Retirement balances of 401(k) faithfuls quadrupled in past decade

[Independent]

Quote:

Originally Posted by Shanky If you started with $50K, added and average of 15K a year for a decade and made a 0% return, you have quadrupled the money in that 401K. Why is this a surprise?

Also my first thought, and, unfortunately,

Quote:

Originally Posted by SumDay Probably because the general population isn't as good at cipherin' as most of the people who participate in this forum.

[Independent]

The last couple paragraphs were interesting:

Quote:

And McHugh said there are far fewer extreme investors today than compared to late 2007. A higher percentage of 401(k) participants are using funds blended with stocks and bonds, rather than putting most of their money in just stocks. That's a far cry from the aggressive investing that took place in 2007, when the allocation to stocks was 65 percent compared to 52 percent in the fourth quarter of last year, according to Fidelity's analysis.

I wouldn't expect a Fidelity spokesperson to call a 65% stock allocation "aggressive".

[Independent]

Here's another article from the same Fidelity source: 401k balances hit record highs - - MSN Money

It doesn't have the "quadrupled" diversion from the Reuters story.

So, I'm a sucker for data, and couldn't help assembling this table of average contributions by age. The last column includes the employer match, which averages somewhere around 3%.

20	-	24	5.4%	8.1%
25	-	29	5.9%	9.1%
30	-	34	6.5%	9.7%
35	-	39	7.2%	10.4%
40	-	44	7.6%	10.9%
45	-	49	8.0%	11.4%
50	-	54	9.2%	12.7%
55	-	59	10.0%	13.6%
60	-	64	10.6%	14.2%
65	-	69	11.4%	14.9%

But, I couldn't stop there. A worker with a constant real dollar income, saving at these rates, earning inflation+6%, and retiring with 4% withdrawals, would generate enough 401k savings to have a replacement rate of:

12% for retirement at 60,
17% for retirement at 65, and
24% for retirement at 70

I don't think anybody's going to be retiring "early" based on that level of saving. OTOH, if these workers also pay for a house while working, and get SS, it should allow "eventual" retirement.

[ronocnikral]

mine is up an infinitesimal amount. In 2003, I had no 401k savings as I was still in college. But, I scored an internship that summer and even though I was there for just the summer, they allowed me to contribute to their 401k plan. They even matched it, so I put in 2% of my internship salary ($3700/month) and they threw in 8% (immediately vested 100%).

I've got about $300k in 401k's, rollover IRA's and Roth funds (from roth 401k). About a third is "Roth money."

[ziggy29]

Quote:

Originally Posted by nun I started a new job and 401a in 2004. So the balance in 2004 was 0 and it's now $200k. $18k annual contributions mean that I have 4% average annual return. Not stellar, but "all things considered" I'll take it.

Yeah, true. I changed j*bs in 1999 and rolled the old 401K into an IRA, so in 2002 I had maybe $50-60K in the new 401K. Now it's close to $350K. But if I look at the *combined* value of the rollover IRA and 401K since 2002, it's maybe tripled overall (I get a dollar for dollar match on the first 5%).

[foxfirev5]

This type of story reminds me of my old boss coming in to give us the dismal year end results. The good news was that we were far above all our competitors in sales. The bad news was that we were falling far short of OUR goals.
To me there's only a few statistics that count. What does my 401k look like compared to my plan and expected expenses. The other guys situation doesn't matter.

[ziggy29]

Quote:

Originally Posted by foxfirev5 This type of story reminds me of my old boss coming in to give us the dismal year end results. The good news was that we were far above all our competitors in sales. The bad news was that we were falling far short of OUR goals.

Or as we hear almost every year when it comes to our annual bonuses based in part on corporate performance: "We had record earnings and revenues, but we fell a little short of Wall Street demands and FAR short of our unattainable internal target, so the corporate component of your variable compensation is ZERO for this quarter."

(Of course, they don't *say* their internal targets are unattainable. And by the way, that means no raises again this year, either.)

[LakeTravis]

Up until this year our 401(k) was administered by Valic and contained a bunch of garbage funds with high ER's. So the real return on mine over the last 13 years has been laughable - the only significant gains were when it recently recovered from the losses of 2007-8.

This year we switched to a different company that gives us access to a lot of Vanguard index funds and target retirement funds. I'm looking forward to seeing what effect that has. But when I do eventually retire, I'll move it over to my Vanguard accounts where it can (hopefully) grow for another 15 years while I live off my after-tax investments until then.

[foxfirev5]

Quote:

Originally Posted by ziggy29 Or as we hear almost every year when it comes to our annual bonuses based in part on corporate performance: "We had record earnings and revenues, but we fell a little short of Wall Street demands and FAR short of our unattainable internal target, so the corporate component of your variable compensation is ZERO for this quarter." (Of course, they don't *say* their internal targets are unattainable. And by the way, that means no raises again this year, either.)

But,the REAL good news is that it really doesn't matter because we're FI.

[jazz4cash]

Quote:

Originally Posted by Shanky If you started with $50K, added and average of 15K a year for a decade and made a 0% return, you have quadrupled the money in that 401K. Why is this a surprise?

The % of folks that would and could contribute 15k/yr is extremely low. Also, I believe the contribution limit was far below $15k 10 yrs ago.

[Lazarus]

I took a look at my records and my 401k did quadruple in the last decade also. That is with contributions and match from employer. Reinvesting dividends also. I am sure it won't quadruple in the next decade as I no longer contribute and take the dividends. Doubling is pretty likely though.

[gerntz]

Mine went to zero last year.

[WestLake]

Mine has almost tripled since the 2009 bottom - I went all out for stocks and am maxing.

[tinlizzy]

I only looked at year ending and it was surprising - the roller coaster years look tame. 2005 looks terrible and I don't even remember feeling any anxiety then. No 401K match and I don't have the records from 1997-1999.

Year TD Contributions Ending Balance
2000 $21,022 $22,629
2001 28,278 28,202
2002 36,612 29,844
2003 45,376 48,077
2004 58,040 58,715
2005 71,490 65,617
2006 84,533 90,125
2007 98,783 114,455
2008 112,766 130,414
2009 127,206 101,191
2010 142,190 149,979
2011 158,052 197,842
2012 175,052 262,381

How do you make those tables?

[Sniggle]

Mine has gone up 7 fold in the last 13 years. I just recently ran the numbers. I did better than the S & P in some periods, and worse than the S&P in other periods.

[Independent]

Quote:

Originally Posted by tinlizzy I only looked at year ending and it was surprising - the roller coaster years look tame. 2005 looks terrible and I don't even remember feeling any anxiety then. No 401K match and I don't have the records from 1997-1999. How do you make those tables?

I've had a lot of trouble with tables.

I moved your data to an Excel spreadsheet, converted the headings to one word per column, changed the font to Courier, then copied and pasted it back here, and put the "TABLE" tags on it.

Sometimes that works for me, sometimes it doesn't.

Year	Contributions	Balance
2001	28,278	28,202
2002	36,612	29,844
2003	45,376	48,077
2004	58,040	58,715
2005	71,490	65,617
2006	84,533	90,125
2007	98,783	114,455
2008	112,766	130,414
2009	127,206	101,191
2010	142,190	149,979
2011	158,052	197,842
2012	175,052	262,381

[LakeTravis]

Quote:

Originally Posted by Lazarus I took a look at my records and my 401k did quadruple in the last decade also. That is with contributions and match from employer. Reinvesting dividends also. I am sure it won't quadruple in the next decade as I no longer contribute and take the dividends. Doubling is pretty likely though.

I'm semi-hoping mine will triple over the next 15 years. That would require an average annual return of 7.5%. No guarantees, but I think that Wellesley or Wellington have a high probability of being able to provide that.

[uofmbish]

Quote:

Originally Posted by Independent Here's another article from the same Fidelity source: 401k balances hit record highs - - MSN Money It doesn't have the "quadrupled" diversion from the Reuters story. So, I'm a sucker for data, and couldn't help assembling this table of average contributions by age. The last column includes the employer match, which averages somewhere around 3%. 20 - 24 5.4% 8.1% 25 - 29 5.9% 9.1% 30 - 34 6.5% 9.7% 35 - 39 7.2% 10.4% 40 - 44 7.6% 10.9% 45 - 49 8.0% 11.4% 50 - 54 9.2% 12.7% 55 - 59 10.0% 13.6% 60 - 64 10.6% 14.2% 65 - 69 11.4% 14.9% But, I couldn't stop there. A worker with a constant real dollar income, saving at these rates, earning inflation+6%, and retiring with 4% withdrawals, would generate enough 401k savings to have a replacement rate of: 12% for retirement at 60, 17% for retirement at 65, and 24% for retirement at 70 I don't think anybody's going to be retiring "early" based on that level of saving. OTOH, if these workers also pay for a house while working, and get SS, it should allow "eventual" retirement.

Hmmm, I get very different results using those same assumptions. The numbers looked a little low to me even with the pretty generous 6% real returns. This is what I come up with:

75% take home income replacement (measured as income * (1- personal savings rate)) at 60
105% at 65
144% at 70

Seems like the average person included in this study is on a pretty decent path for early retirement under the assumption that things like a mortgage and kids college expenses may be done around that age. Plus they may have accrued some SS benefits.

[jasond]

I'm in the government Fers and at the endof 2000 had 191k, and just recently it hit 620k mostly stocks don't move it around much. I contribute 15 percent with five percent match. Just recently turned it down to five percent because I need to pay off some bills.

I've been a big believer of time in the market not timing the market.

Jason

1987 $3,349
1988 $8,239
1989 $14,572
1990 $21,301
1991 $29,323
1992 $38,161
1993 $48,329
1994 $56,024
1995 $81,725
1996 $108,299
1997 $106,537
1998 $150,240
1999 $194,905
2000 $191,007
2001 $183,938
2002 $161,847
2003 $223,350
2004 $270,511
2005 $307,880
2006 $386,151
2007 $431,040
2008 $293,316
2009 $399,799
2010 $487,963
2011 $510710
2012 $586457

[cons]

My 10 year 401k balance:

Jan/2003 was 1743
Jan/2013 was 263550

Not sure exactly what my rate of return has been nor how much I've contributed during that decade (actually, I just checked my annual statement and shows a lifetime contribution of 136418, but this does not include matching contributions). However, I've been maxing it out since 2003 along with a 5% match. I've also invested aggressively in 100% stock index funds since 2003.

YMMV