CNN - How did you do it?

[tmm99]

Maybe this has been posted before (I am still wo*king so I don't have time to look at all posts here) so please ignore this if this has been discussed before...

Are you a 401(k) millionaire? - Economy


Maybe some of you could let them know that LBYM is the key? (or something else..)

 

[LOL!]

Probably time is just as important as LBYM and staying at the same place for all that time.

 

[NW-Bound]

I do not think $1M in a 401k account is that unusual. I recall seeing on the Web recently a statistic about 401k accounts with more than $5M. That's real money.

If my memory serves, there are about 9,000 such lucky accounts of $5M+. I say "lucky" because most of these were stuffed with successful startup stocks that went IPO. Normal saving and investing alone would not get you to that $5M level. Just now I searched, but failed to locate this Web article.

 

[LOL!]

here's the GAO report on retirement account balances which started the media frenzy:

U.S. GAO - Individual Retirement Accounts: Preliminary Information on IRA Balances Accumulated as of 2011

Note the report has info from 2011 and we know what the markets did the past few years.

I think that folks that have put the legal maximum contribution into these plans for 30 years (and left it untouched) can have a 7-figure balance even if there was no employer matching as long as they took some risk (i.e. did not leave contributions in the money market fund). If there was company matching, then it would take less than 30 years.

 

[NW-Bound]

Note the report has info from 2011 and we know what the markets did the past few years.

I think that folks that have put the legal maximum contribution into these plans for 30 years (and left it untouched) can have a 7-figure balance even if there was no employer matching as long as they took some risk (i.e. did not leave contributions in the money market fund). If there was company matching, then it would take less than 30 years.

Thanks for the info. The article I saw was just a spin-off from this one apparently, but this confirmed that my memory remained "superior".

By the way, that's a lot of people with awkwardly high multimillion 401k accounts, but I cannot count myself among them. Oh well, maybe next life... One cannot have his good memory and lots of money too, I guess.

 

[eta2020]

It is one component of FI. I don't know about millions but one college graduate can surely have more then 500k by the age of 45 which is after less then 20 years of 401k contributions.

Make it couple and .....

 

[LOL!]

Let's not forget that the contribution limits were relatively low 20 to 30 years ago. And it looks like age-50 catch-up didn't exist until 2002.

See Figure 8 in http://www.ici.org/pdf/per12-02.pdf

 

[NW-Bound]

On the other hand, let's not forget the power of compounding either.

The $7K contribution in 1987 would become $61K in 2011 if invested in the S&P 500 Index. Add to that 50% matching from the employer, and we have $90K just from that one year.

And some of us have been working from earlier than 1987.

PS. And you are right about the report being from 2011. By 9/2014, that $90K is now $155K!

PPS. Ah, but then I forgot the effect of inflation. The $155K above is worth only $73K in 1987 dollars. But it also means that $1M 401k is not a big deal anymore.

 

[Htown Harry]

If my memory serves, there are about 9,000 such lucky accounts of $5M+. I say "lucky" because most of these were stuffed with successful startup stocks that went IPO.

There's also the Private Equity / carried interest method...

What's Really Going on With Mitt Romney's $102 Million IRA - The Atlantic

 

[clifp]

here's the GAO report on retirement account balances which started the media frenzy:

U.S. GAO - Individual Retirement Accounts: Preliminary Information on IRA Balances Accumulated as of 2011

Note the report has info from 2011 and we know what the markets did the past few years.

I think that folks that have put the legal maximum contribution into these plans for 30 years (and left it untouched) can have a 7-figure balance even if there was no employer matching as long as they took some risk (i.e. did not leave contributions in the money market fund). If there was company matching, then it would take less than 30 years.

I am not sure why this isn't more common. From June 1984 to Jun 1999, I contributed as much as the company allowed (which was almost always less than the legal limit) to a 401K . In 2000 I rolled it over to a 401K and haven't added or withdrawn since then. The balance hit high of 975K earlier this month and ended today at 955K. and plus I've converted 60K from the same account into a Roth. The companies contribution for the 15 years is in separate fund which is at 675K. If we both had been for the last 15 years instead of me being retired I got to think the number would have been closer 2.5 million at age 55.

 

[tmm99]

And the news continues with some individuals who saved over $1 million... (not $1 million in 401K but in retirement accounts...)

Dream trips to Europe - What I gave up to save $1 million - CNNMoney

 

[clifp]

I'm reading the stories of the good savers while listening to the woe is my broken egg retirement movie. How come they don't make movies about every day folks saving enough for their retirement?

 

[foxfirev5]

I'm reading the stories of the good savers while listening to the woe is my broken egg retirement movie. How come they don't make movies about every day folks saving enough for their retirement?

Because it's a long boring process - if done correctly

 

[RobLJ]

Starting in '90 with a fixed VALIC account and shifting a small account to Fidelity in '95, I got close but no cigar and won't make it since I'm stopping contributions next year and semi-retiring. Starting salary was 26k, I recall. The company match was huge, as well as luck in fund selections and rebalancing methods.
With DW's accounts. . .
It was indeed a long and boring (and lucky) process.
We didn't max out but came within about 70-75% of max savings in '07 onward. (DW's 401k options were largely terrible or she would have come out better than I and still may.)

 

[FireBug]

Slow and steady wins the race

 

[Walt34]

Because it's a long boring process - if done correctly

Exactly.

 

[LitGal]

And the news continues with some individuals who saved over $1 million... (not $1 million in 401K but in retirement accounts...)

Dream trips to Europe - What I gave up to save $1 million - CNNMoney

Nice article; but it does reflect personal preferences. Though I never saved a million dollars, it hadn't been a goal to begin with. Yes, I hoped to FIRE one day, and was happy to LBYM, do without new cars, stick with boring saving/investment plans, etc.

But I could not give up travel. Ours has been done on a modest budget.(Quantity always trumped luxury...........for me.) It was far more important (for me) to reach old age with adventures to remember, rather than money I could not take with me.

Of course, we don't know how long we will need money.......that's the rub.

So, we all do our best to plan accordingly.

(If only there could be a way to take one last trip and drain the accounts dry.....on our second-to-last day.......)



(I don't mean to "change the subject" of this thread. It's just that destinations have always held more appeal than cash.)

 

[H2ODude]

I think I started in 1981 with a "deferred comp" program in local government that allowed max of $7 or $7.5k. It was with Valic I believe and the performance of the stock funds was pretty subpar IIRC but I always maxed it. Had other jobs, never had a match but always maxed and rolled it into the Fidelity IRA. When got to 55 upped it to that max, and about that time my local government added a 401k in addition to the DC program. Up until that time the DC had absolutely AWFUL offerings through a shyster program that had gotten in tight with ... well somebody. So in spite of bad fund availability and no match, from 1981 until 2011 maxes and no removals since, it's all worth about $1.3. Won't touch it until 70.5, and will take SS at 70... to PAY THE TAXES! Nice problem to have though. I will admit that in 1981 that 7k was about 18% of salary and a stretch, but made available due to a sudden increase in pay. Discipline, grasshopper.

 

[mathjak107]

back in 2006 cnn's money magazine and fidelity investment magazine both did a feature story on us. it was fun working with them on it.

 

[Car-Guy]

h
I think that folks that have put the legal maximum contribution into these plans for 30 years (and left it untouched) can have a 7-figure balance even if there was no employer matching as long as they took some risk (i.e. did not leave contributions in the money market fund). If there was company matching, then it would take less than 30 years.

I started contributing to my companies plan as soon as I was eligible back in the mid 80's. The company I worked for would match 100% of my contributions (up to the legal limits) To me, that was like free money and it took far less than 30 years to break into 7 figures.

 

[tmm99]

back in 2006 cnn's money magazine and fidelity investment magazine both did a feature story on us. it was fun working with them on it.

Wow! Do you have a link to it that you want to share?


Sent from my iPhone using Early Retirement Forum

 

[growing_older]

I have usually tried to contribute as much as the plan would allow (often less than the legal limit due to plan rules) but I will never be close to 1M in a 401k. If nothing else the fees in the company 401k will make me want to roll the money out of the 401k as soon as I can. Folks with 1M in a 401k must have worked for a single employer for a long time. Most of my employers didn't stay in business that long.

 

[purplesky]

I'm reading the stories of the good savers while listening to the woe is my broken egg retirement movie. How come they don't make movies about every day folks saving enough for their retirement?

Because everyday folks just don't have enough CONSISTENT income.

This is a tough crowd on here. Not much empathy at all. But life happens.

The everyday folks that make 30k to 50k with gaps in employment will not save enough for retirement. But they will get by.

Do you really want to see a retirement savings movie about a UAW worker making $15hr in the right to work states?
Or a guy at Walmart making $13hr and paying for his own health insurance?


There are millions of people in this demographic and they are everyday working folk.

They are busy just keeping the lights on and putting food on the table.

I will get flamed now because I guess am showing too much empathy.

Yes, some working folks will be able to save if life cooperates. But most working folks not so much.

 

[Willers]

I don't think there is any danger of you getting flamed, but you are likely to get some reasoned disagreement.

In my opinion, it has nothing to do with empathy, or lack thereof, but rather the fact that earning a lower than average salary simply does not mean someone cannot save.

I earned in this range for the first 10 years of my career and saved steadily. Did I have a new iPhone, iPad, big screen tv, new car, etc? Not a chance. I used all disposable income to invest (in real estate at the time).

I recognize the differences in lifestyle, but to say that savings are unattainable at anything but high salaries is just not factual. It's all about choices.


Sent from my iPhone using Early Retirement Forum

 

[mathjak107]

Wow! Do you have a link to it that you want to share?


Sent from my iPhone using Early Retirement Forum

i will have to see if it is still up on their site. it was 2006.

in fact i wonder if it is still here, i posted it when it was first done.