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

[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]

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]

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]

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​

​

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

[/TD][/TR]

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]

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]

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]

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%​

65 - 69 11.4% 14.9%​

​

[TR][TD]30 - 34 6.5% 9.7%[/TD][/TR]
[TR][TD]35 - 39 7.2% 10.4%[/TD][/TR]
[TR][TD]40 - 44 7.6% 10.9%[/TD][/TR]
[TR][TD]45 - 49 8.0% 11.4%[/TD][/TR]
[TR][TD]50 - 54 9.2% 12.7%[/TD][/TR]
[TR][TD]55 - 59 10.0% 13.6%[/TD][/TR]
[TR][TD]60 - 64 10.6% 14.2%​

[/TD][/TR]

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

 

[FIREd]

Looking at DW's 401K (I didn't have access to a 401K for most of my working career):

Balance on January 2000: $0
Current balance: $301K

Contributions: $182K (maxed out every year since 2002)
401K match:$25K

 

[foxfirev5]

401k balances -1985 - high 4 figures ,1995 - mid 5 figures, currently low 7 figures. Simple AA of 60/40 declining to 45/40/15 with occasional rebalancing. Max contributions from 1994 until 2010.
DW was a reluctant participant during her 15 years of work from 1995 -2010. Even at that she put away a nice low to mid 6 figure stash.
I've said it before, but I'd rather have a GOOD 401k plan than a DB plan. Of course I'm a hands on control freak so it may not be for everybody

 

[gerntz]

Question: If you're retired, and if your 401k plan has limited investment choices, does anyone keep their savings in that 401k versus transferring it to an IRA where the investment choices are infinite? If so, why? Thanks.

 

[Lazarus]

Question: If you're retired, and if your 401k plan has limited investment choices, does anyone keep their savings in that 401k versus transferring it to an IRA where the investment choices are infinite? If so, why? Thanks.

Yes, I am not 59 1/2 yet. If I put the money in an IRA I would be limited to a 72t withdrawal. Leaving it in the 401k allows me to make penalty free withdrawals once a year if necessary and I can have the dividends distributed to me from the company stock.

I may move to an IRA when I am old enough.

 

[ziggy29]

Question: If you're retired, and if your 401k plan has limited investment choices, does anyone keep their savings in that 401k versus transferring it to an IRA where the investment choices are infinite? If so, why? Thanks.

1. Inertia.

2. The ability to withdraw starting in the year you turn 55 if you are retired, instead of 59 1/2 with an IRA.

3. If applicable, dividends from company stock can be paid directly to you outside the 401K for additional income, instead of reinvested (which can also be a negative depending on your perspective). This can be good as long as dividends are taxed at a lower rate, so you can pay dividend tax rates instead of ordinary rates when you withdraw later. (This is the same reason why high dividend stocks are often better in a taxable account than in a 401K or traditional IRA.)

If none of these circumstances apply to someone, a rollover IRA with more (and better) investment options would likely be superior.

 

[photoguy]

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.

I always thought everybody just maxed out their contributions but when it's come up in casual conversation I've been surprised that many do not. Even when coworkers are making over 100k/year and they have math/stats/physics degrees etc.

Question: If you're retired, and if your 401k plan has limited investment choices, does anyone keep their savings in that 401k versus transferring it to an IRA where the investment choices are infinite? If so, why? Thanks.

One difference is that in a 401k plan you might have access to the institutional versions of a mutual fund with lower expense ratios. If your 401k is already at a decent provider (like vanguard) this might be a reason to stay (in addition to inertia -- probably the biggest reason of all).

 

[ziggy29]

One difference is that in a 401k plan you might have access to the institutional versions of a mutual fund with lower expense ratios. If your 401k is already at a decent provider (like vanguard) this might be a reason to stay (in addition to inertia -- probably the biggest reason of all).

This is true. If these are institutional versions of very good funds with very low expenses, that might be a reason to stay put. My 401K is with Fidelity and most of the funds are institutional, usually requiring a million dollar minimum for "individuals" to access. The expenses are slightly higher than most of their Vanguard equivalents, but still quite acceptable.

 

[karluk]

Question: If you're retired, and if your 401k plan has limited investment choices, does anyone keep their savings in that 401k versus transferring it to an IRA where the investment choices are infinite? If so, why? Thanks.

I'm 60, so penalty free withdrawals between age 55 and 59 1/2 doesn't apply to me. But I have no immediate plans to transfer any of my 457 into an IRA. I can think of two main reasons:

1. The stable value fund in my 457 is not available elsewhere and has a current yield of 2.43%. In my view that makes it a superior alternative for a portion of the bond allocation in my portfolio.
2. I hold VIIIX in my 457 and VFIAX in my IRA. I'm highly satisfied with both and would probably just move VIIIX into VFIAX if I rolled my 457 into an IRA. But when I check expense ratios, I see that VIIIX charges .02% vs .05% for VFIAX. Admittedly both expense ratios are tiny, but .05% is two and a half times .02%. What's the point of going to the trouble to transfer one S&P 500 index fund into another when all I accomplish is to more than double my expenses?

 

[ziggy29]

1. The stable value fund in my 457 is not available elsewhere and has a current yield of 2.43%. In my view that makes it a superior alternative for a portion of the bond allocation in my portfolio.

I think a similar argument might be in play for retired Feds who have access to the "G" fund in the TSP.

 

[Sniggle]

I always thought everybody just maxed out their contributions but when it's come up in casual conversation I've been surprised that many do not. Even when coworkers are making over 100k/year and they have math/stats/physics degrees etc.

They may be socking money away in some other investment, like a Roth IRA. Maxing the 401K and a couple of Roth's on 1 salary, even one above $100,000 in a relatively high cost area is not easy. I have never been able to max both 401K and Roth contributions (Maybe I could if I pulled back all fun money and did not take a vacation, but not going to do that).