needs major remodeling. And I could find myself unemployed for a stretch.

    The reality is that people like us, not rich but not struggling, find this kind of savings rate unattainable. I’d love to do it but there’s simply little left over at the end of the month.

    Reply
    • Martilyo

      “The reality is that people like us, not rich but not struggling, find this kind of savings rate unattainable. ”

      Seriously? You come on here stating you are not rich and you say you make $145K a year? That is $12K a month before taxes. Absurd! Sir, you are indeed broke. You just need to admit to what kind of broke you are…house broke? Car broke? Please get your financial priorities in order! Stop the 529 and only invest in a matching 401K up to the match. Then focus on eliminate the student loan. If you are driving anything brand that is considered luxury such as, but not limited to, Audi, BMW, Mercedes Benz, Lexus, Infinity…etc, then consider down grading to a Honda or Toyota. Small house? What is a small house? 500sqft or 3000sqft? I have a feeling that your are lifestyle broke and have a problem with admitting it.

      Martilyo

      Reply
      • Kevin

        I have a feeling that you sir “Martilyo” are an obnoxious know it all. The notion of being rich at $145k a year (combined income) is a completely subjective one on your part.

        He said he was sitting on a lot of cash because of his job situation being tenuous. What did you not get about that? Day care is expensive..do you have any experience with that? Practically calling someone a liar on a forum based on your “feelings” is ridiculous and rude.

        Reply
  24. Rex

    Your savings look larger than they really are because your table does not take inflation into account.
    Using with your ending numbers and adjusting them for inflation:
    0% inflation
    743,000 – 3,500,000
    2% inflation
    317,089 – 1,493,691
    3% inflation
    208,443 – 981,900
    4% inflation
    137,580 – 648,089

    Using 3% inflation, and dividing the final numbers by 17 gives us:
    12,261 – 57,759 per year for life

    after all of that saving, this is what you will end up with. which is not a lot really..

    Reply
    • Steve

      Financial Samurai,

      Rex raises a very interesting point about inflation.

      Do you concur or refute what Rex wrote?

      Why do I ask? If this is the reality of investing, I’ve worked and saved like a dog (15% annually with company matching to 3%) to only have a minimal benefit.

      Reply
  25. SavvyFinancialLatina

    Great article! I’m currently maxing out my 401K . My husband does not have a retirement plan at work, so I have to make up for it by maxing out mine, and then maxing out our IRAs.

    Reply
  26. Paul

    I was taught at a young age to put 15% of my gross pay into a 401K, no matter what. My wife chose to stay at home, we put 4 kids through school, owned 3 homes, paid for two weddings but always put 15% in our 401k. I am 57 and will retire in December thanks to my 401K. From a young age I taught my children to do the same. I guaranteed them that if they followed this strategy they would thank me when they turned 50. My oldest two are in their 30’s and are well on their way. Financial independence is not determined by how much you make but on how much you save.

    Reply
    • Chris

      You’re going to take that 10% hit to retire a year before the penalty goes away? That seems a bit nuts, unless you don’t plan to draw on the 401k until a year or two go by.

      Reply
      • peggym

        there is no penalty if you retire at age 55 and draw from the 401-k of the company you retired from. it’s one of the exceptions for 401-ks that does not apply to IRAs (IRS pub 575)

        Reply
  27. Linda

    I started to save at 32 yrs old in our 401k, ira, annuities and real estate. Started with $400 and now have $1.7 million at 61

    Reply
  28. Chris Whelan

    Is your 401k truly giving you the foundation for a solid retirement?

    Reply
  29. Billy

    Some of the replies from younger commentators astound me. “It’s not realistic..”, “it’s impossible”, etc. Do you think you have a choice? If you don’t do it, you work the rest of your life, probably poor and in ill health at a menial job for the last ten years. You don’t get a choice. You either save the money or you end up suffering. Who do you think is going to save you, if you don’t take action?

    Reply
    • Financial Samurai

      I’ve had a lot of dissension from the under 35 crowd about savings and investing, and a lot of support for the over 35 crowd.

      My home is that by showing younger folks the power of savings, they will get motivated to save more. Unfortunately, many also just see the numbers, don’t believe, and give up.

      Reply
      • Jc

        You can call it savings, but it is investing and put yourself in the shoes of many of those youngsters who have invested alot in their 401K’s yet the market from 2000-2013 (S&P) returned non inflation adjusted return of around 5.5% or less. Kids likely could have done better buying bonds. Plus factor in the risk of our ever so volatile stock market and how it is more and more becoming a game and electronic trading ground, younger americans may want to look at a ROTH and other asset classes for their money, not just the 401K tied to the market. The under 35 crowd have seen no returns, hence the dissent.

        Reply
  30. Joe

    Wait, Financial Samurai, you said you had mutual funds with high fees? I would have thought ETFs, since mutual funds — from what I’ve been reading on Personal Capital’s site — are the financial equivalent of Leatherface. Or did you just say mutual funds with high fees for the effect, when in reality, you chose your funds very carefully a long time ago…

    Reply
    • Financial Samurai

      Yes, I had invested in several mutual funds with high fees before discovering Personal Capital two and a half years ago and running my 401k through the free 401k Fee Analyzer. My Fidelity Tech Fund had a 1.6% fee which I didn’t realize and quickly traded into a Vanguard tech fund instead.

      Check out this post on how to reduce 401k fees:

      http://www.financialsamurai.com/how-to-reduce-401k-fees-through-portfolio-analysis/

      Reply
  31. Jon

    No offense, but Financial Samurai lives in a fantasy world. It’s easy to give advise when you didn’t have to deal with the same hardships that most of us face on a daily basis. The kid graduated from a top school and began his career at Goldman Sachs in NYC. Yet he feels able to tells somebody who has college debt, gets paid the bare minimum, and has to drive 30 miles each way to work that he/she simply isn’t making the right choices on how to save money. I quote below his response to a guy who has to drive to work:

    “What’s wrong with a bus, train, or scooter? Or how about car pooling? Why not live closer to where you work?”

    Easy for you to say, isn’t it. However, not everyone lives in a big city with easy access to public transporation. Living closer to work? That gets expensive buddy. A scooter? Give me a break. We all can’t share a studio apartment with a buddy in NYC like you did in your early twenties. I applaud your ability to make a ton of money after the dot.com bubble of 99, and go on your own to start your own blog. However, much of your “advice” is simply not realistic. 10% of America would do great heeding your advice, but everybody else would be far better off getting advice from somebody with real world experience.

    Reply
    • Financial Samurai

      No offense taken Jon. Thanks for your perspective! What I’m striving to do with this article is showing people their POTENTIAL if they saved X amount after so many years, and then highlight the reality.

      Forget about what I did before age 35. I decided to pull the rip chord and try my hand at entrepreneurship by resetting to 0. I wanted to see if I could do something on my own with my own two hands. As a result, I still drive a 14 year old car named Moose, who is worth $1,500. And I still take the bus into work every day. I realize public transportation or owning a beater isn’t sexy, but it’s a choice that I’ve made.

      I think more people have more choices than they know!

      Here’s a post you might be interested in: Why Being Out Of Touch With Reality Doesn’t Make Sense

      Reply
  32. Brendan

    These assumptions are ridiculous. Who has a job at age 22 that pays enough to allow them to put $17,500 into a 401(k)? The only people who have starting salaries high enough to contribute the maximum (besides professional athletes and movie stars) have advanced degrees and professional degrees and are age 25 and over.

    Reply
    • John

      Very good point. I am 22 years into my career, two degrees in computer science, and I am still not able to even contribute half of the maximum of my 401(k) each year. There are these expensive and mysterious things called “a house payment” and “children” and “college education” that have to be purchased.

      Reply
  33. Steve Peterson

    These assumptions are incorrect and unrealistic. Most importantly, who would be crazy enough to work from age 22 to 65 and give up the best years of your life to SLAVERY. Few people have a labor of love. Most work in a stressful, slave-like, boring, repetitive, predictable job! Live within or beneath your means, stay debt-free, “work” as little as possible and retire as early as possible, stay healthy and ENJOY LIFE. One does not need a ton of money to do this. These figures in the millions are ridiculous and greatly exaggerated.

    Reply
    • SmallIvy

      How sad. When you are working, you’re doing things for other people and providing meaning to your life (note, raising children is also working). How pathetic it is for someone to sit around doing nothing and “enjoying life,” spending their hours on this earth in useless, personal pleasures rather than spending the majority doing things to meet the needs of others, as someone who works from 22 to 65 does. When you work you are not a slave – you are a servant . You have a purpose and you make an impact on the lives of others and make the world a better place. Who is more important to this world, the offspring of a rock star who spends their lives going from party to party or a janitor?

      If you thinks work is slavery, perhaps you need to find a different job.

      Reply
      • Anonymous

        I agree with the above poster. I used to drive to work with chest pains thinking about what I had to do. I’m lucky to have saved a half million, but knowing my mom has Alzheimer’s at 63 and my dad died at 60, do you really think I’m going to take that cruise this year or put extra I to retirement?

        Reply
  34. Rich

    I for one found the post and table at very least interesting. It is hard to satisfy all or write something that covers all or most situations, so thanks for trying. At 46 (like myself) it is sometimes hard to know if you are on-track to actually retire in 20 years. This lets me know I am within range, but lower than I need to be. I have heard about having somewhere between 8x and 20x your ending salary saved for retirement, but it is hard to estimate 20 years in advance.

    When I was in the military for 11 years and raising a family I was not able to save much in an IRA. Now later in life I am able to contribute to a 401k with a match and have become very aggressive as of late seeing the end goal of retiring getting increasingly closer. I maximize the 17.5k and have the wife doing the same (it was a struggle to get her to understand the importance). Fortunately I have had a match plan from my employer (she doesn’t) that has helped me catch up in an alignment with this chart since my Air Force days.

    I understand how fortunate I am, but have worked very hard to get where I am today, just wondering if I can continue to work so hard for the next 20 years, paying off mortgage (on-plan to be paid off in 10 years), bills, etc, and land on a reasonable income needed for retirement. I’m shooting for 65 and hope there are very few hiccups on the way, fingers crossed.

    I continue to encourage my kids to save and they are starting to take it seriously, but I do understand that it seems daunting from the on-set.

    This article lets me know that I need to apply myself more to saving today as well as continue to push the importance on the kids. Old-me and old-them will thank me one day.

    Reply
  35. dan

    its nice to want..as the low end high end chart indicates…in reality….the liar’s and thieves in DC have made this chart ‘unattainable ‘….so all else is ‘wishful’ thinking……imho

    Reply
  36. Ed H

    The assumptions listed are too high for many individuals and families. However, starting early (even if you’re only contributing $1000 per year) is always a step in the right direction.

    Always max out matching contributions but don’t accumulate cc debt and pay off balance prior to age 30.

    Based on my 33 years of experience in the financial business, sometimes a simple plan makes sense. But utilize resources and listen to experts. Of course, persons who call themselves “experts,” probably aren’t!

    Reply
  37. KC

    Hey, some people may want to use this article as a general guideline or as a kick in the pants to save more, but not everyone should take it to heart. As I’ve read some comments, there are some people who will never be able to invest/save $17,500/year while making less than $40k/year. I am one.

    I’ve been working for 30+ years but feel I’m still “ahead” in the matter of my $190k retirement savings instead of the $480K listed (low end). My 401(k) investments varied, never going over $13500/year. Personally, I don’t have a lot of “stuff”, don’t take extravagant vacations, don’t go out much (cook/eat at home), don’t keep up with the Jones, etc., & don’t have any health issues, yet I cannot even afford healthcare much less $17,500 in my 401(k), which would have been about half my yearly salary. I drive a 1994 car, but ride my bike to work most days (petrol is expensive!). My only “expensive” hobby is numismatics (in a minor way, not a big expense), but I want to enjoy the journey of life, not just the destination of retirement (NOT owing money, & paying bills). It took me 3 years to save for a Hawaiian vacation. Life is all about “balance”.
    For a couple of years I worked extra hours & got a 2nd job, worrying about my retirement & trying to reach my goal of $17,000/year savings. I had no life, was stressed out, got little rest, & missed fun/important things because I was too worried about retirement savings. What’s the cost of STRESS? Of working too much? Of not having any fun? Of missing out on life? Like I said, life is all about balance. Don’t let saving become all-consuming.

    I think the high end numbers are way too high unless those readers make/made over $150k/year, & most of the low end numbers are too high too. You gotta be realistic with the average American. Few can save like this ( few earn the money to be able to while many live beyond their means, assuredly). The low end numbers for age 55, 60, & 65 seem about right (the way I plan it anyways). For me. Depends on markets, world events, & health isssues too.

    When I was a young adult (late 1980’s), the thought of buying a $100,000 home was scary, even more so when looking at 30 years of payments that would total over $300,000. I thought, “What a waste of money!”, so I paid extra principle payments. Now that my 2nd home is paid off (paid in 2007, the 1st house used as an investment, a fixxer-upper to rent out & help with my mortgage payments), & I may be “behind” by your chart, I feel I’m still “ahead”. Being mortgage free for the rest of my life is a relief. I hate owing money. Now that I’m finally making almost $40k/year (& have been debt free for 7 years), I’ve been saving/investing more. But my living expenses aren’t nearly high enough to warrant saving that much as on the chart. I learned to live off $15k-20k/year. I’m not living off $60/80/100K now, so why would I in retirement? I think practicality has to be used when planning retirement. I think people have to look at the general picture of their lives instead of dreaming of big numbers. If I can live off $30-40K in retirement, I’ll be living in luxury.

    My plan: to retire at 62, sell the fixxer-upper house, use that money to live until I’m 70, & postpone Social Security (which will pay out over $30,000 to me at age 70, if it is still around). Then I can also start pulling out of my 401, which I’m trying for/planning on being $1,000,000 – $1,3000,000… for 25 years in retirement (maybe I’ll live to 95?). My 401 has earned an average 16% over the 17 years I’ve been in it, only 3 “down” years. Depends on life, the market, work, world events, health, how long I live…. It’s really a crap shoot, isn’t it?

    Reply
  38. David

    The first chart is absurd, and shows how out of touch retirement projections are with economic reality. Also if you have been watching the news lately, you would realize that economic disparity has been increasing. Very few will meet these requirements in the aggregate. I am glad to hear the stories from the outliers on this site, if their claims are true. It allows the rest of us to feel bad about ourselves and our situations. When this country took away pensions, it replaced it with a model that is unrealistic. I do however like KC’s comments above, and it gives me some hope for the future.

    Reply
  39. Brian

    I am interested in your opinion regarding how a military pension will factor into the amount of personal savings. I don’t have a 401 but a Roth IRA for both myself and spouse, mine is approx $100k and 3 year younger wife is at approx $85k. I am 43 and eligible for military retirement in Aug 2014. Would it be fair to give a % of the numbers in the chart to represent my military pension? I can’t image my Roth equaling the #s in the chart when I finally retire from the work force in 20+ years, although, my Roth + a possible future 401 + military pension might = the chart. Thanks.

    Reply
  40. Ima Ikany

    So what does a person who has been disabled and unemployable for over 35 years do to catch up? At 58, I am going through an intensive rehab to get back into the workforce. The thought that I am nearing retirement age but have not worked consistently is depressing and frightening.

    Reply
  41. Johnny London

    The chart is depressing. The reality is that many of us will live like paupers, looking to a bankrupt government and a broken healthcare system for what meager assistance they can provide. And I’m an optimist!

    Reply
  42. Ray K

    We did the million in the 401k the hard way as we didn’t start saving until age 36. I always tell the new people coming in to the job, save at least the match amount and increase your contribution with at least half your raise. Keep the expenses low and buy affordable housing that doesn’t make you house poor and you can payoff early. No debt and weekly dividend income allowed me to retire at 60.

    Reply
  43. Guy

    Graduated HS in 1976. No college. Worked for 5 different oilfield service companies then went to work for Exxon in 1979 as “maintenance specialist” or roustabout $8.65/hr. Just retired last year at the age of 56. Have net worth of 2.5 million.
    Yes you can do it. Start saving the day you start working. Work harder than all your peers. Save all you can. Leave your nest egg alone!

    Reply
  44. Brian113

    After about three years of contributing to my 401(k), I borrowed from it, which, well, you can just imagine the impact that decision had on my retirement outlook …

    Yep, with that money I bought an engagement ring. And with that ring came a wife and a share of my wife’s pension. Then, when people shifted to conservative investments in 2008 and 2009, we dumped all of our investments into stock while the market was low. So, you guessed right — we’re doing all right.

    BTW, it’s disingenuous to tell people to not rely on Social Security at all. It is asinine to use the “there is no bathroom!!!” threat (rewatch Kindergarten Cop if you don’t get the reference) to scare people into saving, when in reality, the grim no-Social-Security picture that you paint instead makes many people feel it is useless to save. I’m expecting only 70% of the benefits from SS, but I am expecting that 70% and I will raise holy hell if I don’t get that 70%.

    My wife have contributed to Social Security as well as 401(k), 403(b) and pension funds. We will expect all four of those to fund our retirement. Will we live in a swanky retirement community? No. But swanky retirement communities are boring. I’d rather have neighborhood kids to yell at.

    Reply
    • Martilyo

      Brian,

      It would also be foolish to rely on Social Security as well. Raise all of the “Holy Hell” as you want. That will make no difference to the Government and could perhaps land you behind bars. I think it would be much smarter not to figure Social Security into the equation. That way, Social Security or not, you won’t have to rely on a government program that may or may not be there. I also wouldn’t put all of my investments into one basket (stocks) I am glad to hear you are doing all right.

      Martilyo

      Reply
  45. Clipping Path

    Thank you! This worked perfectly.

    Reply
  46. Anonymous

    You assume 8,000 the first year out of college when the average starting salary is sub 30,000 before taxes and medical. Not very realistic.

    Reply
  47. Steve

    I would love to see a version of this chart that is “backward looking” so that I could compare my current 401-k value against the real 401-k limits in the past. Is this difficult to put together? I believe in the 80’s the maximum contribution was in the $7,000 range which would make the backwards looking table significantly less.

    Thanks!
    Steve

    Reply
  48. tom

    In my case, 401-k balance makes up under 15% of our investments (the rest is in IRAs), since I have often worked for smaller companies, and have sometimes changed jobs and been required to roll over old 401-Ks. But whatever the vehicle, these numbers make sense to me for total retirement balances.

    Yes, it’s unrealistic to hope to achieve these numbers on a low income. The “realistic” numbers are the anemic ones you show in your second chart, but they’re no recipe for successful retirement. We have to aim higher.

    To folks feeling demoralized, I’d say don’t give up — you can get there by making smaller sacrifices early, and keeping at it. Buy a lot less house or car than you think you can afford. Even if you’re far from maxing out your contributions, you’ll probably hit the low-end estimates, because they don’t assume employer match or investment return. Over a forty-year working life, if you’re saving consistently, you can ride out investment cycles and start compounding, until your investment gains start to dwarf your salary.

    For anyone interested in this stuff, I recommend the book “Your Money Ratios”, http://www.yourmoneyratios.com/, which is another interesting take on where you should be at given points throughout your life in able to retire in comfort. Good luck to all!

    Reply
  49. dan

    I’m 41 with $275,000 saved and I contribute the max but I also get a pension so I feel I am about on target.

    Reply
  50. j

    boy reading your potential charts nearly gave me a heart attack. Feeling much better after looking at the actuals.

    And as far as “no one will bail you out”, come on man – look around at all the people who are on welfare. Our government can and will rescue anyone and everyone regardless of whether it was their fault or not. They bailed out the automakers and the banks – they will do the same for the collective American people, even if it breaks the country’s future to do it.

    Reply
    • Financial Samurai

      Glad you didn’t get a heart attack!

      You’re right. Bailouts are the American way, and I do believe America is gradually turning into Europe. Maybe we’ll get there in 50 years. But it’s not so bad. Europe has consistently the happiest countries in the world!

      Reply
  51. Anonymous

    I started saving straight our of college and lost 75% when the market took a dump in 2008.. this article is bullsh*t if you use real world analytics.

    Reply
    • Financial Samurai

      What did you invest in to lose more than the market decline in 2008? And how is your portfolio now, given we are at all time record highs?

      This is where a financial adviser, or having a diverse portfolio really helps weather the storms.

      Reply
      • Martin

        Sam,
        I do manage to max out my 401k each year and save another 10% of my $65k income at 26.
        Not easy in the SF Bay Area, but frugality makes it possible.
        My biggest problem is trying to decide what fund types to build my investments. I don’t want to pay an advisor and I don’t want to throw darts.
        How about providing a theoretical % breakdown of how to allocate my savings…

        Reply
    • Martilyo

      Seems to me that it was the perfect time to buy. I can not figure out why people always sell their investments when they “take a dump.” You don’t lose any share. It is just the price per share that goes down. Seems to me the perfect time to buy. So when the market rebounds, you make some serious gains. Remember the old adage… Buy low, sell high!

      Martilyo

      Reply
  52. Travis

    The general information given in the article is spot on. As others have pointed out; no one’s situation is the same. Some graduate at older ages, start off making sub 30k a yr, commission pay, heavy debt (necessary living/school expense or poor financial choices as a young adult or a combination), not to mention economical factors. Personally I do not have a 401k or IRA. I know I need to start one sonner rather than later being that I’ve been in the workforce for almost 3 years but, the crash in 08 left me skeptical. I have been diligent in saving and own two properties, one income producing, with the plan to close on a 3rd aid the first of year. I guess the point if this long winded post is to be diligent in saving and diversify yourself. Everyone’s situation is different and there is no “get rich quick” guide that is applicable to all.

    Reply
  53. Annie Logue

    Heh. My husband had some of his 401(k) contribution returned last year; the non-highly compensated employees had not participated at a high enough rate. Eventually, the top executives at some companies will see that they have to give incentives to their staff to participate, and that may help the numbers.

    Reply
  54. Rod

    I have maxed out my 401k for over a couple of decades, and I am only somewhat above your “low” estimate, and not even in the ballpark of the “high” estimate. I have been invested in a diversified portfolio of mainly stock mutual funds, with 20% or so in a bond fund. Your chart is too simplified in it’s assumptions to be very useful; past maximum contribution limits were lower, the stock market overall didn’t do well for an entire decade in the 2000’s, and you don’t account for inflation.

    The numbers you have for 401ks are probably vastly skewed to the low end. The vast majority of my retirement money is in an IRA that I rolled over from 401ks of previous companies. To have a realistic number, you would need to include ALL types of retirement accounts.

    The depressing part is, to be financially independent and be almost guaranteed not to run out of money after retirement, you can only extract 3% to 4% annually. That means you need $1M dollars just to live on 30k to 40k a year for the rest of your life. Inflation over time will make that 40k into almost nothing after a decade or more of retirement.

    Reply
    • Financial Samurai

      Life is complex. It’s up to financial writers to simplify things but also keep the main points to get messages through.

      If one is in the range, which you say you are, then you are doing great. Don’t let comparison be a thief of joy. Keep it up!

      Yes, a million dollars isn’t what it used to be thanks to inflation.

      Reply
  55. Danny

    This is eye-opening, and disheartening! My two cousins have less than $10k savings at 28 and 29, and I myself am not much better off at $12k at age 30. Luckily, we are living at home, and I have paid off all student loans, car, etc. Much of my cash was indeed squandered on MacBooks, HDTVs, media entertainment, etc., so I can say I’ve enjoyed my “toys”, but it will apparently cost me later should this trend continue.

    I should be able to lock up 80% of my income (currently $62k) to savings for say in my current situation, until I settle down and start a family, but then I’m not sure if I’ll need to reevaluate then? Is this realistic and the solution to our poor start? Please let me know as I would like to sit down with my cousins for a financial planning discussion.

    Reply
  56. An Economist

    The author mentions we should be saving because “It’s better to get in the mindset of completely writing off Social Security to motivate yourself to save more for retirement.” I agree. However, why are we assuming that this broken government that was never supposed to tap into our social security (AND HAS) won’t tap into our 401Ks?

    It’s my opinion you will not “have the last laugh” if/when the growingly desperate, financially depleted government learns it can’t print money for eternity and decides to enact measures to obtain the money from other sources: like skimming off the surface of 401Ks and IRAs. Anyone who’s paying attention knows the Fed’s balance sheet, and money supply, can’t expand for eternity without negative repercussions. These are beginning. Take a look at the BRICS nations plans on forming a cohesive union to dismantle the dollar. Moreover, if you think the act itself of obtaining money from savings impossible, ask if they agree in the EU (particularly in Cyprus). It’s coming. Obama’s MyRA plan was just the beginning of the government slipping it’s tentacles into our retirement savings.

    So, what’s the answer to a folding government? Tangible assets, international savings and alternative currencies. This completely violates the thoughts mentioned in this write-up. While I agree, it’s best to have a huge amount of money to invest in all of the above, we all learn about marginal benefit and marginal cost in econ 101. So, the theme really should be to maximize your long-term well-being.

    Speaking of economic – let’s talk incentives to close. I don’t think it’s ever wise to listen to financial advisors about how much you need in retirement. Surely, us non-finanical advisors should certainly be educated. I just think the worst people to be educated by are financial advisors who reap rewards on you placing more in to the system they benefit from. Does that mean we shouldn’t save a lot for retirement? No. It means you should not blindly trust the level of your contribution amount to people who are paid more if you contribute more.

    Reply
    • Mr CB

      I think you might be forgetting a small fact though. The financial industry has trillions of dollars worth of savings that they will lobby to keep untouched by the government. This is the same industry that got nearly one trillion dollars in bailouts. If they can get that kind of money from the government by lobbying they can certainly keep that much money by the same means. Just a thought.

      Reply
  57. Chuck

    I don’t think the numbers are off. But I have some unique excuses. In 2005, we had a crash that took half of my 401(k). Half. I took that half of my savings and invested in rental properties. They did well until 2008. Now they are worth about 75% of what I bought them for. They still pay for themselves, but not too much more. My 401(k) is worth about 320,000 today (I’m 49), but I divorced my wife and she will take $100K of that. My net worth after that is $424,000. I’m still saving and with SS, I’ll be fine.

    The real threat is privatizing social security. If the very rich make that happen, there is no future for anyone in this country. Look at current savings rates. Very few can or will save enough on their own (including me). I think before you can bash SS and the government, you need to disclose how you are doing with savings. If it isn’t on par with the numbers given in this article, then STFU, because the government is going to have to save your sorry butt.

    Reply
    • Financial Samurai

      Hmmm, that’s a good point regarding government bashing! Never thought about that.

      I think you’ll be fine too if you work for another 13+ years and save aggressively with SS. For those who are under 40, I wouldn’t count on any SS to help.

      Reply
  58. Lee

    FS, I’m afraid most of your comments are coming from people who may have missed your point entirely. We had a brief period where people could depend on three things for their retirement planning–personal savings, Social Security, and a PENSION. Couple the dismal savings rate in the United States with the catastrophic projections for Social Security, we are facing a huge social crisis. “An Economist” makes a valid point that denominating all your savings in US Dollars won’t solve all your problems, but it’s still the best option in the world today. Couple it with a reasonable investment in real estate and you’re ahead of just about everybody else you know.

    Reply
    • Financial Samurai

      I think most people who are under 40 do not count on having any Social Security in their retirement equation 20+ years from now. That’s a good thing. But a big risk comes from those who do. It’s better to have a “nobody will save you” mentality and end up with too much, than end up with too little when we are too old and don’t have enough energy to work.

      Reply
  59. Random Dude

    I started my career in 1987 and married in 1988. My wife and I both have college degrees and we live in the SF Bay Area. From day 1, we have maxed out our 401K contributions. When we had children, my wife did not work when they were young so she was unable to contribute, but I always did. We bought cheap cars, a modest home, simple vacations, all while raising three children. We will both turn 50 next year. Our 401K combined balance is 1.7Million dollars. Consistent and smart investments and management of those funds really does pay off.

    Reply
  60. It happens

    You can save all you want it matpy not matter ! I saved over 800k by age 55. My wife divorced me and took aphalf of everything and now gets 45k a year for life while I am out of work an will be living in my car soon. Live for today and don’t bither to save.

    Reply
    • Financial Samurai

      But if she took half, do you still have 400k?

      Reply
  61. LJDude

    I’m well above the national average for a 401K, but well below the minimum for a 57 year old with 30 years of service (still working). I’m a bit unhappy with my 401K savings (250 $M), but I have a home and nice vehicle and no debt. I will also get a pension that will be ~ 40% of my annual salarly of 90 $M.
    I plan to work 2 – 5 more years and then do something else. Retire? Not until my health gives out. I think working is fun! Next time I will work for myself. I have a degree in Fine Arts and plan to do that full time. If I make $1000 per month I’ll be happy.
    I suppose the reason I didn’t save more in my 401K is that I have spent a nice amount of money the last 15 years on vacations (scuba diving), socializing, paying for my daughter’s college education and wedding and I bought her a new car.
    Looking back…I wouldn’t change a thing. It is what it is.
    I do want to say that I think (what someone mentioned above) that 401K’s and now health care investment plans are the biggest heist of the American worker ever perpetrated by Coporations, Wall Street and Washington Politicos. If you are saving your income into a 401K and health care investment plan, subtract that from your income. You are making less money. I’m very fortunate that I have a pension.
    Plus investment plans carry a BIG risk. You can loose it all baby (2009). And if you’re 62 years old, it’s devastating.

    Reply
  62. Anonymous

    Saving early and often is key. This habit matters. Personal Capital should consider mentioning the use of an immediate annuity in retirement to protect against longevity risk for a portion of their portfolio. Many Americans will live well into their 90’s or longer, and need longevity guarantees.

    Reply
  63. byron

    This spending of the best part of one’s life earning money in order to enjoy a questionable liberty during the least valuable part of it reminds me of the Englishman who went to India to make a fortune first, in order that he might return to England and live the life of a poet. He should have gone up garret at once.

    Reply
    • Financial Samurai

      All is rational. One saves because one wants more security and freedom. If one already feels secure and free, then the urgency to save is less.

      The problem lies when one gets too old to work, or is discriminated b/c of age and doesn’t have enough saved up.

      Better to save more, than save less. Life changes, always.

      Reply
  64. Anonymous

    One variable the data doesn’t consider is graduate school. Even working full time, $80k in grad school payments will result in student debt and greatly reduced savings for 2 yrs. It seems that in today’s business environment, a graduate degree is a requirement for continued career progression. This may be one reason for the under 30 crowd having a more negative reaction.

    Reply
    • Financial Samurai

      Yes, graduate school definitely delays income and savings, that’s for sure. I decided I didn’t want to delay, so I went to get my MBA part-time from 2003-2006 at UC Berkeley. It was painful to have to sit in class from 8am – 6pm on Saturdays the first year, and 9am – 5pm for the last two years, but it was worth it. Didn’t pay 100% tuition, and continued to earn.

      I hope people really take their time considering grad school FT.

      Reply
  65. LifeDoesNotJustHappenItsStuckOnRepeat

    Whether this is feasible or not, in execution, it’s realistic in terms of what one would need to accomplish. Math is math. However, even at the risk of sounding like a naysayer, I have to admit that I think this outcome is in fact unrealistic (for most Americans currently 22 to 30).

    Very few people I know actually graduated at 22. Most of them had to work and attend university. As a result, they may have finished with less loan debt than could have been possible, but it took much longer. I have at least one friend who graduated free of debt, but it took him seven years to get a BA. I started college at 17, but I finished at 23 because of financial hiccups and moving across the country. I was fiercely dedicated in high school, and I finished in the top 10 of my class, but I was only able to secure a partial scholarship and some financial aid. I studied and compounded my credits too much to work, so I took out loans for the residual fees. My loans are all paid off now, at 30, but I have no retirement savings.

    After graduation, virtually no one I know was able to secure a job that paid enough to contribute what this article says is the minimum. Most entry-level jobs pay peanuts, and a good amount of them do not offer much in the way of benefits. It took years for most of them to find jobs that paid even decent salaries, let alone offered any help with 401ks. $130k by 30? Most of them are only now able to start saving.

    For me, specifically, I also had to be patient. The recession, living in the mid-west with a IS/CS degree (good tech jobs are practically a myth in my region), and going in and out of the hospital for ailments that have presented since birth, I’ve only now at 30 secured a job paying anywhere near what I expected to earn when I was a naive student. I barely make 40k/yr with a 401k that my employer doesn’t match. I have $0 in that, I spend nearly $300 a month on health insurance I cannot go without, and I have a used car that’s barely $100/month. I have little to no credit card debt, no outstanding medical bills ATM, and I eat like a college kid. I am fortunate enough to have 2 rooms w/ a family member that are free, and my only other bills are my insane care insurance, my phone (I need a smartphone for my job), and internet (again, I need it for my job – but they don’t subsidize anything).

    Despite all of this, I’ve barely managed 20k in savings in over 2 years. Working full-time, freelancing on the side, and putting away most of what I earned. Also, I’ve had to break even with taxes. I get no return, but I do earn it throughout the year. But that’s not $17,500, and it couldn’t be. Not without deferring all semblance of a life. I’m not living lavishly, and I’ve made a ton of sacrifices. I go without most of the year, and I only go on one vacation a year. If the figures in this article hold true, I will likely never be able to retire. I know that the 65-year-old me will want to live and have money. But I can’t waste the one and only youth/life I’ll ever have in all of existence. You’re only young once. You can only really experience this world once. If you live in a dorm and eat noodles until you’re 65, you will NEVER know what it was like to be young and cut loose. Never…

    I only hope one of the following pans out 1) I study up and find a way to invest and make additional money, be it stocks, bonds, cds, flipping houses, making a viral youtube hit, or inventing the new Beanie Baby – 2) I win the “lotto” and find a job with a pension plan – 3) I find a rich spouse and become a servant – 4) WWWIII occurs and we’re all blasted back to a tribal existence.

    [Apologies for any typos!]

    Reply
    • Financial Samurai

      As a CS major, what are your thoughts on moving to a place like San Francisco where such majors with experience are in SUPER HIGH demand? $100,000 – $200,000 a year jobs are plentiful. Just check out angellist.co/jobs

      Reply
  66. RobS

    Sam — well done. You’ve broken up the myth that the “401(k) won’t work” for people. It can work if it’s used according to it’s design. People can save money with it, but that money does need to come out of their take-home and go into the account to make a difference. For anyone that thinks they might want to retire one day (or leave a legacy to grandchildren or children; or even just protect against health or disability risks at later age), then they need to be acting — not just thinking — on this topic seriously.

    Reply
  67. Warren Lunch Buffet

    This is a great article. I think the non-saving mentality is a huge problem. Prices of goods are overstated because people aren’t paying themselves first.

    A first or second year out of college grad can save boatloads by living at home and not spending at the bars and restaurants. Also could get a part-time job. 9am – 5pm hours are great but if you truly want to save you can work a couple more hours a week at night. Tutoring, bar tending, retail, etc.

    Reply
  68. SL

    I’m 32, and these numbers have almost no basis in reality. Assuming someone can save 17.5k per year starting at age 22 is assuming the “average” 401k saver makes close to 6 figures immediately after college AND carries no significant student loan burden. The “average” 401k balance, assuming someone makes “average” salary at age 22 and have “average” student loan burden, with an “average” career / salary increase would be nowhere near 130 to 200k by age 30. By that table I should have somewhere close to 150-160k in my retirement savings at this point in my life.

    And all this of course is assuming you didn’t go back to grad school and incur more debt (which is usually required for those high income jobs that’s a prerequisite for maxing out your 401k), bought a house, got married (weddings are expensive!), or have kids.

    Reply
    • Financial Samurai

      Sometimes it’s OK to be below average SL. The question is: what will you do next?

      Reply
  69. Matt

    Hello! First job out of college, just turned 22, and I am making 55k. I am currently contributing 10% towards 401k and my company matches the full 10 percent, which is the max. I have a 6 month emergency fund already. Cheers!

    Reply
    • Matt

      How am I doing?

      Reply
  70. Young Person

    This chart is unrealistic, I make 30,000 a year and have school debt. I’m lucky if I can hit 2000 a year, in my retirement savings. I am 23 btw.

    Reply
    • Financial Samurai

      Young Person, but you haven’t even given yourself a chance. How long have you been working and saving?

      Don’t give up so soon at 23!

      Reply
  71. Kevin

    For all of the ‘whiner’s’ out there, I must reply.

    Anyone would understand that any single chart like this, covering 360,000,000 people, is just informational. It is just a rough starting point. Every ‘but…’ that you offer is an exception, but it is ALSO one that others had to deal with to achieve what they ultimately achieved. I hit ALL of those ‘but’s…’ and more. However, the point of the chart is that YOU make your own decisions.

    If you make the right decisions, you can achieve the results on the chart. If you are a ‘whiner’, you won’t make it at all because you won’t try. You won’t make ANY of the recommended sacrifices described and required. You will end up with all the rest of crowd that screams that “the Government should” take money from others (taxes) and pay for the things that I was unwilling to sacrifice for myself. In essence, that means others who DID sacrifice and save will be oppressed and taxed out of their savings to pay for those who did not save or sacrifice. This is the DEFINITION of oppression and loss of liberty.

    My point? Not to complain or scold, but to challenge each of you today to reject the ‘taker’ attitude and rather use this chart and others to guide you and motivate you to achieve this NECESSARY goal. I lived on the same planet as the rest of you.

    I made all these sacrifices and more. I started at $11,400 a year and saved and (later) invested all that I could. Now, in my early 60’s, I am at the top of my bracket and retiring early. I hit all the ‘but’s…’ you mentioned and more, including loosing almost all my savings in a divorce at 40. It left me with $3K cash and a $14,000 IRA (marriage is seldom a good financial decision for men, although I did marry 9 years later).

    That’s right, I basically started over and hit this goal in 20 years !! I had my first million in ten years, just saving and investing is stocks and max’ing out my 401K.

    I have not had ANY debt since the divorce, except a mortgage on the home we just sold. No debt makes a HUGE difference! I have never paid more than $11,000 in my life for a car, and my last three were Jaguars (OK – repairs HAVE gotten a bit expensive). I just bought a very nice Volvo convertible for my wife for about $9,500 including a large repair bill.

    Decide first WHAT you want to achieve, then set out to make decisions that will achieve it. IF you do, you will hit, or come close to the goal. If you don’t, you will become a ‘taker’ and a ‘whiner’. (Keep your hands out of my retirement savings !!)

    Reply
  72. Lynn

    Hi FS!
    I am 23 and just graduated and started working. I know nothing about finances except that the money is for having fun and enjoying the life. However, my mother has very good grip over it and I do not like to be always talking about money. My mother and all of you here say that one must be “money-wise”. With this background let me explain why I am here. I started working in the middle of August 2014. So far, I have received 2 pay checks(base pay $5,000/pm) and the pay stub indicates contribution of $75.00 towards 401(k). The employer matching is $50.00 per pay check. Today, just out of curiosity, I logged into the Vanguard website and noticed that the “account balance” is $123.69. My question is : why there is difference between the contribution and the account balance? Should not be they same? Does it mean that I might lose money? As said in starting, I know nothing about “financing”. I might not have used proper technical terms. I actually do not understand how it works. Do I have to choose how and where to invest money even after contributing to 401(k)? As per my understanding you forget about the money until you retire. Please help me understand in plain and simple language. I do not talk money language. Thank you all for reading in advance.

    Reply
    • Financial Samurai

      Hi Lynn,

      You probably lost money through performance or through trading fees. I’d give Vanguard a call and ask.

      Reply
      • Lynn

        Thank you FS!

        Reply
  73. Mike

    I’m 30 and I’m trying to follow this formula but because of unemployment I had to cut down on other expenses. No kids and no house for now. I have about 1500 saved. Wish me luck.

    Reply
  74. RIC

    It would, perhaps, be appropriate to add a qualifier to the chart in the article that says “actual results may vary – drastically.” The chart shows what may be possible, but far more probable is that at sometime in your life real world circumstances will blow your savings plan all to hell. Divorce, illness, prolonged unemployment, and other unforeseeable events will mean that it’s the unusual person who ends up with a portfolio amounting to millions of dollars. And the fact is that many people are so clueless about financial matters that balancing a checkbook is challenging, let alone choosing among various investment options.

    It’s also worth noting that the raging bull market has been propped up, since 2009, with a steady infusion of borrowed money to the tune of some $85 billion a month. Take away the “quantitative easing” and we are left with a huge debt (plus interest) that has to be paid by someone, if not us, then our children, and their children. Do you feel good about a retirement savings plan that is based upon bankrupting the unborn? And let’s not forget that due to government action, any and all savings could be used to “bail-in” the banks that are “too big to fail.” So perhaps the chart is right in a world where nothing ever changes, the bull market continues endlessly, house prices never fall, and politicians aren’t owned by international bankers who manipulate markets, but that is not the world we are living in.

    Reply
  75. It can be done

    I came from a blue collar family and graduated from a state college in 89. I started maxing out my 401K with a 6% company match at 22 making $35,000. I did some research about 401Ks and at that time planned to have $2.4 million (figuring for inflation) by the time I retired at 60. With help from the bank, I bought my first home a year later. My wife taught for a nine years until the second kid arrived. We have the first child at a private university and she will have no debt upon graduation. We have another still in high school and he will leave college debt free as well. I have barely exceeded six figures and own a $400,000 home debt free. We have not had a car payment since 1993. We vacation a week or two every year and eat out a few times a week. My 401K exceeds 1 million as of this year and I am 48 years old. I am not bragging, but I know that it can be done. We have always lived a life style comparable to our friends, but most would not guess that we don’t live paycheck to paycheck. We keep about a years salary aside from the 401K to guard against job loss and such. I am concerned that the politicians will make us pay for our lifetime of living within our means when we start withdrawing it. I am still maxing out the 401K and am concerned that it won’t be enough considering the reckless spending and lack of accountability in our government.

    Reply
  76. Marc Davis

    I have contributed the maximum amount to my 401(k) for 20 years. When I started, the maximum was not $17,500 but significantly lower. With that in mind, the $17,500 assumption for the “low end” in the first chart is not valid.

    Reply
  77. Annonomous

    I am 59, I did not have access to a 401k until I was 30. I started working for a generous financial services company. I put the max in my 401k account as soon as I was eligible. Was it easy, NO. I made it a priority. I worked for 28 years, until I was forced into retirement. I have $2M. My company matched 6%. I am living off the interst of my EFT’s very comfortably. Your chart is very realistic and achievable. I loved my job, but when they kicked me to the curb, I was ready. I volunteer, I excersise, I travel. I do all the things I wanted to do while working 50 hours a week, but was too exhausted to do. I have never owned a new car, and haven’t made car payments since my 30’s. If you save enough you can do what you like, it’s totally worth it. Living the Dream.

    Reply
  78. Anonymous

    Too many people under 40 are not saving because their priorities are flawed. They talk about how they struggle to manage paying for life’s “essentials.” There essentials, however, are often extensions of their need for needless “fluff-factor” consumption and sense of entitlement; – expensive cell phone and cable plans, a German car or gas guzzling 4wd truck, constant upgrading of big screen TVs and other electronic gadgets, eating out 10+ times a week, etc. They think that when they get caught up, and have $$ left over, they can increase their savings. The problem is that there is never $$ left over. Savings need to be deducted first, as if the $$ never existed. Then, whatever remains, can be go for frivolous consumption. This approach requires discipline – a trait that is eluding generations X and Y — Quico

    Reply
  79. WC

    I guess we are on the low end, or pretty close to it. I retired 2 years ago at age 55 and my husband plans to work for a couple more years. We have just over $1M in our 401Ks, $300K equity in real estate we plan to sell next year, and I get a $20K a year pension. Our home has no mortgage, and we will not have any debt after the real estate is sold next year. Using the 4 percent rule, my pension should be worth approximately $500K, but I’m not sure if this should be counted.

    Reply
  80. LJDude

    It’s ironic that if everyone followed an austere plan to gather money for retirement and never borrowed money to buy new things like cars, homes, furniture, electronics and took nice vacations then the economy would collapse along with the mutual funds, stocks and bonds people have invested in their 401Ks.
    Realistically, this will never happen because the vast majority of Americans are consumers and are willing to borrow money to get what they want now and not wait.
    Another irony I see and have witnessed many times. Most elderly folks will not spend much (if any) of their retirement savings. It means more to them to have the security of having a large sum of money than to spend it on anything. They die with it and leave their children a nice inheritance.

    Reply
    • Paul Doherty

      This is best reply so far, out of the hundreds I’ve already read – well done!

      Reply
    • SmallIvy

      The economy wouldn’t collapse because people would still need to buy things. There would just be a dip as the economy stopped running on borrowed money and returned to pay-as-you go. Kind of like when you cut up your credit cards after always paying the balance in full each month and then need to spend a month or two paying off the float that you were putting on credit cards each month before you can resume you previous spending levels.

      On dying with money, I’d rather pour out some water from my bottle after a long hike than run out before I get back.

      Reply
  81. Robert Kinghorn

    My first reaction was, ‘you have got to be kidding that people CAN save that much out of their salary’. Especially those in the lower earnings brackets. I knew many 80k programmers back in 2000, who barely saved 6%… Did find the other comments interesting on how to save. The car is of course many peoples mistake on how much they spend.,

    Reply
  82. YOU THINK?

    Setting financial goals at an early age, having the discipline to save and making some small sacrifices. Good book to read: The Millionaire Next Door. I’d prefer to be able to retire at a young enough age where I can enjoy life rather than spend all my income on STUFF now. I believe that if more parents and schools taught kids at a young age (like mine did) that saving is important, more would be in a better financial position. We are greedy Americans who want to look good and feel good. I look back on my life and am very grateful for being constantly reminded by my parents to SAVE. I started with $10/pay into a savings account that I would never touch. That amount increased with each new job and with increases in income. Then I set goals as to how much I should save. By age 30: $150,000.00. By age 40: $200,000. By age 50: $300,000. I managed to exceed my goals but I also know that I still have debt and will likely not meet my goal of $500,000 by age 60. Even if I am able to hit this goal, I know it’s hardly enough to retire on. My income averages well below what most make but I know that discipline truly works.

    Reply
  83. Annoymous

    This is not a realistic chart or article for anyone working in non-profits, teaching, or many, many of the service fields and those who don’t start out of the gate making 60K. 60K as a 22 year old in a beginning job?

    It’s also not realistic with the swings in the market, the low interest rate we’ve had for years now to use the 401K as an investment tool.

    Then you have the “extra” expenses that can happen in that work span period, let’s see…..large housing expenses such as new roofs, furnaces and multiple other things, parents who become ill for years and travel is necessary, children who need college expenses which is out of this roof, the list is long and many if you are having a life. And that’s what concerns me the most. These are numbers on a page and don’t account for the multiple ways we LIVE. What you are advising is that everyone bunk down with roommates, sock lots of money away–fund managers need their jobs–and then low and behold, magically you will have a 401K at retirement. Of course, if something happens before your magical retirement day–and the list is long–illness or even death–then lucky you, you got to work all your life, never experience a vacation or something fun, and gee..your financial manager on the 401K sure received their payment.

    The wealthiest families and people I know did not invest in their 401K’s, they plunked it into real estate as buying rentals and operating vacation properties. It was a lot more solid of an investment than a 401K that can go up in smoke with flash crashes on Wall Street.

    Sorry, to burst your bubble–but the 401K is not these nice numbers on a page.

    Reply
  84. thomas

    The numbers that matter most are, how much you need during retirement and for how long – and how are you going to achieve that. Otherwise how much in your 401K is totally irrelevant. How much you have access to -total net worth and liquidity is what I think most important. A bunch of money sitting in a 401K getting eaten up by inflation might not last as long as money that is invested. Then again, money that is sitting in index and bonds might dwindle to near nothing too, crashes happen, and like global warming, are getting worse. Pensions are subject to default. I’ve decided that bascially, I will need to work with benefits until I’m mostly dead, if I want any financial security at all. Tough reality to accept, but I have not seen any way out of it. And my numbers are well aligned with those above. A person needs well over a million to retire and have any kind of a decent ‘above minimum wage’ lifestyle, , which is not saying much. Given that, just stay calm, and work on. OR be completely broke, go on medicaid and live in a home.

    Reply
  85. 401K_Since_2004

    I did not contribute to the 401K when I started work right out of college. I did not know anything about finance – period. However, I did learn from a former co-worker who has since retired and he taught me about investments etc. I began contributing into my company’s 401K a little over 5 years later after I began work and now 10 years later I wish I would have started right away. Seeing how my contributions have grown throughout the years, it makes me feel good knowing that I’ve got a big retirement saved 10-15 years from now. There is no better feeling than to have independence from a work place when you are in your 50s. The job market these days are getting more and more volatile.

    Reply
  86. David

    I am 51 years old, make about 70K a year have three kids and my retirement savings is 650K. I have done nothing amazing except to follow the advice of people like the one who wrote this article. Anybody can argue that their life circumstance prohibits saving but it is all a matter of choice. I drive older cars, live in a modest house, don’t pay a cent for TV, and almost never eat out. Soon I will retire before age 60, have over a million in savings so my wife and I can travel the world for the rest of our days.

    Thank you for encouraging others. I am a believer!!

    Reply
    • MG

      Might want to do some quick math on your retirement. $1M isn’t enough to be a world traveler for the rest of your life from age late 50s. Yearly it’s less than you make now, if you don’t want to die a pauper.

      Reply
  87. john

    I started saving in an IRA during college putting the max $2000 in with money I earned working during the summer and at night while at school. Basically, I was borrowing for student loans while saving my earnings.
    Since working, I put 10% in my 401k plus matching. In addition, I have invested in real estate. By the time I was 40, my net worth was more than my total lifetime earnings and I was worth over a million despite a modest income. I married late in life and sadly can no longer claim I am worth more than my lifetime earnings.
    My advice: Don’t buy new cars and stay single or at least marry someone that has the same financial goals that you have.

    Reply
  88. SmallIvy

    Come on – a 401K does not do a “woeful job of replacing a pension.” If someone contributes to their 401k regularly (10-15% of their income), takes advantage of employer matches (which are typically 5% of pay), and DOESN’T TOUCH IT they will end up with a lot more money than they will from a standard pension. They will also not need to wait and have their money dribbled out to them over the years and will be able to leave their 401K account to their children if they die early. The 401K is a ton better than a pension. And so far as security goes, if the company you worked for goes under, you’re dropped onto the government plan and lose a lot of your benefits, assuming the government can continue to bail out pension plans with $18T in debt on its own books.

    The trouble is that people do mess with their 401K accounts. They withdraw money to pay down credit cards that they then run up again. They decide at 45 to start a business and use their 401K to bankroll it. They take out a loan from their 401k to take a vacation or add on to their home and then never pay it back. Or they think they are stock traders and move in and out of mutual funds in their accounts, running up the costs for everyone and missing out on the big moves that would give them a 15% return instead of a 5% return. There is nothing wrong with 401Ks except that people have the ability to pull the money out for stupid reasons and, even though they pay a big tax penalty, they do so.

    Reply
    • Financial Samurai

      As a middle class citizen, I’d much rather have income for life of $40,000+ a year from a pension than the average 401k, or even potential 401k amounts in my chart.

      How much do you have in your 401k? Or do you have a pension?

      Reply
      • SmallIvy

        But if you had $3.5M, you could withdraw 4% per year, or $140,000 per year, for the rest of your life and have a very good chance of still having $3.5 M to give your children or grandchildren when you die. That’s $100,000 per year more than your pension.

        After 15 years of contributing an average of about $7,000 per year (including company match), I have about $250,000 in my 401k. This includes the 2000 dotcom crash and the 2008 housing crash, so it wasn’t a great time to invest, and yet I still got a return of almost 10%. If I get the same rate of return and never contribute another dime, I’ll retire with $1.1M in 28 years. This will be an annual income of $44,000 per year after contributing for 15 years, versus contributing my whole career to a pension to retire with $40,000 per year.

        Reply
          • SmallIvy

            That 4% _is_ living off of the interest. Assuming you are earning something like 10% per year, you take 4% of the account for living expenses and then reinvest the rest to allow the account to grow and keep up with inflation. 4% is considered the amount you can take without depleting the account, meaning you could do it forever, although some say it’s safer to take maybe 3%.

  89. plock

    I didn’t get a job that was 401k eligible until I was 27, but I’ve saved the maximum amount every year since then. If I adjust my age by 5 years, I’m in about the middle of the assumed high and low ranges set forth in the chart. Sounds great, right? I’ll have 1.5 million to retire on by age 65. 5% of that — the most you could take out per year — is $75,000 per year. My father does better than that with his pension, but I’m not complaining. The problem is that I’m the extremely rare person who maxed out the 401k for my entire working life, and it’s barely enough. The program is badly designed and will leave most people impoverished. We need Social Security more than ever. Let’s hope the clueless idiots in DC don’t gut that critical program.

    Reply
    • SmallIvy

      Oh come on! First of all, the assumptions made in making the chart were ludicrous. No one would be on the “low end” and receive no growth over their working lifetime unless they left all of their money in cash. On the high end, returns would be 12-15% based on previous market returns, not 5-10%.

      Also, the table and the text are misleading, saying that the high range assumes 5-10% returns. Looking at the values given, the table assumes a 5% rate of return, not 10%. (And note the yearly income from even that $3.5M with the low rate of return, assuming a 4% withdrawal rate – the amount that you can withdraw without seeing the value go down much of the time – is $140,000! A lot better than a $40,000 per year pension. At 10% and the same contribution rate, you would have almost $14M, or a yearly income of $560,000 assuming you withdrew 4% each year after retirement.

      But let’s see what happens if you do a reasonable contribution for most people instead of contributing the max and use real market rates instead of these low rates. Assuming a fixed contribution of $8,000 per year at 12%, you end up with $13.5M. At 15% return and an $8,000 per year contribution, you end up with $41M at retirement, or a yearly income of $1.64M for life after retirement, with $41M to leave your kids when you die.

      And Social Security? The rate of return there is nearly 0%, so your return after those 43 years of working would be at the low end of the table. With a $50,000 per year job, you’re contributing about $6500 per year to the program. In a 401K, you’d have $11M, or a yearly income of $440,000 if you could put it in a 401K, versus $15,000 per year from the government. And that money goes away when you die, so if you die at 64 you get nothing. And still, they have already “gutted” that program. With $17T in national debt, including $9T added on over just the last 6 years alone, we’re one interest rate jump away from seeing the interest on the national debt consume all of the money going to Social Security payments currently. This wouldn’t be a risk if we were putting money into private accounts instead of sending the money to the general fund and then paying out benefits like a Ponzi scheme.

      Reply
      • plock

        How are you going to get a 12 or 15% return, net of fees, year after year? Some textbook may say that’s possible, but that’s not reality.

        My 401K plan has had a 7% return over 20 years. My wife has done 6% for the same period. My 10 year return on my non-401k investments have been a little better — 10%, but that’s because it leaves out the 2000 dot com bust. If you’re planning on a return of more than 7-8%, you’re not being realistic.

        You’re reference to interest rates rising tells me that you don’t get how markets work — have you been predicted high interest rates since 2008? How has that worked out for you during this long period of unprecedented low rates? If we do get an interest rate boost, it will because the economy heats up. So any increase in rates will be offset by greater tax revenues.

        And SS is going to save my generation from abject poverty. It’s definitely a good deal — it’s an inflation adjusted annuity that protects against a long lifespan, a disability insurance policy, and provides spousal benefits. For current retirees, only the poorest have just SS to fall back on, but in 20 years, that will be all there is for most people because the 401k experiment was a disaster.

        Reply
        • SmallIvy

          The answer is you invest in low-fee growth stock funds (like index funds) and hold them for a long time. Here are the only growth funds I could find in Vanguard that have been around for 40+ years:

          Morgan Growth VMRGX Return since inception: 10.27% Inception date: (12/31/1968)

          U.S. Growth VWUSX Return since inception: 10.29% Inception date: (01/06/1959)

          Windsor VWNDX Return since Inception: 11.55% Inception date: (10/23/1958)

          Note that every one returned better than 10%, with Windsor providing about 12%. This correlates well with the market for the period, which returned about 12%, with the difference due to fees.

          As far as SS goes, how exactly do you expect the government to keep paying out SS with the national debt at $18T and growing, young people not finding jobs and not starting careers until they are 30 or older, and fewer young people in general? And even if they do miraculously keep paying at the current rates, it would be dwarfed compared to the return from a 401K. The only way they will be able to pay is if they confiscate all of hte 401Ks, which I wouldn’t put past them.

          Reply
      • Tarac

        I don’t know what kind of calculator you’re using, or how many savings years you are putting into the equation, but $8k per year, even at 15% (which, I agree with Plock, is unrealistic), would get you nowhere near $41M unless you a) are making an average of $66k per year b) start saving at around age 23 and c) retire at age 70. A lot of folks are lucky if they end up with a $66k salary in their last years of retirement, and I don’t know about you, but I’m not working till I’m 70 years old. I was extremely happy to get 20% return on my 401k last year; this year, I’ll be lucky to get 10.

        The bottom line is, it’s all a guessing game to a certain extent. I had everything all planned out with my financial advisor to retire with a fairly healthy sum (close to $1M) – now, after a recent acquisition, I’m very much in danger of losing my job. I’m still seven years away from my desired retirement age, and in my late fifties, who knows how easy it will be to find another job at even half my current salary. No one can predict how the markets will go, what health issues you may encounter, or whether job changes will adversely affect your income. You can plan, for sure, but unless you’ve been fortunate enough to be making $500k annually and sock a good part of it away, you can only plan so far.

        Reply
        • SmallIvy

          Using http://www.thecalculatorsite.com/finance/calculators/compoundinterestcalculator.php, starting with an $8000 deposit and then compounding that on an annual basis at 15% interest for 43, years, I get a balance of $26.7M. The other calculation was compounded continuously, thus the discrepency, and I agree that I should use annual instead. This is just using his assumptions of 43 years and someone starting at 22, meaning retirement at 65 or 66. This is not inflation adjusted, but then neither were the numbers in the article. When this person retires, $23M moght be like $5M today. Still, it is a lot better than his table.

          Reply
  90. Matt Joseph

    I put the enough to get a 401K Match (9% full in my company.) Would you suggest putting in more than that if I am 22 and will begin to get my MBA. My company pays for 80 percent of my MBA which will still result in me having to pay approximately 20-30k out of my own pocket. Would you max out your 401k still in a situation like this?

    Great website!

    Reply
  91. Bob Taggert

    I quit putting anything into my 401k after the certain government officials started talking about confiscating them at some time in the future.

    Reply
  92. Rico

    I had to tap into my retirement savings in my 30s to care for a terminal parent. Turning 40 with little savings was not what I envisioned for myself when I graduated with my MBA… I didn’t think I could possibly save enough to retire comfortably so I used my savings to buy a multi-family house. I live in the studio apartment on the ground floor (for free as the rent from the other apartments cover to mortgage, taxes, and insurance. My goal is to pay the mortgage off by the time I’m 55 so that I can retire on the $5,000 monthly income (net) that the property clears.

    I believe we can all get to a good place financially in retirement if we put our minds to it.

    Reply
  93. jaded

    I have been working for about 16ish years (including college) and including those college years, I have only had access to a 401k or retirement plan for around 6 of those, optimistically.

    Work at a small company? No 401k for you. My current company just added a 401k last week.

    I haven’t had access to any employer sponsored retirement savings for the past 8 years for more than about 6 or 7 months in total.

    This assumes it is even an option. Even better would be to offer tips for those of us without access to employer plans. It is not just service or retail jobs that are impacted.

    Reply
    • SmallIvy

      What’s the problem? You’ve got the greatest pension plan of all -Social Security!!!

      Seriously, you can still contribute to an IRA or a Roth IRA as long as you have an income from work to cover the contribution. I believe the limits are $5500 per year for you and your non-working spouse, if you have one. If you had done that for the last 15 years, you’d have about $233,000 today for yourself and your spouse. Beyond that, you can always start an account at Vanguard or another fund company and invest in index funds. They won’t trade much, meaning most of your money will grow tax deferred until you sell them anyway since there won’t be many capital gains realized. You can still save even if you don’t get a tax sheltered account and you’ll be a lot better off than those who save nothing.

      If that still doesn’t sound good, weither find a job at a larger firm with a 401k, or write to your legislator to enact the Fair Tax, which would get rid of income taxes, making 401ks meaningless. Find info here: http://www.fairtax.org.

      Reply
  94. Practically Impractical...

    So here’s a little story about Joe and Matt who were both in their early 20’s, hard workers and new to the workforce.
    Joe was the type that saved as much as he could and worked hard for every penny. He did this by living in dumpy apartments and driving broken down cars. He didn’t go out much since it cost money. He didn’t hang out with people from work, it cost money. He was content watching TV on the couch and seeing his savings build up. Subsequently Joe didn’t make many friends and never had anyone over to his apartment. By the time Joe turned 40 he had a nice savings built up; still he didn’t have many friends or much in the way of “this one time” stories.
    Then there’s Matt. Matt worked hard and played hard. He lived in a decent apartment down the street from his favorite bar which he used a time or two to get lucky with the ladies. He was conservative with his money but indulged on the weekends and took annual vacations. Fast forward 20 years later. He’s sitting in his modest home which he’ll be paying for the next 20 years. His and his wife’s 3 and 4 year old cars sit in the garage and he’s telling his kids stories about the crazy trip him and an ex-girlfriend took across the country.
    Let’s skip ahead 30 years. Joe is retiring in a few days and ready to spend all that money he worked hard for. He buys a house on the beach, a boat and of course a new sports car. A few years later while Joe is finally living it up Matt will be attending his son’s wedding in week, but not before a weekend golfing with “the guys” of course. While Matt is at the reception dancing with his new daughter in law Joe has been hit by a drunk driver. Matt is now joking with his son about tips on a successful marriage. Joe lays on the operated table unconscious. He’s not awake but his mind is racing. He’s trying to find a reason to keep going. His mind is looking for something, possibly a memory to give him enough strength to wake up; to fight death and continue to spend all he is worth.
    Matt sits in a rocking chair on the front porch of the only house he has every owned. His granddaughter in his lap. He’s speaking words of wisdom to her, “the best day is one you wake up to” he says.

    Life is short, no matter how much money you save.

    Reply
    • Financial Samurai

      Every life has its own journey indeed. There’s no right path to take. But I do believe there are suboptimal paths to take that will lead to regret if action is not taken now.

      Reply
  95. Kim

    I just had to weigh in on the 1/10th rule and the Cash for clunkers program. I have intuitively known this for about a decade and spend maybe 1/20th of my gross on a “new” car. When that stupid program came out, all i could think about was all those perfectly good used cars being junked. That of course meant less inventory for those of us who purchase used cars. What used to cost me about $2000 is now roughly double for the same vehicle today due to limited inventory. I always said that ridiculous program was only a benefit to those who have disposable income. Big time fail.

    Reply
    • Financial Samurai

      Thank you. I agree. BIG TIME fail!

      Reply
  96. Matt

    Hello,

    How do you include company match in this equation?

    Reply
  97. MG

    Keep up the good fight!

    Saving for retirement isn’t hard, just takes discipline. My wife and I earn comfortable, but not extravagant salaries (under six figures each). Each of our retirement accounts are at or very near your high end chart value for our respective late gen-x ages.

    Responsible spending choices and automatic contributions really pay after compounding. And it’s not that we live like hermits either, we just save and spend cash for European vacations or toys.

    So the chart is far from laughable, it is achievable. Just can’t keep chasing the Joneses.

    Reply
  98. Mark Lewsader

    I am 55 and have $287,000 in my 401K. this chart tells me I only have half the money I need but it does not take into account the money I have in savings and assets. I also have $100,000 in a cash account, two pension accounts (maybe three by the time I retire in 10 years), not to mention my wife’s pension. All tolled, I should be able to pull in about $61,000 /yr at retirement (age 63) with a life expectancy of 82. I would say that’s pretty good.

    Reply
    • Financial Samurai

      Good stuff Mark. The first chart can be used as a guideline for one’s OVERALL savings rates/assets by age.

      Reply
  99. Andrew Wong

    How much would one really need if one wants to retire at 49? Do one need to have at least 1.2m set aside by that time? Most people would need to work till they are 65 or longer to accumulate that amount.

    The question I have is would 1m be enough to retire on at the age of 49 if the assumption is that one would live to the ripe old age of 98?

    Reply
    • Douglas

      Andrew Wong: You’ll have to provide MUCH more information about your situation at 49 yrs old. Do you own your home? Have any other debt? Have a company medical subsidy as part of your early retirement? Expect any pension from your former job? How’s your health? How much of that million is taxable Etc., etc…. Sheesh.

      Reply
    • Noah Juan

      Andrew,
      I think the charts are showing how much you *can* have at certain ages, not how much you should have in order to retire. If it were how much you should have then the chart should go the other way with the youngest needing the largest amounts. In addition, how much each person needs depends on how much they spend. If you only spend $15K/year, then $1M is more than enough, but if you spend $100K/yr then $1M won’t last more than around 10 years, if you’re lucky.

      Reply
  100. Katrina

    I generally like this chart but do think there are a number of dependencies to consider, and everyone’s situation is different. The most important thing is to have a plan that works for you and that puts you in financial control of your future. I am 33, have $215K in my 401K (double that if you include my husband’s), and believe I’m doing quite well, so I don’t speak at all from a “defensive” position. I may not be on the “high” end of the chart, but my husband and I also have $175K equity in our home and $100K in short-term savings. As a total package, we are doing quite well.
    Considerations:
    – Financial position at graduation. I had student loans and needed a car for work. A new Honda was 0% interest and I drove it for 14 years, investing no more in it than only stnd maintenance. I aggressively paid off the car and student loans because for me, 0 debt and “some” short-term savings made me feel most secure. My short-term savings helped pay for my grad school. My starting salary was $50K.
    – If contributions are pre- or post- tax. Much of my 401K is in a Roth account – contributing post- tax dollars means effectively putting away even more than the equivalent for a traditional 401K
    – Whether or not you have children is a HUGE one. Infant care in DC can be over $20K per year (keep in mind those are mostly post-tax dollars). Nothing is worth more to a working mother than knowing her child is being well cared for while at work. When you have a family, many of us also tend to spend more on things such as health insurance, life insurance, accident insurance, etc.
    – Balance: My husband and I work very hard and live a mostly modest lifestyle. However, I think it’s also important to occasionally splurge, even when you are young, permitting you have built that into your plan. We work for our futures but aren’t going to wait until we are 70 to reward ourselves for our hard work.

    Overall, I think everyone should work hard to get to the $17.5 contribution but it’s ok if that doesn’t happen 2 years out of college. What’s most important is that you are sitting down early on in life / your career, making a plan. That plan is personal but saving should be very intentional.

    Reply
  101. Don

    The bottom line, I feel is save something and take advantage of a company match, if offered. While you may always have an opportunity to make money, if you stay in good health, you will never have the opportunity to make more time.

    Reply
  102. BIJAN

    Katrina – You have expressed one of the most grounded, balanced, and realistic outlook on life and finance that I have ever seen on financial blogs and from a young person of your generation. Sam’s sharing of his life experience, research, and sensible data collections – wonkish as they may be – are thought provoking contributions to the younger generation to make them mindful of the possibilities and what could be achieved through some planning and sacrifice. However, the conclusions drawn in his admirably idealistic but inherently dogmatic scenarios, often fall short to impress those who routinely contend with a spectrum of day to day life issues similar to no one and constrained to no formula.

    I am 58 years old, married with two children. With a networth of $3.4 mil and a combined expected pension of a little over $6k at our forthcoming retirement age of 62, my wife and I consider ourselves among the financially more fortunate people. Since the time I immigrated to the U.S. at age 24, I discovered life anew with boundless pleasures and opportunities. The first ten years of my life I worked hard, played well and extracted joy in assisting many others close to me to achieve their potentials. Noteworthy achievements were building a career, credibility and trust among peers, but most of all life memories in places and with people. At age 35 right at the time I got married to my wonderfully compatible wife, our combined financial networth was merely $10k, but our educational capital, balanced perspective on life, and credibility on paper as well as among people who knew us were our greatest assets. From then on building our current financial networth was simply tweaking some priorities and rearranging our focus – we already had all the assets and ingredients necessary to grow our wealth. We focused our talent, energy, and imagination on establishing a business that satisfied our passion for helping others, while also targeting for rewarding jobs in our professions. Money was merely a welcome byproduct of the natural path of our life’s journey.

    As Katina said above, plans are personal. No two journeys are the same, and if you happen to fall short in Sam,s charts, there are unlimited ways to complete your financial picture and even exceed your happiness threshholds. Use some imagination with realistic planning, temper them with sincerity and hardwork and let things sail towards your very own and unique destiny. Effort to reach an ideal target need not be constricted by any particular timetable or method, but rather expanded through infinite pathways in a perpetual process.

    BIJAN

    Reply
  103. Really?

    I would love to see the savings numbers and expected amount saved broken out by gender and location. Here in Utah, it has taken me 20 years of work, with a B.S degree from a top 3% college program to earn $50,000. Why? (1) Wages in Utah are lower than other states. The good news is that goods are lower. But, it takes us off the mark in terms of actual dollars saved. (2) Gender gap. Utah has the largest gender gap in the nation. 55 cents to the dollar. My performance reviews are consistently high, I am well-respected in my field, and I have had job offers out of state. But, I am female and have stayed in the same location to provide stability to my children and maintain medical insurance. (3) Medical emergencies are real. One of my children has a disability which has cost over $250,000 in medical expenses. My employment provides excellent insurance, so I have only had to cover about 35% of the cost. But, that certainly pinches even the most frugal of families.

    So, I am happy to have the 10% 401k investment I have done. I have learned to live frugally. But, I read the numbers, the article, and the comments — and would advise it is more than “If I can do it, you can too.” Sometimes, we can’t.

    Reply
  104. gim

    Based on this I wished I had gone to college right from high school Didn’t get a college degree until mid-30’s. Also, since only about 25% of the population gets a degree, this addresses a much smaller population. Try figuring out how to save when making minimum wage (and I did have roommates until my mid-30’s), paying rent, bills, and tuition. Currently my 403b only allows $3,600 max a year, so that’s not helping much. I was hoping to retire in another 10 years. Guess I’ll work until 70. 🙁

    Reply
    • Noah Juan

      The return on [the right] college degrees can be formidable, but remember that SS is progressive. In other words, the lower one’s life time income the higher the percentage of that income SS will replace. Not everyone needs to be a millionaire when they retire, in order to have workable retirement.

      Reply
  105. John

    This is pretty unrealistic, based on my experience. I am 45 years old and manage IT for a major organization. However, the first 10 years of my career, the small companies I worked for did not offer a 401(k). When I found a company that did so many years later, there was still no match. Although I do pretty well finally, I can’t imagine maxing out my 401(k). I only know one guy who can pull that off, and he is 47 and lives with his mother, had no house payment and no kids. Even a working-class professional who is moderately success cannot do that, and that’s what this article calls the “low-end.”

    There are good reasons why we don’t all retire as millionaires, and it’s not always because of poor money management skills.

    Reply
    • Noah Juan

      As an IT Manager, I would think that you could handle the $18k/yr to max out a 401k fairly easily. IT management for a major organization, I would think, would be making a 6 figure salary, which makes $18K less than 20% – pre-tax. And, that doesn’t even include matching.

      Reply
  106. R

    My facts! I’m 54 now. Started 401k at age 33. Made approximately $35k then. I drive a dependable 2009 truck and have a 2006 luxury car, and a 2007 Harley Davidson custom, all paid for and paid off early. Have $250k equity in my home, Have $50k cash saved, have a $150k hobby collection and have $800,000 in my 401k. I save max now but only saved 6% at the beginning to get company match of 50% on the first 3%. I’m a high school drop out but worked hard and now earn 6 figures. I feel I am ahead of the curve yet I still enjoyed life with boats, dirt bikes, Harleys, swimming pool and travel. You see you have to start where you start and never give up trying to do more, have more and you know what you will get more. No way I work past 63.

    Reply
    • Anonymous

      Yes, but your 401K is not worth $800,000. You subtract fees and also if the market tanks, you jhaver $0. Put more in the bank. You can’t count 401K because it is not really money. It is a figure that changes. That’s whay nobody seems to get.

      Reply
    • Noah Juan

      Sounds like you’ve done well. Congrats!

      I would suspect, however, that without the toys and hobbies you could be “retired” already. Not that you should / have to be, you sound like you knew your options and chose to do it this way. Keep doing what works.

      Reply
  107. Gary

    An interesting article and some insight to the retirement issues. My question deals with all those people who do not work, pay taxes, don’t have a pension, don’t contribute to a 401k/IRA, in in simple terms live off the efforts of others.

    Who is going to pay their retirements? Time to start pushing back and re-evaluate welfare, false claim SSI disability, and other free handouts to the lazy. I’m tired of funding their lives.

    Reply
  108. Anonymous

    One thing that this article assumes is that everyone needs to be a milliionaire to retire comfortably. This is just not the case. My wife and I plan to live a simple retirement life. We don’t plan to have a Florida home, take cruise after cruise, or go to the casino. We plan to do sim ple,, free things, and just enjoy NOT having to do anything. So, we can be on the “low” end and be just fine. The other thing that this article doesn’t address is liquidation of assets. My wife and I own everything: cars, house, etc. We don’t lease or buy on credit. So, we plan to sell our home when we retire and buy a smaller townhouse and pocket the difference. Even if we were to sell for what we bought the house at, we’d still make $50,000 at least based on teh type of house we would then buy. 401K is not the only way to retirement. I only contribute for tax reasons. 401K’s are rip offs, to be honest, as you lose so much due to “fees”. Mhy dad had it right: if you want to retire, save your money. That’s all you need to do.

    Reply
  109. paul

    I dont know what economy they pulled that chart from. I contributed 20% of my salary for almost 30 years and did not have half of what the chart suggest. The last 7 years of my 401k laid flat under GW Bush wartime economy and almost delayed my retirement. Had it not been for a small inheritance to go with my 401k I would have been working until I was 70. Thanks GW. for screwing up my retirement.

    Reply
  110. adelphi_sky

    So, everyone assumes that no one will get sick. No homes will be purchased. No repairs will need to be done on homes. No secondary degrees will be sought after that require thousands of dollars. No kids born will go to college or need to go to daycare. Etc. Etc.

    I think it’s great that people are saving. But what life are you living? Because my life suggests that there are more important things to take care of NOW rather than hoping I live to retirement 30 years down the road. So, my family starves NOW so I can live comfortably at 67? No thank you. I think there need toe be a balance in life. For those who are more concerned about life 50 years from now so much that you miss out on your current life, more power to you.

    Here’s an idea. How about companies paying a living wage? People have to live, let alone thin about saving a large portion of their puny income.

    Reply
    • LJDude

      You are not alone in your opinion. Austere saving for the future is not something everyone can do. 401K’s are certainly welcomed by corporations, investment companies (Wall Street) and politicians with financial ties to Wall Street.
      I look it the same as yourself. You must must deduct the money you are earning from that that you invest into a retiree investment plan. If I said I will hire you and pay you $60,000 per year, minus the 18% you invest in the 401K, you make $49,200 per year. Throw in a Healthcare investment plan and you make even less.
      All are financial scams by the financial industry to get your money to invest and make trillions of dollars. Heck, some of them might even be breaking laws and cheating (insider trading, etc). Could that be (thinking of the 2008 financial crises)? Making money off your sweat.
      Yes, some folks have saved and done well. A gentleman that wrote previously reminded me of my neighbor. He has saved over a $million dollars. He is a very hard worker, DIYer, and doesn’t waste money on new vehicles every 3 years. He also has a double income. His spouse makes as much as I do. And that makes a huge difference. I just hope our savings plans don’t take another financial tsunami before we retire. Or, we won’t. We do have pensions, btw, so we are better off than most.

      Reply
  111. JohnnyJ

    The other thing to consider (that this doesn’t talk about) is if you have the option of some kind of pension available. I know many folks discount their value and their viability in the future, but if you have a job/place that you enjoy then if can also be a good option. Of course you still have the option of still contributing to other retirement plans as well. Its called an investment/retirement strategy, right? Lets be strategic.

    Reply
  112. Jim

    This chart is really beyond realistic, although savings are very critical to financial security later in life, and too many do not save and buy cars and homes well outside their means displayed by the average 401k/IRA savings amount and national debt, for those with jobs just starting out and lower income profiles, saving to the IRS maximum is not possible for those under $50k a year due to taxes, insurance, etc. unless you wish to promote not getting married nor having children. Stating repeatedly to suck it up and live in a studio apartment and not buy a car, and live with friends or relatives is not just non realistic in today’s culture, its simply rude to suggest investing $17k when one only makes $35k or $40k. On the other side of the coin, those in the six figure salary range have no excuse including the tax benefits of isolating pre tax money. Be very careful, Pesonal Capital will ask you for access to your IRA accounts and bank accounts. if you “join”

    Reply
  113. bcl1

    I have found that investments in 401k plans tend to be more conservative than they pretend to be, and as a result do not grow as fast as other investments in the long term. While I have maxed out my 401k every year since the year I graduated with my Masters degree, I have found that the money that I put into Roth IRAs has grown at a faster rate than my 401k. Do you have any comments on 401k vs (Roth) IRA contributions? I have been maxing out both since 1991 which probably puts me a little higher than the maximum on your chart. Should I start contributing less???

    Reply
  114. Brad

    Look, say what you want but here’s my history and I still managed 685,000 in retirement savings. I’m 60 years old been devoiced one time had 2 beautiful girls from it whom I had to pay child support on and had no problem doing so since they were my girls! I paid for college for one and the other went to trade school which I paid for as well. I bought a house while I was divorced (which is now paid off) paid child support yet still managed to put in no less than 7% into my 401K during this time while only making approximately 40K a year. I was disciplined and every time I received a raise I increased the 401k. Today I put in 50% until it is maxed out then I start putting money into other areas. I stayed on top of my savings and knew what was going on in the market. Today I am making more money than I ever thought I would without a college education 70K. I’ll be leaving this job soon because it’s time to scale back and will be able to afford it. You either have the discipline and commitment to save or you don’t. Excuses are easy results you have to WORK for. And oh by the way I drive a 15 year old car with 160K mile on it. Saving for retirement CAN BE DONE quit making excuses!

    Reply
    • Central Scrutinizer

      Well done, Brad.

      Reply
  115. Brandon

    This schedule is so out of wack, what 23 year old can afford to put 17k a year in their 401k? that is utterly ridiculous, the average salary for a 23 year old can’t be more than 40k. i’m not sure what the angle is here but this whole article is worthless, shame on you.

    Reply
  116. gary

    Pay yourself first, people. Fundamental rule of money management.

    Reply
  117. Anonymous

    Here is what I wrote to my daughter about this article when she sent it to me. It did make her think about putting money away:

    The person writing this article does not live in the real world. He/she lives in fantasy land where people come out of college making six figure salaries, have no college debt and must live at home with their parents and have no living expenses. I believe certain oil rich countries are like this. Maybe you should have earned a degree as an oil field engineer. The only statement that is true in the article was this, “The biggest challenge of a 22 year old is to not develop wanderlust too early and maintain discipline in saving as aggressively and consistently as possible.” That doesn’t mean you need to save the maximum, but do save as much as you can and put away a little extra whenever you can, meaning if you receive a bonus put as much of it away as possible. A new car is nice, but it will depreciate in value and it is expensive to maintain. I laugh at the guy who takes his bonus check and buys a new BMW. Put it into something that gives you some kind of return not a money pit. Of course I use to take my bonus money and pay your mom’s law school tuition. Actually, that had a pretty good return after all. I think you are doing fine I wouldn’t worry about it. I didn’t start my 401K (as it did not exist under the tax code) until I was 26. I started out putting in the maximum then which was only less than $2K per year, the permitted contribution has increased significantly since I started, and I have a portfolio closer to the articles high range. If I could have put away $17,500 per year I would be retired now. The other thing is your IRA portfolio return has been around 15%, much higher than the 5-10% assumed in the article for high end value. That means you can save less and still achieve the high end of the chart.

    You should read some of the comments. One person even states the $17,500 per year is absurd for someone right out of college. The other thing, Sam, the person writing the article (not sure if male or female) has an undergraduate degree and an MBA from Cal. That is a pretty spendy education and I doubt he/she paid for it him/herself. I think he/she should get information from people who live in the real world who went to the school of hard knocks, not William and Mary and then California.

    The real purpose of the article is a scare tactic so you will go to their “Join Personal Capital” link and give them money (sure it says free, but that’s not why they are in business).

    Love,
    dad

    Reply
  118. Muhammad Abdusamad

    This is depressing and makes me sad. I guess its Alpo for me in retirement. 🙁

    Reply
  119. Deregulate This

    401(k)s were created for “high income earners to save money tax free”. The problem with 401(k)s is they only really help the “high income earners”, because they are the only ones able to contribute the maximum amount.

    I propose that 401(k)s have a subsidy. Companies should be required to contribute to the workers’ 401(k) to help make the maximum yearly 401(k) contribution limit. Since companies eliminated Pensions, they have record profits. They haven’t been giving raises.

    Workers should be able to contribute 10% of their income and have the company contribute the rest to meet the yearly maximum. For example, let’s say a worker makes $50,000. The worker could contribute 10% or $5,000 and the company would contribute $13,000 to meet the 2015 $18,000 maximum contribution limit.

    This way, all workers would be able to retire at some point and Wall Street would be super happy at having more people to steal money out of their accounts. Maybe they’d steal so much, they’d finally trickle down some wealth to the rest of us.

    Reply
  120. Central Scrutinizer

    Pretty close. I did not start working until I was 29 as I was building my human capital in graduate school. I began saving with my first paycheck. I am 52 and 401k balance is $1.2 million. I still contribute the max including catch up contributions. I also have $150k in a ROTH and $1.3 million in taxable investments, very small tax liability there. I also have a small pension which I plan to take as a lump sum some time in my mid-60’s. I plan on working 3-5 more years because I like my job and co-workers. I can also whack the mortgage to zero over that time. My father influenced my savings habits when he said, “There is nothing wrong with being young and not having any money; it really sucks to be old and have no money”.

    Reply
    • Deregulate This

      @Central Scrutinizer,
      You are truly in rarefied air. You have $2.65 Million saved???? Do you realize that 1 in 3 Americans have nothing saved…. the other 1 in 3 have less than 50,000 saved…..

      To have saved that much, you have been extremely fortunate. You are also lucky to not have been outsourced as soon as you turned 45. American workers have been crushed by Free Trade Agreements, elimination of Unions, and tax policies for generations. You got a pension? You are so lucky. You better hope Mitt Romney’s Bane Capital doesn’t purchase your company and take out loans against the pension fund then declare bankruptcy and take it away from you like they did with many other companies.

      If you divide your savings by your 40 years of work, you’ve saved $66,250 each year for 40 years. Wages are not that high for most jobs now. Thanks to Trickle Down Economics and Anti-American Free Trade Agreements, we have very few high paying jobs left. I’m sick and tired of rich people claiming that everyone had the same opportunities as they did.

      Reply
  121. JerseyGuy87

    This chart is only applicable in a “perfect world”. Where is your information from?

    This is a fact, average GDP per capita was $51,939 in 2013. Let’s just assume, you are saying that everyone is SINGLE and let’s use this average and let’s be honest, this is pretty high considering the majority of American’s make allot less than this statistic. At the 28% tax rate, which this income falls into, you pay about $14,500 just in taxes, leaving you just about $38,000 to take home every year. So according to your chart, you simply are assuming everyone is going to save another 1/3 of theire total take home income, leaving you with a measly $22,500 for the entire year for EVERYTHING else…..see where I’m going with this?

    I am now 30 years old, recently finished graduate school (earned my MBA) and I can tell you that your chart of having $130-200K at 30, is just not possible.

    You know how it would be possible? Mommy and Daddy paid your entire Undergrad degree which means you had no student loans to pay back (not in my case). You also lived at home for free all those years or Mommy and Daddy paid your rent (which unfortunately is a common theme and I also did not have that luxury). You don’t need a car where you live, which would eliminate payments/insurance/maintenance/gas, etc.

    You might say get a roommate (which I did and mostly everyone does) or move to a cheaper area. Let’s be reasonable and in the metro NY area, a 2 bedroom apartment in any decent neighborhood which you would actually want to live in (Manhattan excluded) and feel relatively safe in, is going to cost you at least $2,000 a month (and that’s being conservative). Utilities, food (easily $500 a month) it adds up.

    I was born and raised in Northern NJ and have worked in NYC my entire professional career. Average cost of just commuting into work every month, $200 (and I think that’s being conservative.)

    I do agree with you that sacrifice(s) must be made in order for a prosperous and enjoyable retirement, but your chart is extremely far fetched and most american’s will unfortunately never have anywhere near this amount saved up for their retirement. But then again, no country is perfect and this is why allot of Americans are now retiring overseas, but this is a conversation for another day. 🙂

    Reply
  122. Codeman

    After finishing College in 1980, I started a job making $17,800 per year and managed to put away $5,000. After being a poor student for four years I had more money than I knew what to do with, so the next year I increased the amount to $7,000. Within five years I got married, bought a used car, rented a small house all the while increasing my savings amount. After five years my nest egg was just over $50,000. Your analysis is dead on. It is now 35 years later, and during that time we put there kids through college, paid for two weddings, we own our own home and we enjoyed a couple vacations every year. I preach exactly what you are preaching to everyone I know. I tell them to save 15 to 20% of their gross income every year for their entire life. I GUARANTEE them that if they follow this advise, when they reach my age they will agree that it was one of the best decisions they ever made, and if they don’t save for the future I guarantee them that they will wish they had. I am now 58, will retire this month and my wife and I are starting the next phase of our life … traveling the country in our 38 foot RV and taking three or four Caribbean cruises a year. Live can be good if you plan appropriately. So all I can say is don’t look for excuses, because they are easy to find. Start saving as soon as you can and put away at least 10% per year.

    Reply
    • Staber Dearth

      My youngest son bought into save early and often behavior. He’s very frugal by nature. He is now 29 years old and has probably far more saved up in a 401k than 99% of kids his age. I think that he is actually surprising himself. My other two children, er, not so much.

      Reply
  123. Phil C

    Is this for per indivdual or per couple?
    As and individuals, I’m at the low end for my age and my wife is below the low end for her age, but together we are at the middle for my age and upper end for her age?

    I did not have access to 401ks until my late 20s and my pay was prettly low most of my career. I did not earn enough to max out until my 40s. Good news is I’ve never had debt other than my house so we’ve been able to do ok.

    Reply
  124. Steven

    I was floored when I first projected my Roth 401(k) and Roth IRA balances. Simply assuming yearly maximum contribution and 8% return, and not counting employer match, my projected (I’m 23) total balance is 1,049,070 at 65, 1,436,526 at 75, and 1,873,730 at 85. And I plan on receiving only the RMD and passing the rest to my grandchildren. For him/her/them, the projected total balance is 20,927,516 at 65, 25,283,460 at 75, and 20,127,490 at 85. And the RMD is 965,291 at 65, 1,876,741 at 75, and 2,792,382 at 85. For awhile I couldn’t believe this is legal.

    Reply
    • Juan Gallardo

      do you live in California ? state taxes add up lovely.. if you retired today you would pay anywhere from 42% – 48% in federal and state tax .. so deduct 48% from your number. oh and you said projected at 8% which it did about a 4% last year but you would have already lost half back in 2008 the numbers they gave you are assuming the stock market does well and it does not look like we are doing well . keep in mind cost of living 30 years ago to today now imagine 30 yeas from now … rent 30 years ago was $500 dollars today same size is triple that in 30 years its gonna be insane…

      Reply
  125. RetiredNhappy

    Life is what happens to you while your making other plans.

    I was always an investor. Great career. Great kids. Beautiful home. But then my first wife a stay at home mom decided she was not happy – low self esteem. We divorced.
    We sold the house. She got most of the money. Our kids lived in an apartment over a bar.

    I was very lucky to find a wonderful woman who had financial common sense and a good job.

    Today we have been retired many years. My kids have done very well for themselves. I’m still a good dad.
    We want for nothing major. The bottom line is get to a place where you are happy and have some money with a good roof over your head. Don’t listen to all the BS out there. Know what is really important in life.

    Reply
    • Workinghardtogetthere

      I did not have access to a 401k at 22, just got out of college during a recession. Once I did have access, a few years later, then I started with a percentage of my income (5%). Then each year I got a raise of 2% or more, I would take a percentage or so of that and add to my 401k before I got use to the increase in salary. I have since maxed out the 401k contribution and am on track. I think what should be taken from this is to start saving, whatever you can and increase as you can. You would be amazed on how much you can save by doing it a piece at a time.

      Reply
  126. Anonymous

    What happens when everything crashes. The stock market bombs. Then what happens, Everyone is broke and we have no retirement.

    Reply
  127. Tom

    What an asinine article. I kept my job, put away as much as I could, have NEVER owned a new car, and live WHERE THE JOBS ARE- in an expensive urbanized area of the country. “Life gets in the way.” How about divorce, unemployment, or eldercare, which will happen to about 60% of the folks reading this article?

    Reply
  128. Mr CB

    Can anybody tell me if the cap on contributions to 401k plans includes the employer contribution? In other words, if I make $100k and contribute 15% ($15k) and get a match of 5% ($5k) from my employer am I going to exceed the limit ($17,500)? Or can I put in up to $17,500 and get the match on top of that? Thanks!

    Reply
    • Ben

      The limitation is only on YOUR contributions to a 401k. If you have more disposable income, you may want to max out a 401k and do an IRA (most likely roth/backdoor roth).

      Hope this helps,

      Ben

      Reply
  129. Tcostant

    You need to be careful for those over 50. My first job out of college, did not have a 401(k) at all. I was there for almost 5 years and the last two years I begged them to add one. I ended up leaving for a place that had a 401(k). Some people over 50 might not have access to a 401(k)

    Reply
    • Ben

      True… but everyone has access to an IRA.

      Reply
  130. Staber Dearth

    I am assuming that the examples are all based on 401K and SS only? Or, are there examples that include pensions that some of us were so fortunate to score, along with saving in a 401K.

    I am almost 60 years old. If I do a 50/50 split on my pension with my wife, I can expect $3600 per month from pension alone, $450k in 401K now, and with the potential to hold off on SS for a time (always a gamble) which at earliest no penalty date of 66 yrs 2 mos, would be $2661 per month. No debt.

    I feel good going into a 65 year old retirement. Should I?

    Reply
  131. jobo

    I’ve been an HCE for the better part of the last decade as such my contributions are severely limited and get kicked back as excessive and taxable. This limited my contribution to less than 2 percent of income so I quit contributing 10 years ago and went into real estate.

    Reply
  132. The Reverend Maryla K Meagher

    None of this applies to us “chronologically gifted.” I had BA. MA, Ph.D when I started teaching …$*,000 a year. I left to go to sales …$12,000/yrto begin. Zero money for saving because of house, marriage, child. I eventually made $16,000/yr before I went to Seminary, worked 3 jobs and made $6,000/yr because I had scholarships for $30,000/yr. Upon graduating with honors from top Seminary in country, I made approx $55,000; so on and so on. I eventually went from Parish to Hospice and made $45,000. Now I’m retired and your charts say I should have saved WAY more than I was able. I have been able to save IRA’s of $130,000 and all of us ministers are amazed at that. Most of these comments “assume” that folks are young and making bou cou bucks on Wall Street … My social security is $1300. If I weren’t married we’d be in big trouble and even with my spouse’s $80,000 salary we are scrapping by.

    Reply
  133. The Reverend Maryla K Meagher

    Oh, yes … major medical expenses, divorce, moving 8 times for parish jobs…selling a home during the recession at $100,000 loss. There are many of us out there is social services jobs —pastors, social workers, workers at non-profits, et al, who work at these calls because tht is what we are called to do (and don’t regret it), but it does make it very difficult. I don’t understand what in my last comment needs “moderation.”

    Reply
  134. poor guy

    I can’t speak for everyone else, but as for myself:
    – Five years ago I cashed out $213,000 of my 401(k) and bought real estate, which I’ve since sold and am now owner financing – and collecting principal and interest payments every month for the next 25 years (unless the mortgagee pays it off).
    – Two years ago, I transferred $144,000 out of my 401(k) and bought a deferred annuity with it.

    The remaining balance of my 401(k) is $77,000, and I’m included in these statistics.
    Maybe a lot of other people might have the same story as mine?
    And because of this, maybe these statistics don’t tell the whole story?

    Reply
  135. Abbey Maystrom

    Cute. After paying of all my limited bills (no car payment, no smartphone, no cable) and living expenses when I first graduated from school, I had about $50.00 cash to play with each month. So, I am guessing this is a plan built for rich kids whose parents set them up with awesome jobs right out of school or pay for their bills. Not realistic. cute, but not realistic.

    Reply
    • Ben

      Sounds like you have an income problem. What do you do? Have you mapped a career path to make more money or set yourself up to make more money in the future? This is not about “rich kids” who get “set up” for jobs… this is about your ability to create wealth and retire with dignity.

      Reply
  136. Jeff Limon

    Do what I did – Drive premium used cars, like older diesel Mercedes Benzes, and max-out your 401K with what you save. Do that for 30 years.

    Reply
  137. John

    All of you whiners out there saying “it is impossible to save the maximum amount, waaaah waaaah!” you need to tune into the blog MMM or Mr. Money Mustache. Wake up and stop living the American consumerism lie and start living happy by living well within your means. Believe me if we stop buying into what department stores and auto companies would have us believe we could ALL live off 25 grand per year and save the rest!

    Reply
  138. Saving at 50

    The chart is aggressive for most people particularly the younger folks in their 20s who may only be making $50k/yr. Assuming 25% goes to taxes, and 20% goes to a mortgage payment, if you add $18k to a 401(k) account that leaves less than $10k left over to pay for food, clothing, medical and other essentials. Forget about it if that person is also paying off student loans. It sounds nice, but not realistic. At 50 I am only now at the point that I can save the $18k/yr and I must admit that I am in the range of your 40 year old as far as retirement savings goes and this is after more than 20 years of diligently saving 10% + of my salary.

    Reply
  139. Mark

    This article and your numbers are spot on. I am 35 years old and have $299K (as of today) in my 401K. As you called it in the article, the people with less than low end number in their account are commenting how these numbers are impossible, only ivy league, rich kids with connections, etc…could ever hit these numbers. I went to a 2nd tier in-state university, paid my own tuition working 2 jobs, degree in business, graduated in 2003 at age 23. Started as an entry level analyst at a med size business making $35K per year. Started 401K same year w/ 10% and 3% company match. I worked my way up in the company into a sales director position, salary gradually increased over the years through new positions and raises so contribution increased. For any 18-22 years old out there reading this; do not listen to all the people saying it is impossible to hit these numbers, There are plenty of us out there that started at the bottom with no connections and through hard work (and some luck) are hitting these numbers. Key thing is to pay yourself first, then you can’t make excuses on why you can’t afford to save for retirement…

    Reply
    • Jacqueline Quasney

      Jacqueline Quasney

      Way to go Mark! Great to hear you are doing so well. Thanks for sharing!

      Reply
  140. Tony

    This is a bit conservative at 5% earnings rate, but directionally correct vs. the above table as it actually uses the historical 401 deferral amounts.

    Year Age 401K Def. 401K Earnings IRA Cont. IRA Earnings Tot. Earnings
    1999 22 0 5% 5%
    2000 23 $10,500.00 $11,025.00 $5,000.00 $5,250.00 $16,275.00
    2001 24 $10,500.00 $22,601.25 $5,000.00 $10,762.50 $33,363.75
    2002 25 $11,000.00 $35,281.31 $5,000.00 $16,550.63 $51,831.94
    2003 26 $12,000.00 $49,645.38 $5,000.00 $22,628.16 $72,273.53
    2004 27 $13,000.00 $65,777.65 $5,000.00 $29,009.56 $94,787.21
    2005 28 $14,000.00 $83,766.53 $5,000.00 $35,710.04 $119,476.57
    2006 29 $15,000.00 $103,704.86 $5,000.00 $42,745.54 $146,450.40
    2007 30 $15,500.00 $125,165.10 $5,000.00 $50,132.82 $175,297.92
    2008 31 $15,500.00 $147,698.35 $5,000.00 $57,889.46 $205,587.82
    2009 32 $16,500.00 $172,408.27 $5,000.00 $66,033.94 $238,442.21
    2010 33 $16,500.00 $198,353.68 $5,000.00 $74,585.63 $272,939.32
    2011 34 $16,500.00 $225,596.37 $5,000.00 $83,564.91 $309,161.28
    2012 35 $17,000.00 $254,726.19 $5,000.00 $92,993.16 $347,719.35
    2013 36 $17,500.00 $285,837.50 $5,000.00 $102,892.82 $388,730.31
    2014 37 $17,500.00 $318,504.37 $5,000.00 $113,287.46 $431,791.83
    2015 38 $18,000.00 $353,329.59 $5,000.00 $124,201.83 $477,531.42

    Reply
  141. DougJ

    During the 20th century, the stock market average return was 10.4%. If you’re not playing in this game, you’ll never increase your personal wealth. Agreed some may not be able to contribute $17,500, but contribute something. Start with $1,000 per year, maybe $2,000 the next year. Why does everyone need to play the all in or nothing game. Too many on this blog need to convince others it’s impossible, why, because you’re behind the curve? You didn’t invest early, take action…
    It also seems the most pessimistic are of higher education, too smart to take advice? Best advice I could provide, listen to those who have succeeded., ask questions.
    Yes, the employer could add more to the account, go ahead and wait for that day. We could run into another Great Recession. All excuses. THIS IS YOUR LIFE PEOPLE you are the only one who will suffer. The others who have successfully saved over the years, they won’t be the individual working a part time job at the age of 75. You’re obviously reading this blog for a reason, only you know the answer to that question.

    Reply
  142. Ray Depp

    You really can’t have a good handled on an average for a single individual, I have multiple IRA’s and 401k accounts. They are all in different financial institutions so someone like Vanguard can’t possibly know what a single person has in all their tax deferred account. The average supplied from Vanguard is only for the accounts they handle, nothing more nothing less. You can’t really gauge the health of retirees with a single institutions averages. I have a feeling if you could figure it out, the averages per person would be a lot higher. Some of my accounts will drag the averages down and some will be way above average. However, if all totalled up, after all its my money, I far exceed the averages. The 401k laws didn’t go into effect until 1980 and most business didn’t start up a program until 1982 or 83. I worked 10 years before 401k were available. You won’t have a good history of people with 40 + years of work history until those people in their mid to upper 50’s hit 65 as they will be the first generation of retirees where the 401k statues have been in effect for their entire work life.

    Reply
  143. Timesetter

    So basically I had to scrimp and scrape and save every available spare penny to contribute what this article states is what I should have been saving…or….should be saving. I’m sorry to be a Debbie Downer, but all you smug bitches saying you did exactly that are in for a big surprise. While you are saving your asses off, your life is passing you by. I’m at about half of where I should be, but I might have a flippin’ heart attack tomorrow. So while you are saving your life away, I am saving what I can afford, what with a kid and a mortgage and much less than $1400 a month to contribute, and fairly happy with what I HAVE saved to this point. Sure, I could probably save $1400 a month, but me and my kid would be eating Ramen and drinking Tang. So, to the article writer, I say…….suck it.

    Reply
  144. Lost Out

    more and more companies have stopped company contributions to 401-k Next will be retirement

    Reply
  145. Christopher Houck

    401k’s were developed as a way to lower your taxable income (bump yourselfs into a lower tax bracket) They were not meant as a replacement to the defined benefit systems (Pensions) . 401k’s were meant as a supplement to your pensions.

    A vast majority of American’s are unable or unwilling to save the amount needed to where they can retire on a 401k account alone. 17k or 18k is just not possible for the average American that earns less than 40k a year.

    If you save 15% for retirement, then even if you make 100k a year that would only be 15k, which is less than the max contribution that this article assumes. More realistic amounts would be 40-50% of the average American’s income would need to be saved in order to max out your 401k as this article describes, and who can afford to have their pay cut 40-50%? Answer – Almost no one.

    The result of the fall of the Pension is this :
    1) Working until you die
    2) Family Members Supporting you, and you being a burden on them

    Welcome to the new America !

    Reply
  146. Anonymous

    My philosophy is and has always been save as much as you can. Realistically it is better for one to gauge based on their own situation (i.e., 10% of their salary or target to have 3 times one’s salary saved by 45) rather than to set up a table of where one “ought to be” because everyone is different and has different sets of circumstances.

    Certainly there will always be the go-getters that have their own successful business, or the 40 year old VP, or the couple grossing a combined $150k/yr that is essentially living on one salary and saving on the other that will say that this table is spot on, but for the rest it might otherwise seem a rather daunting task.

    Reply
  147. Fortunate

    Don’t have the large 401k balance but will have 2 pensions when I retire, military retirement and state retirement. Neither paid a lot which stymied my 401 contributions but believe I will be comfortable in retirement.

    Reply
  148. making it

    The numbers can be achieved! I am 51 and on the high side of what has been published here. I have a good wage, but not outrageous.

    Reply
  149. NA

    Very nice to hear from the 1% crowd who have mostly responded. As they state, it is possible to work like a dog, invest, invest, and invest, and but in the end, it is all about luck. Invest in the right thing, you make money, invest in the wrong thing and you are flat broke. If you are REALLY lucky you are in good health and able to work. If you are unlucky you get laid off time after time. The chart that shows how much Americans have actually saved versus what is possible, demonstrates how ridiculous the entire subject is. This is compounded by the 1% crowd that have proclaimed success, as measured in America by how much money you have.

    It’s social security for me but I have no problem living on the street.

    Reply
  150. Vegas

    If your investments do well, you do well, if not too bad. To retire in America you must play the stock market casino and it better not come up snake eyes. Vegas has an advantage over the stock market though, you at least get free drinks.

    Reply
  151. doug williams

    well, why save to have money in the bank when your old. Live while your young , enjoy life
    you might not even make it to the age to cash out.

    another 401 k ad , with over inflated numbers and assumptions and doesnt take into the fact
    that life happens and so do market crashes…..and if you think your 401k is safe , you deserve to lose your money when you actually do. as a former worldcom employee i watched my 401k of 15 years go bye bye. then only to rebuild and see the market crash and now its falsly being held up, but will eventually crash hard. good luck.

    Reply
    • Charlie

      OK, Doug, you go for it. Your are right on one point. ‘Live while your young , enjoy life you might not even make it to the age to cash out. ‘ I can just about guarantee that when you are old like me, you will regret this false wisdom. You also just might be wrong in your assumption. My wife and I are 73 years old, have both survived fights with cancer, wife just this summer beat the odds when two different doctors gave up and advised she would not survive a fight with sepsis due to a blood infection, and now she is a double amputee learning to walk on prostheses. We never had large incomes, only came close to the $100k combined annual level a few times. We both sacrificed for years to save while raising a combined family of four sons, helping to provide them with education experience and getting all four established in successful careers. We didn’t drive new vehicles, and didn’t take on more debt than we could handle. I never screwed over anyone to whom I had obligations. I never took public money for anything, even while being out of work a couple times for varying periods. We own our home and have a vacation property in the Rocky Mountains where we built and paid for a log cabin. Besides my small pension which just barely covers my vehicle payment, we both have comfortable IRA accounts, the results of our ‘frugal’ lifestyle. But now, we think nothing of going out for a nice meal that may run $50-$60 dollars. I can take several thousand dollars a month out of my savings, if I want to, without depleting it, to supplement our SS income, which probably won’t last due to stupid and dishonest politicians stealing from it. We have travelled to Europe twice, Hawaii twice, and Alaska once. Also have spent several winters in Florida or Arizona. My wife started and ran two small businesses besides getting an education while raising four boys, and sold both to help with her savings. With the growth on my investments just this month I could take the growth alone and trade vehicles with no debt. I do have a small mortgage but my savings covers the monthly payment with growth left over. This was by design because I could get better return that the interest costs. We also have college savings accounts for our grand children who are close to college age now. Also we fund annually our Long Term Care health policy. As a trusted client with our financial institution based on years of reliably meeting our obligations, I can arrange loans and financial obligations from two states distance, and have the funds this afternoon.

      We went from being a farm boy weeding soybeans for $1.00 an acre and the daughter of a life-long factory worker doing babysitting, to being self-made millionaires by retirement time,

      No Doug, you are not going to be able to do all this if you don’t wise up and do the savings while you can. I checked and as of this minute, as of the market close today I’m on track to have ‘earned’ retirement income growth of over $24k this month. How are YOU doing?

      Reply
      • Elmer

        “went from being a farm boy weeding soybeans for $1.00 an acre ” brought back memories.
        I detasseled seed corn for $.65 an hour after 7th grade, then learned I could stack bales of hale on a rack behind a baler for $1.00 an hour. I never subsequently worked for less until I enlisted ($68/mo.) so that I could get off the farm and out of town. Fellow servicemen, urbanites, who were accustomed to disposing of a weekly paycheck, couldn’t understand why or how I would accumulate several negligible paychecks before endorsing them to my home town bank and mailing them using one envelope and one stamp. (Interest rates were similar to today’s.) Growing up on a family farm, where once a year income happened if a decent price coincided with when your livestock was ready to sell, was great training for saving.
        A few years later as a Peace Corp volunteer I was assigned to a location where the average annual income was US$28. Welfare was the mercy of your extended family, which likely were equally poor. Those, who can’t save, could try living without family, friends, income or welfare. A teenage boy a half block away went outside in the dark to relieve himself before going to bed, squatted, was bitten by a poisonous snake, and was dead before daybreak. The four generations living in their small house acquired an empty space.
        But, we are Americans and don’t live that way, and many refugees would have said that.

        Reply
  152. Brian

    I thought this was supposed to be a realistic figure of what the average person has in their 401k by age group not some make belive land where everyone makes 100k plus a year

    Reply
  153. George Tomas

    I’ve been hearing this “Crap\lie” for 27 years; “save as much as possible, and max out that 401k”. The problem is, the system is rigged towards the wealthy, and the government has been complicit, if not culpable for them.
    I’ve been saving “maxed out” since i was 22 years old (I’m 47 yrs old), and my employer matches my contributions up to 6%. (I’ve been with the same company for 27 years)
    The problem is, you can only use your money for stocks or bonds in a government approved retirement 401K, or similar retirement account.
    Since the beginning, I’ve seen the stock market go up, and then 4-6 years later bomb out and take all my gains. Plus the 2001 9/11 post stock market crash – 40% or higher loss.
    I have about $250 in 401K savings today after working 27 years, and as you can see, no where near what is projected in this article.

    I would advise young people today to save money using their own means. Or put it into real property\real estate; or something that is tangible and has potential future growth.

    The stock market is rigged as a slush fund for the wealthy, and big business. They always come out smelling like a rose or bailed out with our tax dollars.
    Don’t read me wrong. I’m a free market person and do not want government intervention. I think that’s the absolute worse thing you can do; and the reason we are where we are today.

    Here’s to eating cat food in my retirement years,
    Cheers,
    Southern boy,

    P.S. to all the spell check monkeys – GFYS. 🙂

    Reply
    • Lucky Us

      George-

      NO “Crapola” in this recipe, dude. A 401-K invested in the least costly, broad based. INDEX equity fund available to you, like a total market index, or even the S&P index should do very well for you over a working lifetime (25-40 years). After age 50 suggest you put 20-25% of new money into a broad based Bond INDEX fund for ballast on those dips. DO NOT mess with it, sure there will be times when it ‘loses’ 50% or near it, it will come back. Look at a 90 year chart for the total market it is ALWAYS upward bound over the long haul. Yes, there can be, and have been 2,3,5 years when it hasn’t exceeded its old highs, but this is 2015 not 2000, or pick a year.
      As a 64 year old married couple, high school graduates who only 1 year earned over than 100K, who only used their 401-K for our working years, and now 4 in retirement (retired at 60 because we could) we have more now than ever.
      There is NO perfect system anywhere in the world. Ours is pretty good -but not perfect.
      You have to feed it adequately, 10-15% is good, make sure you use a ROTH on the side if you qualify. Tax free is better than taxable at retirement.
      At retirement you should;d end up with ~500K, plus ~50K in a ROTH. Add that your social security, any pensions and you should do wonderfully!
      Be debt free when you retire, it is even better! Stay the course, look at it once a year it won’t need you babysitting it. Compounding is sheer magic!

      Reply
      • Doug J

        Amen my friend

        Reply
  154. Mark

    I was Fortunate enough to be able to buy 4-House Rentals (3-during the downturn in Real Estate values.). Now (essentially) the Renters are saving for my Retirement.
    Now, I’m putting all I can into paying them off. It will be a tough road to get them all paid off in another 9-years but, that’s my goal!
    They produce about $5,000 a month (after Property Tax but, before income tax.)
    We will see!

    Reply
  155. American Mom

    I am 33. I have a modest house in the Bay Area, but with Obama Care I have to pay for health insurance I don’t want, instead of saving for my retirement. It is crap because I can’t pay my insurance premium, but I make too much for any assistance.

    Reply
    • J Leo

      but we “love” obamacare! Not!

      Reply
  156. Anne

    I feel the title of this article is inaccurate. I would like to know facts about how people are actually doing vs. What it theorically could be. Other than that this is just discouraging.

    Reply
  157. Lucky Us

    I see a variety of “successful” investors here, as well as the comments of the “less-successful investors.”
    “Successful” Pay themselves first. They likely “PAY” themselves something into an emergency fund (if they don’t already have one), then something toward a tax-sheltered retirement fund 401-K, 403b etc, and may a TAX FREE ROTH.
    Sure, you have to start somewhere, at sometime with whatever you can do -but-START!! The younger you start, the better, but any age is better than “later” when there is no time left. We liked the 401-k route the employers offered a match, and it was not easy to touch. Then we funded a small ’emergency fund’ and eventually grew it to a more useful balance. (Drop a Transmission once, and see what I mean).
    Later on, we both started funding a ROTH. Not fully for a number of year, just could not afford it “all”
    My point here is, as income grows, slowly for most of us these days, you can expand savings as easily as you can expand spending. What are your priorities? Not hitting the LOW end of the cart for your age is not the end of the world, and hitting it is great! Not having anything at retirement IS much more of a problem – uncorrectable.

    I run across too many in my “Boomer generation” that always thought they would do it ‘later’ Some did really well, some moderately, some not at all. The ugly truth, many of the ones with ‘higher income’ were more prone to spend it as well. Retirement is showing too be the “great equalizer” to this generation.
    Funny how that works out, the tortoises -the pluggers- DID win.

    Reply
    • J Leo

      We’re the voice of the minority… folks will not listen, but will have the attitude of live life income + the limits on their credit cards, 2nd mortgages, and etc… 7/10 households cannot make past a paycheck… regardless of income… live continually in debt… banks grow larger, while our retirement and savings diminish – disappear… We love cars, NEW cars, boats, trailers, campers… what’s a $200, $400, $600 per month payment? We can “AFFORD it.” NOT! But we can sure impress folks we’ll never know at stop lights – looking good.

      Reply
  158. Jama Stankiewicz

    Practical discussion , I loved the information . Does anyone know if my assistant can locate a sample 2013 IRS 1065 – Schedule K-1 document to use ?

    Reply
  159. Charlie

    When I was in my 40’s and got serious about retirement savings, I had a good start with a profit-sharing plan from an employer I had worked for 11 years. I rolled that into and IRA, and began contributing. Around the time I turned 50, I decided that any time I received a salary increase, I would contribute the net increase in take-home to my 401k. I soon was at the maximum contribution level allowed. This was pretty painless because I had not gotten used to having the extra.
    The other thing we did was to severely control our use of credit which saved lots of interest expense. This worked very well for us and we now have a comfortable retirement income stream.

    Reply
  160. KERSTIN ARNETTE

    Greetings! My business partner located a fillable 2013 IRS 1065 – Schedule K-1 version here schedule k-1 2013

    Reply
  161. Chewbacca

    How sad. So many folks posting that “It’s tooooo harrdd!” Been there, done that, got 40 years worth of tee-shirts. Let me tell you something — skipping one Starbucks Latte a week and putting that $5 away at 4% for 40 years turns into $20,000.
    I used to work with a guy whose indulgence was going out for lunch. He had a stable of low cost chinese, mexican and italian places where he could generally do lunch for about $7-8 a day. I watched him leave at noon everyday, and munched my brown-bag sandwich. Skipping the restaurant lunch could yield about $200,000 over a 40-year work career.
    You have a kid? I bet you have a snazzy, $95 car seat in each car, so you don’t have to move it from Mom’s backseat to Dad’s on the weekend. I also bet junior has enough pairs of shoes (half of which he/she has already outgrown) to match a Kardashian.
    PEOPLE! It isn’t as much fun as a weekend in Cabo, but you have to save something! Who cares where you end up on the chart – – just get your butts on the chart in the first place, and try meeting friends for Friday night martinis at your place, instead of paying $12.50 + tip at the bar.

    Reply
    • USS Retired

      Amen! There are numerous ways of depriving yourself of instant gratification, and most won’t help your social life, but if Social Security is your sole retirement plan, you’ll have plenty of company crying about any absence of an annual inflation increase. That voting block is too big to ignore, but ask the PIIGS how that worked out.
      (PIIGS, a derogatory acronym used in economics and finance, refers to the economies of: Portugal, Italy, Ireland, Greece and Spain, EU member states that were unable to refinance their government debt or to bail out over-indebted banks on their own during the debt crisis, but they, like VW, were too big to fail so others bailed them out while their citizens squealed.)

      Reply
    • EricS

      I go up on the cost of healthy organic eating. Yes as much as I value saving, I have a place for maintaining healthy good quality living.

      Reply
  162. John

    When I started working after college in 1985, I was only earning in the 20’s (k per year). So, assuming people save 8k during their first work year, I don’t know….even today, that seems a bit high unless they are living at home.

    Reply
  163. EricS

    I commend and applaud for all the savers on this board, but I want to introduce an alternative and more REALISTIC perspective, considering the current savings habits of most Americans are far below the blogger’s low and high range savings by age estimates.
    I am in my mid-30s, I have been employed since age 25 (not age 22), and I contribute into my 401k 6% of salary, the amount the results in the highest employer matching contribution of 4.5%. This is lower than the $17,500 as my salary isn’t $175K. I had expensive and necessary spendings in my 20s and 30s I do not regret. Yes it could have gone to savings, but instead I traveled north to Alaska, traveled by rail in Europe, met my spouse and spent towards ring and wedding and honeymoon, I had some fun. I like that I did this. I could have maxed out my 401k but I decided to live out my youth, at least to some extent.
    Now, I am still better off in savings versus the average American but am below the low for the age 35 on the chart. Here are some of my alternative catch-up tactics:

    1) Spouse is 9 years younger than me, so I plan to retire when SHE turns 65, when I’m 74. And rollover my 401k into IRA in joint name during those last 9 years.

    2) I have found ways to increase my investment returns above the 6-8%s by re-allocating my assets between funds such that I minimize losses during market plunged and maximize portfolio gains during market ralleys. As an example, I might keep 50% in Fund A and 50% in Fund B. If Fund A recedes far below B, after a trend turns around, I might allocate extra to A and less to B, then when A and B are back to where they were, I’ve earned higher returns than both Fund A and Fund B.

    3) I also have savings accounts that my wife and I are growing, but we have fun too.

    You have to strike a balance. You need to save but you need not suffer either. You have limited time alive on this planet and then you die. Your time is even more valuable than your financial nest egg, but time is money as well, so as I say…must find a middle ground. Do save, but don’t deprive yourself of fun times in your young energetic life.

    Reply
  164. Mark

    I have a small balance in a 401K but, have 4-Rental Houses I plan to Retire with the Rents being my Retirement.
    Of course, the Bank and I are Partners on the houses so, gotta pay them off first!
    I’m hopeful my Wife and I can live off the Rentals and Our 401K’s can just be extra!
    The thing I really like about the Houses is, when my Wife and I pass our Hairs get the Rental not decreased by anything (knock on wood.). While our 401K’s are decreased!

    Reply
    • J Leo

      Good planning. I especially like the fact you mentioned “paying off the rentals.” Look into estate planning and leave the real estate in a will. Many folks transfer property to their heirs before passing on. BIG mistake. IRS limits are up to $5.5M if done correctly.

      Reply
  165. Greg Starr

    I’m not sure why so many people think the chart is unrealistic. I retired early and so can you. Here’s my story: I graduated college at 23 with a degree in liberal arts. I worked my butt off at the highest paying minimum wage job (i.e., minimum wage) as a floor clerk at Toys R Us working 25 hours a week (if I worked any more then the company would have to abide by Obamacare and be forced to give me health insurance). I scrimped my heart out and managed to save 75% of my take-home pay after maxing out my 401K AND Roth IRA. I invested my savings in aggressive index funds with low fees. Thanks to the magic of compound interest and having the self-discipline to not touch my retirement money as well as not eating, having a car, having a place to live, or paying any bills for a year, I made over $10 million dollars and was able to retire at 24. Now I’m 25 and life is so sweet. I’m glad I listened to all of these financial blogs and other advice on the internet. I will live off the interest at the magic 4% withdrawal a year and my plan is that I can hopefully make this $10 million last at least for another 37 years at which point I can live off my social security. I better get it too. I didn’t work that whole year of my life contributing to social security for nothing. So I hope this motivates some and inspires others. If I can do it, so can you!

    Reply
  166. Gregg Starr

    I’m not sure why so many people think the chart is unrealistic. I retired early and so can you. Here’s my story: I graduated college at 23 with a degree in liberal arts. I worked my butt off at the highest paying minimum wage job (i.e., minimum wage) as a floor clerk at Toys R Us working 25 hours a week (if I worked any more then the company would have to abide by Obamacare and be forced to give me health insurance). I scrimped my heart out and managed to save 75% of my take-home pay after maxing out my 401K AND Roth IRA. I invested my savings in aggressive index funds with low fees. Thanks to the magic of compound interest and having the self-discipline to not touch my retirement money as well as not eating, having a car, having a place to live, or paying any bills for a year, I made over $10 million dollars and was able to retire at 24. Now I’m 25 and life is so sweet. I’m glad I listened to all of these financial blogs and other advice on the internet. I will live off the interest at the magic 4% withdrawal a year and my plan is that I can hopefully make this $10 million last at least for another 37 years at which point I can live off my social security. I better get it too. I didn’t work that whole year of my life contributing to social security for nothing. So I hope this motivates some and inspires others. If I can do it, so can you!

    Reply
  167. J Leo

    1. Live below your means (have a plan, a monthly budget)
    2. Have NO car payments. Buy in cash used cars that are 3-10 years old.
    3. Have NO whole life insurance. Just 20-25 year TERM that’s 10-12x income. Target “self insured” by age 50.
    4. Stay OUT of debt (except mortgage that’s NO more than 25% of TAKE HOME PAY)
    5. Save at least 15% into any retirement tax sheltered savings (starting day one) in good growth stock mutual funds that have a proven track record of 15+ years.
    6. Save more if you can past 40 as income/budget may permit.

    Reply
    • Josh

      So basically spend your entire life worrying about the bottom line, meanwhile missing tons of upside.

      If you’re young: take career chances, learn, take risks. Whatever, you’ll end up way better off by mid-career than some lame grinder taking this advice.

      Reply
  168. J Leo

    One caveat to add to my previous post:
    1. College debt-free: Attend in state college, (community college for the 1st two years is an option), work 10-20hrs/week while in school + work full time (or more) during summer. SAVE. Not all degrees are “useful” in the workforce. (While “underwater basket weaving” is fun and challenging, it won’t but a $2 hamburger at McD.)

    Reply
    • Josh

      Have fun grinding away making $50k mid-career doing something boring.

      Reply
  169. Miss Kat

    I’m sorry, but there’s just no homemade way in hell that this information is accurate for EVERYBODY. It might be true for somebody who is making a huge salary (and living on another planet), but for the average person, there’s no way on earth they could do this well. The market has drops from time to time which will take out a lot of your hard earned profits. It doesn’t just go up and up.

    Reply
    • Josh

      True that. My EL salary barely covered rent, and I’d have to live on Mac & Cheese 1 week out of the month because I had to use that paycheck for rent. Couldn’t even pay my student loans.

      How do you expect ELs to SAVE $8000 annually??? Only if parents are handing them that money.

      Reply
  170. Josh

    “It’s better to get in the mindset of completely writing off Social Security to motivate yourself to save more for retirement.” <- this is just silly. Do you realize there is huge opportunity cost to locking away capital for 40+ years (for a 20-something)? How about everything else that needs to be financed in the meantime?

    Reply
  171. Tom

    I’m 60 and have saved in my 401(K) since I was about 40. Contributed Max amount plus additional savings and its barely enough.

    These numbers ARE correct.

    Most (not all) people will not achieve this level of savings and will be very poor when they retire. VERY Poor. This is why the shuttle buses going to casino’s are packed with the elderly, and it will only get worse. It’s going to happen.

    YOU HAVE BEEN WARNED!

    So stop whining. Move to a cheaper place, delay having kids (or don’t have them at all), go back to school to get an education. Share living spaces with relatives.

    Either do that or be poor. But Stop Whining Y-Gens!

    Reply
    • Doug J

      Amen…

      Reply
  172. Anonymous

    This is bs….In to mid 90’s I lost 60,000 and in 2008 I lost 30,000…. DO YOUR OWN SAVING. In both cases a broker told me NOT to sell. Use your gut. I have almost made the money up by doing it myself…….. What could have been does not pay YOUR retirement!!!!!

    Reply
  173. Anonymous

    This is not even remotely realistic. Not even close. The average kid out of college makes $38K / year. Saving $4K (assuming a match from the employer) is a huge stretch for someone that young trying to establish themselves in a career. Likewise the scaling and contribution expectations are completely unrealistic.

    Reply
  174. Withheld - Feelin the Bern

    I lost my 401k in the stock market crash. All of it. I’m 52 and don’t trust the system anymore. I will work until I die and I have accepted that.

    Reply
  175. marvin Lowery

    I started in the 401 program back when they first came out and chose the GIC option. At that time it was drawing 7 percent interest. The fund grew very well. Upon retirement I placed it into a credit union account at 5 percent. Today you are lucky if the account no matter where you put it will gain no more than 1,4 percent. I do not see at that growth rate any how any 401-k can meet the numbers listed in the article.

    Reply
    • Robert Lewsader

      I made 7% last year on m y 401K. So far this year, I have lost .25%, but the market is showing signs of recovery now and I believe I will pull about 6% this year.

      Reply
  176. Pigman

    I don’t see it, Nobodies talking about how much is suppose to be made by the companies handling your $s
    We have not made anything on our $s for the last 4 years when we follow what our advisors tell us to do.
    We put in $8,000 and loose that much in the same year, vanguard does their thing by putting your $s in their funds by the year of your retirement and the market keeps eating it up. I’ve been in this business of putting $s in for over 30 years and not seeing a return of nothing to loosing for the last few years.
    I would probably been better off not adding and lump in after it falls this time, I do a lot better in other long term stocks then my 401k has ever done except maybe 2 years out of 30.
    What does a 59 year old guy do. work till death.

    Reply
  177. Eduardo Tolentino

    Financial Samurai’s table does not take into consideration the effect of stocks & fees on 401K. I contributed max to 401K but when I retired at age 66 my 401K balance came out to what it was 2 years ago. So I lost all my contribution and my employer’s contribution within the last 2 years. Then within a year after I retired my 401K balance lost 20% because of stock investments. Hopefully it will come back up again. Thank goodness I have savings in banks so I have not drawn significant amount from my 401K.

    Reply
  178. Scott

    I did not start a 401 k until I was 33 because the company I worked for didn’t offer one. They do now and they match 3% of our gross income. I did not go to college and I started welding right out of school, so I didn’t accumulate college debt but I worked hard and as many hours as I could to get ahead. I have 7 kids so saving can be tough but I did manage to save $2000 a year for first 15 years. I came to the conclusion my kids do not need everything, I did not buy them a cell phone until they were 16 and if they want a fancy smart phone they pay for it. Like many other things kids want you have to make them work for it, or they don’t get it. I drive older vehicles and maybe go out for supper twice a year with my wife. My wife uses coupons and buys things when they are on sale. Trust me anyone can save when you prioritize your needs from your wants.
    I am 46 now and I have been maxing out my 401 k for the past 12 years and my retirement savings including my IRA has grown to more than 400 k. My 401k adviser said at the current rate I am saving when I retire I could accumulate around 3 million in savings. The key is work hard, spend less and save more, I might not have lived the most exciting life but I do have my health and a wonderful family that I hope I will be able to enjoy when I retire.

    Good luck all

    Reply
  179. Kathy

    Are these figures for a married couple or a single person?

    Reply
  180. Clay

    I think more elderly Americans need to consider becoming Ex-Patriots. Moving to a country where you can survive a lot better with less money. The 401K saving charts are entirely UNREALISTIC for what people make gross income and then taxed to death take home net. The tax system is designed to keep us at a certain level (slaves) to the system.

    Central American countries are looking better and better these days.

    Reply
  181. Rich

    I agree with a number of the responses that what is proposed is unrealistic. I am 72 and retired 4 years. I was unable to save very much until my kids were on their own. What I did was concentrate on being debt free and – paying my mortgage down. Most my savings came from contributing to IRA’s and a 401k in the last 29 of my working years. Retiring debt free, no mortgage and with assets of about 3/4 million with 500k of liquid investments has provided a comfortable retirement. I purchase long term care during my 50’s to insure the benefit of our savings will carry over for the survivor and feel fairly confident we will live conservatively well for the foreseeable future. Take care of your family, keep out of debt and don’t cash our; take a loan against what you are able to save; don’t take advice from those who will gain from selling you investments or, as one writer asked ” show you his/her budget that supports the proposal” – and you will do well.

    Reply
  182. VS

    At 37, I still only make $40k. There’s no way I’ll ever be able to put away $17k a year!! I work for a small company, so we don’t have 401(k) matching, either. This chart makes me depressed.

    Reply
  183. Randall Sewell-Edmonds

    The median 22 year old in the US is earning about $16k/year. This chart assumes that person should be saving between 50 and 106% of their gross income.

    This is wildly unrealistic advice for the vast majority of Americans.

    Reply
  184. Dan

    I come back to this aspiring post once a year since 2009, so I could compare and see how I’m doing relatively to the numbers in this chart.
    I came into this country at age 20 (am a citizen now but it doesn’t change the fact that I’m an immigrant). Went to a third-tier public college in the northeastern region and studied computer science. Worked through college, and although I came out debt-free, I was already 25 upon graduation. Went to NYC to look for a job, and it took another year before I found a full time job. When I saw this post in 2009, I was making $50K base salary, $0 bonus, and had $0 in 401k. I shared a one-room apartment with a buddy. That year I was only able to contribute $3K to my 401k. After 7 years now I’m 33, making $95K base salary, $60K bonus, and have $150K in my 401k, $30K in savings account, and $95K in the brokerage account. I live in suburb with my wife, a mortgage, 2 kids and 2 used cars. I have been able to max out my 401k in the last 3 years.
    As you can see that I’m still below the low end numbers of this chart, but that’s not the point. I’m catching up. It is supposed to get you motivated, so that you would try your best to find a way to earn more, besides living within your means, and invest for your retirement. Compare to yourself and see if you’re in a better situation today than a few years ago.

    Reply
  185. John

    It’s more than doable. My wife and I are both 36 years old and have saved $981k to date. We made under $60k for our first few years out of college and our sacrifices are paying off. I still drive a Camry with 210k miles on it. Needs and wants decide your retirement future. Good luck, save early and often!

    Reply
  186. steve

    Saving as much as you can is important. Then maybe a layoff and you have to use that 401k since savings may not be enough. Then you have to start over and not everyone can build that money back to where it needs to be. Some people get lucky and do not run into hard times. The only thing that you can do is save the best you can and do not worry about things. Live within your means and those that can save don’t brag you just piss others off.

    Reply

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