How much 401k at age 38

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ps2me11
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How much 401k at age 38

Post by ps2me11 »

We started quite late contributing to 401k. How much a couple should have at the age of 38. Say 99 percentile.
Average monthly expense currently around 8k in CT which will not go down as we haven’t started home mortgage yet.
Apologize if there’s already a calculator available.
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retired@50
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Re: How much 401k at age 38

Post by retired@50 »

Here is one perspective, shown as multiples of your salary.


Image

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sailaway
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Re: How much 401k at age 38

Post by sailaway »

What are your goals? Sounds like you want to be able to spend at least $96k. When do you want to retire? Do you have any pensions? What will SS look like? What other savings/ assets do you have? You say you haven't started a mortgage "yet"? Is that a priority? In many high cost of living areas, renting is a better option financially.

Consider doing a complete case study to lay out the info in a format that bogleheads have learned to recognize.
KlangFool
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Re: How much 401k at age 38

Post by KlangFool »

ps2me11 wrote: Thu Sep 23, 2021 7:46 pm We started quite late contributing to 401k. How much a couple should have at the age of 38. Say 99 percentile.
Average monthly expense currently around 8k in CT which will not go down as we haven’t started home mortgage yet.
Apologize if there’s already a calculator available.
ps2me11,

A) That does not matter. How does this helps you at all?

B) The correct answers are

1) What is the size of your TOTAL portfolio versus your annual expense of 96K? 1X? 2X? 5X?

2) What is your annual savings versus your annual expense of 96K? 0.5X? 1X?

3) How long do you expect continue working?

C) If you save enough, it won't matter where you ranked versus others. If you do not save enough, it won't matter where you ranked either.

Focus on your own goal. Let others deal with their own problems.

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Wannaretireearly
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Re: How much 401k at age 38

Post by Wannaretireearly »

retired@50 wrote: Thu Sep 23, 2021 7:49 pm Here is one perspective, shown as multiples of your salary.


Image

Regards,
Don't think I like this one. Unless my income drops significantly next few years 😉
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retired@50
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Re: How much 401k at age 38

Post by retired@50 »

Wannaretireearly wrote: Thu Sep 23, 2021 8:27 pm
retired@50 wrote: Thu Sep 23, 2021 7:49 pm Here is one perspective, shown as multiples of your salary.


Image

Regards,
Don't think I like this one. Unless my income drops significantly next few years 😉
I didn't invent it... Just passing it along. I think it originally came from an article on Fidelity's website. The OP seemed to be looking for a rough idea of how to gauge their progress. Since the OP is young, knowing what expenses will be during retirement years is a wild guess.

Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
Point
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Re: How much 401k at age 38

Post by Point »

Here's a starting point:

- take your current salary and inflation adjust it to your retirement date. Let's say you plan on retiring at age 65. Pick an inflation percentage (2%, or?) and factor that for the next 65-38 years. If you plan on retiring earlier than 65, use that number;
- Take that inflation adjusted salary and multiply by .8, assuming that you'll have lower costs (no FICA deduction, 401: contribution, work driving, clothes...) when you're not working;
- Now you have a retirement income goal;
- Plan on having zero debt by retirement age, what will you need earnto pay off your debt before retirement?
- Plan on an emergency fund, medical costs, travel, what will that be on a one time basis, and on an annual basis? Will you have that money set aside by retirement? Will that annual amount increase your retirement salary amount?
- Take the inflation adjusted salary and divide by 35,000.
- Multiply the result by 1 million. That's your target retirement amount. Every million yields 35K per year at a 3.5% drawdown rate, pre tax. The usual caveats apply.

- Note: if you have a defined benefit plan, or other sources you can reduce your planning target by the expected yield of these sources or not, assuming that you will vest and they won't go bust. That's up to you.
ps2me11 wrote: Thu Sep 23, 2021 7:46 pm We started quite late contributing to 401k. How much a couple should have at the age of 38. Say 99 percentile.
Average monthly expense currently around 8k in CT which will not go down as we haven’t started home mortgage yet.
Apologize if there’s already a calculator available.
absolute zero
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Re: How much 401k at age 38

Post by absolute zero »

You are asking how much money a couple should have in order to be in the 99th percentile? Seems like a pretty strange question. Why do you care whether you are in the top 1%, or the top 20%, or the top 0.01% of net worth?
an_asker
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Re: How much 401k at age 38

Post by an_asker »

ps2me11 wrote: Thu Sep 23, 2021 7:46 pm We started quite late contributing to 401k. How much a couple should have at the age of 38. Say 99 percentile.
Average monthly expense currently around 8k in CT which will not go down as we haven’t started home mortgage yet.
Apologize if there’s already a calculator available.
I'm curious what you mean by "99 percentile." I'm not being facetious.

Because we've been contributing our level best since we started earning and we are absolutely nowhere close to the 99th percentile ... the way I refer to percentiles, and this is in spite of the fact that our household income was pretty good in percentile terms! :oops:
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Re: How much 401k at age 38

Post by Lee_WSP »

retired@50 wrote: Thu Sep 23, 2021 8:30 pm
Wannaretireearly wrote: Thu Sep 23, 2021 8:27 pm
retired@50 wrote: Thu Sep 23, 2021 7:49 pm Here is one perspective, shown as multiples of your salary.


Image

Regards,
Don't think I like this one. Unless my income drops significantly next few years 😉
I didn't invent it... Just passing it along. I think it originally came from an article on Fidelity's website. The OP seemed to be looking for a rough idea of how to gauge their progress. Since the OP is young, knowing what expenses will be during retirement years is a wild guess.

Regards,
I was actually thinking it seems low. You'd have to only be spending 40% of your salary plus social security to meet the 4% rule
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ps2me11
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Re: How much 401k at age 38

Post by ps2me11 »

Thanks for the wonderful replies! I was just curious where I stand in terms of 401k so that I can plan my post- tax saving accordingly. Looks like I need to do some calculation of my own. Thanks!!
Nohbdy
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Re: How much 401k at age 38

Post by Nohbdy »

ps2me11 wrote: Thu Sep 23, 2021 10:01 pm Thanks for the wonderful replies! I was just curious where I stand in terms of 401k so that I can plan my post- tax saving accordingly. Looks like I need to do some calculation of my own. Thanks!!
I am using 25x my anticipated (above pension and social security) annual expenses as a target for fi.

Google investment calculator and put in what you have and what you contribute. Actual returns may vary…

Alternately, post according to the guidelines and (possibly) receive feedback on your specific situation. viewtopic.php?f=1&t=6212
smectym
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Re: How much 401k at age 38

Post by smectym »

an_asker wrote: Thu Sep 23, 2021 9:34 pm
ps2me11 wrote: Thu Sep 23, 2021 7:46 pm We started quite late contributing to 401k. How much a couple should have at the age of 38. Say 99 percentile.
Average monthly expense currently around 8k in CT which will not go down as we haven’t started home mortgage yet.
Apologize if there’s already a calculator available.
I'm curious what you mean by "99 percentile." I'm not being facetious.

Because we've been contributing our level best since we started earning and we are absolutely nowhere close to the 99th percentile ... the way I refer to percentiles, and this is in spite of the fact that our household income was pretty good in percentile terms! :oops:
I reckon OP just wanted a rough idea as to where they stood, in relation to “best case.” But yes, the discussion is a bit confused
Mustang8307
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Re: How much 401k at age 38

Post by Mustang8307 »

I’m 38 and I have around $170k in retirement accounts. My wife (36) has around $30k. We also have around $20k in 529 accounts and some additional money for a down payment. I think I should have done much better in both saving and investing, but this is where we are.
finite_difference
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Re: How much 401k at age 38

Post by finite_difference »

Lee_WSP wrote: Thu Sep 23, 2021 9:41 pm
retired@50 wrote: Thu Sep 23, 2021 8:30 pm
Wannaretireearly wrote: Thu Sep 23, 2021 8:27 pm
retired@50 wrote: Thu Sep 23, 2021 7:49 pm Here is one perspective, shown as multiples of your salary.


Image

Regards,
Don't think I like this one. Unless my income drops significantly next few years 😉
I didn't invent it... Just passing it along. I think it originally came from an article on Fidelity's website. The OP seemed to be looking for a rough idea of how to gauge their progress. Since the OP is young, knowing what expenses will be during retirement years is a wild guess.

Regards,
I was actually thinking it seems low. You'd have to only be spending 40% of your salary plus social security to meet the 4% rule
Well, if you have your student loans, mortgage and college expenses all paid by 67, then taking those out from expenses might reduce your expenses to 40%.

Assuming you buy your house at 37 with a 30-year loan, which seems reasonable.

Also, your salary will go up quite a bit over time..
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tomsense76
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Re: How much 401k at age 38

Post by tomsense76 »

retired@50 wrote: Thu Sep 23, 2021 8:30 pm
Wannaretireearly wrote: Thu Sep 23, 2021 8:27 pm
retired@50 wrote: Thu Sep 23, 2021 7:49 pm Here is one perspective, shown as multiples of your salary.


Image

Regards,
Don't think I like this one. Unless my income drops significantly next few years 😉
I didn't invent it... Just passing it along. I think it originally came from an article on Fidelity's website. The OP seemed to be looking for a rough idea of how to gauge their progress. Since the OP is young, knowing what expenses will be during retirement years is a wild guess.

Regards,
Know you are just passing this along, but yeah have actually heard quite a few gripes about this one. Ben Carlson covered this in this blogpost and on Animal Spirits (though I don't have a link for that handy). Think he added some good points while being understanding of the issues that can lead to delay. From the blogpost this sticks out to me...
Young people have to deal with expensive housing, student loans, grad school, weddings, down payments, the prospect of having kids, maybe taking a flier on a new business or start-up, travel, and actually enjoying their youth while they can. Saving for retirement ends up way down the list at this stage in life.

...

Very few people are this prepared for retirement in their mid-30s. And that’s OK. No one’s perfect and everyone’s path is different. But here are a few considerations for those who are just starting out or those who need to play catch up so they too can take a walk on a beach someday:
  • A high savings rate combined with a low level of lifestyle creep is a personal finance superpower.
  • Start small.
  • Systematize your $.
  • Take advantage of free money.
  • Whatever you do — do not compare your financial position to anyone else’s.
(trimmed out additional content in the list to avoid going to long)

Looking at my own life, grad school and student loans definitely slowed down saving for retirement in the beginning. There was some travel as well, but the cost pales compared to other two.
"Anyone who claims to understand quantum theory is either lying or crazy" -- Richard Feynman
tomsense76
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Re: How much 401k at age 38

Post by tomsense76 »

finite_difference wrote: Fri Sep 24, 2021 1:24 am Also, your salary will go up quite a bit over time..
This is as much a solution as a problem if one is calculating with multiple times salary though. Had a bit more than 1x (maybe closer to 1.5x) salary when leaving my first job out of grad school in my early 30s. Though my next job paid significantly more. So based on this metric I was behind and had to play catch-up. However it's not like I need most of that salary on a day-to-day as I do LBYM, which gets at the real issue. It's not about how many times salary one has saved, but how many times expenses one has saved. So this is the real issue with this metric. It's aggressive yes, but it is also targeting the wrong thing, which is as bad if not worse.
"Anyone who claims to understand quantum theory is either lying or crazy" -- Richard Feynman
tomsense76
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Re: How much 401k at age 38

Post by tomsense76 »

Lee_WSP wrote: Thu Sep 23, 2021 9:41 pm I was actually thinking it seems low. You'd have to only be spending 40% of your salary plus social security to meet the 4% rule
It's actually not. Would argue it is maybe a bit high if anything. However here's the thing. There are a few major expenses that will change:

1. No longer need to save for retirement
2. Taxes are lower (no FICA, some tax-free & capital gains savings, some expenses like medical care are deducted, etc.)
3. Mortgage paid off (as finite_difference noted)
4. Kids out of the house

Possibly some other changes I'm not thinking of or are harder to quantify.
"Anyone who claims to understand quantum theory is either lying or crazy" -- Richard Feynman
tomsense76
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Re: How much 401k at age 38

Post by tomsense76 »

ps2me11 wrote: Thu Sep 23, 2021 7:46 pm We started quite late contributing to 401k. How much a couple should have at the age of 38. Say 99 percentile.
Average monthly expense currently around 8k in CT which will not go down as we haven’t started home mortgage yet.
Apologize if there’s already a calculator available.
It's hard to estimate without more info. Namely what multiple of annual expenses you are saving per year now (or can save)? Also how many multiples of annual expenses do you have already saved?

A rule of thumb that is commonly used (though not without its own set of limitations) is to save 25x expenses. So if you were able to save 1yr of expenses each year and we assumed no growth, you could pull this off by 63, which is actually 4yrs before SS current normal retirement age of 67. This is a bit simplistic though as it assumes your expenses remain fixed and so does your savings rate. The reality is expenses may grow/shrink over time and your savings rates should be updated to reflect that.

Next we would then want to look at your asset allocation. Have you selected one? If not, would take a look at this to help decide. More stocks means a higher rate of return, which could shorten the time to reach your goals, but also means greater volatility (50% drops are not uncommon). Though over the long run stocks have tended to grow one's money (even despite the sometimes steep declines). Bonds tend to roughly keep pace with inflation (maybe beating it by a hair). If you are not sure where to start, would take a look at the target date funds. These have a baked in asset allocation and will slowly reduce stocks as you approach the retirement year (and reduce stocks further even after that).

Once you have figured out your asset allocation, we could take that with your expected saving rate and some return assumptions about stocks & bonds to estimate how that looks in terms of your end goals. The biggest factor will remain savings rate, but asset allocation can grease the wheels a bit.
"Anyone who claims to understand quantum theory is either lying or crazy" -- Richard Feynman
YeahBuddy
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Re: How much 401k at age 38

Post by YeahBuddy »

Answers vary wildly on this one. I'd look at total portfolio vs incomes and portfolio vs annual spending. How much will your spending increase to once you have a mortgage? What are your financial goals? At what age will you retire and what will be your expenses then.. Just some of the ?s I'm wondering to start. Using that graph, at 30 I had almost $0 for retirement as it all went into my home downpayment, kids, and starting a life. Now at 40, I'm about 4x our annual spending, mortgage will be gone by age 50, this is all off 1 main income.

So you can catch up no matter the situation. There's no one size fits all calculator that I know of.
My best advice is to maintain your EF, attempt to reduce expenses, and plow everything you can into your retirement/investment accounts now. :sharebeer
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Re: How much 401k at age 38

Post by ruralavalon »

ps2me11 wrote: Thu Sep 23, 2021 7:46 pm We started quite late contributing to 401k. How much a couple should have at the age of 38. Say 99 percentile.
Average monthly expense currently around 8k in CT which will not go down as we haven’t started home mortgage yet.
Apologize if there’s already a calculator available.
Age 38 isn't "quite late" if you create and execute a reasonable plan.

Establish a high rate of contributions, use broadly diversified mutual funds with low expense ratios in tax-advantaged accounts, index funds if available.

Educate yourself on investing basics.

Start by reading the Bogleheads' wiki article Bogleheads® investment philosophy, and Dr. Bernstein's free short pdf book "If You Can".

Then read one or two more good books on investing. Wiki article "Book recommendations and reviews", link.

According to the Federal Reserve in the U.S. as of 2020 in the age range 35-39 the median retirement savings is $2k, the average is $22k, and top 1% is $500k. link. This is retirement accounts and pensions only, this is not "should have" this is what people do have.

Here are calculators you can use to assess the range of possible outcomes at different levels of contributions:
1) www.firecalc.com; and
2) www.i-orp.com.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
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retired@50
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Re: How much 401k at age 38

Post by retired@50 »

tomsense76 wrote: Fri Sep 24, 2021 2:35 am Looking at my own life, grad school and student loans definitely slowed down saving for retirement in the beginning. There was some travel as well, but the cost pales compared to other two.
I think people are starting to re-think schooling (and its price). Now that the price has shot up faster than inflation, it deserves scrutiny.

I managed to get through 6 years of college by saving, working, more saving, and borrowing a grand total of $1,500. I know it's not typical, but I have relatives who've done this as well, so it's not "just me". In any event, everyone charts their own path, but student loans are (or can be) just as crippling as credit card debt if not used judiciously.

Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
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ruralavalon
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Re: How much 401k at age 38

Post by ruralavalon »

For comprehensive information about this general issue see this pdf report:
How America Saves 2021 | Vanguard Benchmark Report
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
tomsense76
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Re: How much 401k at age 38

Post by tomsense76 »

retired@50 wrote: Fri Sep 24, 2021 8:54 am
tomsense76 wrote: Fri Sep 24, 2021 2:35 am Looking at my own life, grad school and student loans definitely slowed down saving for retirement in the beginning. There was some travel as well, but the cost pales compared to other two.
I think people are starting to re-think schooling (and its price). Now that the price has shot up faster than inflation, it deserves scrutiny.
Couldn't agree more. Would be great if market forces intervened here. Haven't seen that yet, but maybe it will happen. As always the reason for rising college costs is...complicated.
retired@50 wrote: Fri Sep 24, 2021 8:54 am I managed to get through 6 years of college by saving, working, more saving, and borrowing a grand total of $1,500. I know it's not typical, but I have relatives who've done this as well, so it's not "just me". In any event, everyone charts their own path, but student loans are (or can be) just as crippling as credit card debt if not used judiciously.
College degrees have become the new high school diploma. It use to be that one could get a high school diploma and still have good work opportunities available. This has gotten much harder. Grad school is increasingly the differentiator. Meaning people are often spending longer in school while earning less. So are graduating later with more debt and less to their name. This also delays family formation, which has broader implications for our economy.

I'm not saying this wasn't hard for others before me. Just saying it has gotten harder. I worked all the way through school. Had help from parents, paid some myself, applied for aid, etc.. Still took on a good chunk of debt. It's all paid off now and have saved quite a bit towards retirement. In fact oddly enough I feel relatively lucky, but it is not hard for me to find peers that are still struggling.

Anyways the main point I was trying to get at from Ben's post is there are many demands on one's income in their 20s & 30s. Can identify at least a couple of these expenses in my own life and know others with different combinations of expenses. Regardless of the particular expenses, it can delay retirement savings. This is the concern with Fidelity's saving guidance in that figure. It's a bit out of touch with the typical early adult experience. Think Michael Kitces did a good job covering this general issue in this Rational Reminder podcast. There's probably a blogpost he did on this too, but not finding one atm.

Of course the OP will need to do more savings than if they had started earlier, but I think they can get there.
"Anyone who claims to understand quantum theory is either lying or crazy" -- Richard Feynman
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