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

[SumDay]

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

"US workers who stayed put in the same company 401(k) plan for the past decade saw the size of their accounts quadruple to an average of nearly $200,000, despite major stock market turmoil."

 

[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?

 

[SumDay]

Why is this a surprise?

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

 

[nun]

If you save money for 10 years your account balance goes up.......amazing!
The scary thing is that about half of Americans don't contribute to a retirement plan other than SS.

LIMRA: Nearly Half of Americans Are Not Contributing to Any Retirement Plan


Maybe they have big taxable account balances ....and I have a bridge in Brooklyn to sell you.

 

[jclarksnakes]

No surprises here but it does go against the very popular urban myth that EVERYONE's 401 has been a loser.

 

[Rustward]

The scary thing is that about half of Americans don't contribute to a retirement plan other than SS.

Would that be the same half that don't pay income taxes?

 

[ziggy29]

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?

Well, that's true if you assume that the average 401K participant has maxed out his/her contributions for the last 10 years.

And it feels like data mining to me to base this off the 2002 market lows, more or less.

 

[karluk]

This article is very interesting, because the quadrupling of 401k balances over the past ten years is very close to my personal experience with my 457 plan. In my case I know for a fact that I have had positive investment returns in my 457 every single year since 2002. That includes 2008, when I took a huge hit in my Roth IRA and taxable accounts (which were mostly stocks), but not in my 457 account. I had read that tax deferred accounts should be devoted as much as possible to fixed income and bonds, so my 457 plan came through the stock market crash unscathed.

I hadn't thought about it before, but now I'm curious as to how much of the 457 increase in the last decade is attributable to market gains, and how much to new savings. Ten years of small but steady investment gains figures to have made a big contribution to the increase.

 

[Andre1969]

I just ran my own numbers, and using 12/29/99 as the start, and 12/31/09 as the end, my total 401k balance (some of them had rolled over to IRAs by '09) has gone up 22.9x!

Going from 12/31/02 to 12/31/12 isn't quite as impressive: 13.4x.

I should clarify though, that I didn't even start a 401k until December of 1997, and in those days I couldn't afford to max it out. So by 12/99, I didn't have very much to start with.

 

[nun]

Since 1997 my net worth is up 22x

 

[nun]

Well, that's true if you assume that the average 401K participant has maxed out his/her contributions for the last 10 years.

And it feels like data mining to me to base this off the 2002 market lows, more or less.

That wouldn't be maxing out because maybe 3% or 5% of the 15% would be an employer contribution

 

[martyb]

Going from 12/31/02 to 12/31/12 isn't quite as impressive: 13.4x.

I should clarify though, that I didn't even start a 401k until December of 1997, and in those days I couldn't afford to max it out. So by 12/99, I didn't have very much to start with.

We're in nearly the same boat for that time frame. 12/31/02 to 12/31/12 for me works out to 13.85x. When I started, those of us in the "old" Civil Service Retirement System (CSRS) were very limited in the amount we were allowed to contribute, and we received no matching contributions. We still don't get matchin, but at least we eventually did (years later) get the ability to contribute to the IRS max, which I started doing as soon as allowed.

 

[jollystomper]

My 401K "only" tripled in the last 10 years, but I didn't start putting in the maximum until 2006. We had a couple of kids in college 2003-2009 and chose to pay those bills to leave them without debt (our college gift to them). I also greatly reduced the 401K stock allocation down to 50-60% just before that time period.

I'm certainly not complaining since I've had a 401K since 1984 and it already had substantial growth before 2003.

 

[martyb]

My balance wasn't substantial in 2002. Lol...it was only $14,495 at that time. So...not such a big balance now, even with that much of an increase. Good enough for $600 or more per month income in retirement, though. After taxes. I'll take it.

 

[bondi688]

One can only double the money in 8 years if you earn 9% a year and have the increase compounded. Additional contributions into the 401k increase the balance, but they are not gains coming from the investments. If you have a hundred dollars in year one, and increase the amount saved to a thousand dollars a year every year for the next 9, you have $9100 at year 10, but that is not because the initial $100 had increased 91 times. In addition, if the market had tanked in year 10 and you lost half of what you have, leaving only $4550 in the 401k, are they writing an feel good article saying the balance had increased 45 times?

More people realize the importance of saving for retirement during the time they are working, and the increase in the balance reflects the recognition. The article is misleading by almost suggesting that if you saved, the market will do further wonders, just think "quadruple".

 

[comicbookgujy]

My 401k in 2000 was $0. My 401k as of today is $300k. Contribute about $13k a year and around $3k in matching so a total of $16k a year. My contribution since 2000 is around $200k and the other $100k is from gain.

Good thing I didn't have anything to lose during the first crash around 2002! Only 13 years and my 401k has gone through 2 major crash already.

 

[obgyn65]

wow. You beat me. Mine is about 180k, started about 10 years ago also but always chose the safest funds. I am surprised at the 100k difference with your 401k plan after 10 years.

My 401k in 2000 was $0. My 401k as of today is $300k. Contribute about $13k a year and around $3k in matching so a total of $16k a year. My contribution since 2000 is around $200k and the other $100k is from gain.

Good thing I didn't have anything to lose during the first crash around 2002! Only 13 years and my 401k has gone through 2 major crash already.

 

[LakeTravis]

My 401k in 2000 was $0. My 401k as of today is $300k. Contribute about $13k a year and around $3k in matching so a total of $16k a year. My contribution since 2000 is around $200k and the other $100k is from gain.

Good thing I didn't have anything to lose during the first crash around 2002! Only 13 years and my 401k has gone through 2 major crash already.

Almost exactly the same for me - had $0 in 2000 and it's kissing $300K now. I didn't start max contributions until around 2003.

 

[nun]

Almost exactly the same for me - had $0 in 2000 and it's kissing $300K now. I didn't start max contributions until around 2003.

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.

 

[martyb]

Almost exactly the same for me - had $0 in 2000 and it's kissing $300K now. I didn't start max contributions until around 2003.

Mine's only at $210k now. As a fed employee, I wasn't allowed to contribute anywhere near the max until sometime (exact year unrecalled atm) but sometime in the mid or slightly later 2000's. So....while not nearly where I'd like it to be, I feel fairly successful with it. Fortunately, we also have wife's 401k & 2 Roths. Not the Rockefellers but every little bit adds up. We won't take a pay cut if I retire tomorrow.

update:
Just checked....it was 2006 when I was allowed to finally contribute more than 10% to my TSP. That's when I began maxing contributions to the IRS limit. Early on, I was only allowed 5%, and I have never received any matching money. So...I guess my $210k isn't too bad in that case.

 

[Independent]

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,

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:

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​

[TD]-[/TD][TD]24[/TD][TD]5.4%[/TD][TD]8.1%[/TD]​

[TR][TD]25[/TD][TD]-[/TD][TD]29[/TD][TD]5.9%[/TD][TD]9.1%[/TD][/TR]
[TR][TD]30[/TD][TD]-[/TD][TD]34[/TD][TD]6.5%[/TD][TD]9.7%[/TD][/TR]
[TR][TD]35[/TD][TD]-[/TD][TD]39[/TD][TD]7.2%[/TD][TD]10.4%[/TD][/TR]
[TR][TD]40[/TD][TD]-[/TD][TD]44[/TD][TD]7.6%[/TD][TD]10.9%[/TD][/TR]
[TR][TD]45[/TD][TD]-[/TD][TD]49[/TD][TD]8.0%[/TD][TD]11.4%[/TD][/TR]
[TR][TD]50[/TD][TD]-[/TD][TD]54[/TD][TD]9.2%[/TD][TD]12.7%[/TD][/TR]
[TR][TD]55[/TD][TD]-[/TD][TD]59[/TD][TD]10.0%[/TD][TD]13.6%[/TD][/TR]
[TR][TD]60[/TD][TD]-[/TD][TD]64[/TD][TD]10.6%[/TD][TD]14.2%[/TD][/TR]
[TR][TD]65[/TD][TD]-[/TD][TD]69[/TD][TD]11.4%[/TD][TD]14.9%​

[/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.

 

[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]

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%).