401k

[miguelmartino]

if someone started working at 20 and retired at 70, how big would their 401k be if they maxed it out? for 50 years they put as much money as the law would allow. each year for 50 years they made about 50k annually working as a bricklayer. they never had kids and never got married. how big would their 401k be after 50 years if they decided to max it out? i think that uncle sam puts a limit per year which i think is like 18 or 20k annually or something like that. would their 401k be like 3 million approximately or more? can someone please help me here? thanks.

 

[joeea]

It would likely be quite a lot.

Of course the current value would depend quite a bit on the specific investments contained within the 401k.

Remember that 401ks have not actually been around for 50 years yet. They only started around 1978.
And remember that if you are the 401k owner, there is no need to estimate.

 

[miguelmartino]

but what do you believe might be an approximate amount if someone maxed it out then? ballpark or rough numbers? rsvp.

 

[joeea]

but what do you believe might be an approximate amount if someone maxed it out then? ballpark or rough numbers? rsvp.

More than $1M ballpark. Maybe a lot more. Maybe less.

 

[RunningBum]

https://www.financialsamurai.com/401k-maximum-contribution-limit/

Put these numbers in a spreadsheet and find the historical return of the market for each year to come up with the number. You want to know the answers to random questions, do a little work yourself.

 

[gwraigty]

Is it just me, or are OP's threads beginning to sound like homework assignments?

http://www.early-retirement.org/forums/search.php?searchid=14595826

 

[bada bing]

I'm thinking that someone is going travelling in the near future.
Maybe it is even someone who has returned from travelling already.

 

[ckelly78z]

I think perhaps that some folks just have no idea how to search the interwebs for anything but facebook, and youtube. I always try to answer my own questions first, and then do a search on the forum before asking any questions....other people, not so much.

 

[GrayHare]

It's called a 401k because once you have $401k invested you can retire.

 

[Masquernom]

If you saved $19,000 every year till 50, then $25,000 till you retired. Assume 5% return every year. You have about $4,000,000 when you retire.

A lot of assumptions in that calculation.

 

[Badger]

If you saved $19,000 every year till 50, then $25,000 till you retired. Assume 5% return every year. You have about $4,000,000 when you retire.

A lot of assumptions in that calculation.

But what if if if if if if ...


Cheers!

 

[UnrealizedPotential]

Miguel, what happened to your supposed inheritance? Someone who stands to inherit almost a billion doesn't need to worry about a 401K.

 

[EvrClrx311]

Odd question, but a rather fun one to answer. I wrote a program a few years ago and have updated the Shiller data. So I think I can give you a pretty good answer. First some important notes:

You can invest $19,000 in your 401K this year, and you could have invested $18,000 a few years ago... however going back 20 years, it was $10,000 as the max you could invest. This value tends (in a rough sense) to follow inflation... very roughly. So I'll just assume moving forward the max contribution will be approximately $19,000 in 2019 dollars.

Now, if we take an individual making $50,000 a year and investing 38% of his income ($19,000) a year (well his salary isn't important, or his rate of savings, let's just say he invests $19,000 a year), and assume he continues to contribute that amount for 50 years we can normalize the data to 2019 dollars and extrapolate backwards to figure out historically how someone investing $19,000 a year (2019) dollars for every 50 year period in history since 1871 would have done.

Here are the results for the last 50ish years...

Someone who turned 20 in June of 1968 and started working that month, investing $2,545.50 (which is 1968's equivalent of 2018's $19,000) into his 401k entirely in the S&P500, reinvesting dividends... who continued to invest an amount each year equal to that $19K in 2018 dollars into the account while letting dividends and growth compound... would end up with $8,625,000 dollars as of June 2018 based on how the market has performed the last 50 years.

If this unfortunate soul had turned 20 in February of 1885, he would have had to work 60 years and 2 months to achieve the same nest egg. If they had started working in September of 1920, it would have only taken them 41 years and 3 months to achieve the same 8.6 million dollar nest egg in 2019 dollars.

To answer your question... it depends.
How you invest and where...
if you invested in the S&P500 the max amount into your 401K every year for 50 years... you'd end up with somewhere between 3.5 and 15million depending on the market tides. Ideally you'd want to start, or have soon after you started... the biggest recession (depression) possible. You'd either not run into one of those when you reached retirement though. In the long run it tends to all even itself out.

That 1885 guy... would surely discover that in his 60's...

 

[joeea]

Someone who turned 20 in June of 1968 and started working that month, investing $2,545.50 (which is 1968's equivalent of 2018's $19,000) into his 401k

Invested into his 401k in 1968? That would have been a nice trick, since 401ks wouldn't exist for another 10 years.

 

[EvrClrx311]

Probably a better way to look at this... is to say, how long will it take me to achieve retirement with a reasonable savings rate over a career...

Let's say you're making $50,000 (2019 dollars) a year when you're 20 and saving 25% a year of that. Let's assume your pay increases 2% above inflation every year (or rather 2% plus inflation a year gets added to your salary). Let's assume this individual wanted a safe withdrawal rate of 4% a year and was hoping to live off of $50,000 (2019 dollars) a year in retirement. Let's normalize this all across the last 150 years by removing inflation from the returns.

On average, it would take that individual 26 years and 6 months to reach their retirement goal... with the fastest path being 17 years 11 months (if they started in 1911... whoops, they'd run into the Depression hard on that one). Or on the longer end would be someone who started in 1886 who took 36.5 years to reach their goal.

 

[EvrClrx311]

Invested into his 401k in 1968? That would have been a nice trick, since 401ks wouldn't exist for another 10 years.

No time machine yet... so I'm stuck using past market data for now