Feel behind on 401k, net worth

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
Devdabz
Posts: 3
Joined: Thu Aug 11, 2022 11:16 pm

Feel behind on 401k, net worth

Post by Devdabz »

Long time lurker, I started maxing my 401k (terrible match) in the last 4 years, but still feel behind for my age. My income increased significantly in the last 5 years at my company so I’ve started to max my 401k and luckily they now offer an HSA, which I’ve maxed as well when it became available.

I recently turned 38 and with 40 around the corner, I am worried I’m behind.

Salary: 120,000 HCOL area
401k: 205,000 (employer match is less than 1% of salary)
Roth IRA: 40,000
HSA (invested): 19,000
Ibonds: 20,600
Brokerage: 19,000
2 529s (total): 28,000
Savings: 5000

No debt. 10+ old reliable car, renter.
Even with maxing all my tax advantages accounts every year, I feel like I won’t be able to hit my target of 3x salary by 40. I do have 2 kids and semi-expensive daycare with the youngest.

Thanks,
User avatar
nps
Posts: 1633
Joined: Thu Dec 04, 2014 9:18 am

Re: Feel behind on 401k, net worth

Post by nps »

I don't think you are behind on reaching your goal. You would be around 3x salary with your current balances and planned contributions to 401k, HSA and IRA over the next two years alone.
smitcat
Posts: 13304
Joined: Mon Nov 07, 2016 9:51 am

Re: Feel behind on 401k, net worth

Post by smitcat »

Devdabz wrote: Thu Aug 11, 2022 11:28 pm Long time lurker, I started maxing my 401k (terrible match) in the last 4 years, but still feel behind for my age. My income increased significantly in the last 5 years at my company so I’ve started to max my 401k and luckily they now offer an HSA, which I’ve maxed as well when it became available.

I recently turned 38 and with 40 around the corner, I am worried I’m behind.

Salary: 120,000 HCOL area
401k: 205,000 (employer match is less than 1% of salary)
Roth IRA: 40,000
HSA (invested): 19,000
Ibonds: 20,600
Brokerage: 19,000
2 529s (total): 28,000
Savings: 5000

No debt. 10+ old reliable car, renter.
Even with maxing all my tax advantages accounts every year, I feel like I won’t be able to hit my target of 3x salary by 40. I do have 2 kids and semi-expensive daycare with the youngest.

Thanks,
You are in good shape - you do not need to be at 3X salary and that metric really tells you nothing. Any goals that you might have would be best related to a multiple of projected expenses not salary.
When retired savings (and SS and maybe pension) is what you will be drawing on and expenses if what you will be paying.
stoptothink
Posts: 15368
Joined: Fri Dec 31, 2010 8:53 am

Re: Feel behind on 401k, net worth

Post by stoptothink »

You may feel behind on this board, but I bet a small minority of your colleagues/peers are in your position. We're around the same age; wife and I have 7 siblings combined who are relatively in the same age category, and I bet you are in a better position than every one of them.
User avatar
Johnsson
Posts: 517
Joined: Mon Jul 17, 2017 2:28 pm

Re: Feel behind on 401k, net worth

Post by Johnsson »

I agree with the others. You're doing fine.

However, don't lose that motivation! Thinking you're behind will only help your focus towards socking it away.

Keep it up!!
'In theory there is no difference between theory and practice. In practice there is.' Yogi Berra
glamdring269
Posts: 40
Joined: Wed Feb 10, 2016 10:08 am

Re: Feel behind on 401k, net worth

Post by glamdring269 »

I was chasing the x salary deal for awhile because it seems like a lot of metrics lean that way. x salary or % of salary blah blah blah. Once I got to looking at it though I realized it didn't make sense (for me).

1) My income increased at a rate that I did not expect. This made the curve impossible to achieve in my opinion. It was almost as if the more my salary increased the more I was going to have to work just to be able to not work. That made no sense at all.

2) Once I looked at it more closely I realized I am just not a spender. So the more money I made the more I was able to just put away which actually will allow me to retire even earlier than I anticipated. Once you max out those tax advantaged accounts start pounding the brokerage and the ibonds and whatever like you already are. Salary increase? Keep your spending flat (if you wish) and just pound even more into retirement.

It's really just all about perspective. I think you're doing fine.
homebuyer6426
Posts: 1833
Joined: Tue Feb 07, 2017 8:08 am

Re: Feel behind on 401k, net worth

Post by homebuyer6426 »

You're in pretty good shape but try increasing your savings rate if you're aiming for early retirement. At $120k it shouldn't be much of a stretch. If you're aiming for a "normal" retirement age, you're on a good track already.

"3x salary" makes the assumption that your expenses in retirement are going to increase with your salary. In other words, that you will get used to spending more and not want to go back to a more modest spending rate. For many though, this is not true and does not make much sense.

Try using a multiplier against your expected retirement expenses instead of your salary.
43% Total Stock Market | 53% Consumer Staples | 4% Short Term Reserves
User avatar
CyclingDuo
Posts: 6009
Joined: Fri Jan 06, 2017 8:07 am

Re: Feel behind on 401k, net worth

Post by CyclingDuo »

Devdabz wrote: Thu Aug 11, 2022 11:28 pm Long time lurker, I started maxing my 401k (terrible match) in the last 4 years, but still feel behind for my age. My income increased significantly in the last 5 years at my company so I’ve started to max my 401k and luckily they now offer an HSA, which I’ve maxed as well when it became available.

I recently turned 38 and with 40 around the corner, I am worried I’m behind.

Salary: 120,000 HCOL area
401k: 205,000 (employer match is less than 1% of salary)
Roth IRA: 40,000
HSA (invested): 19,000
Ibonds: 20,600
Brokerage: 19,000
2 529s (total): 28,000
Savings: 5000

No debt. 10+ old reliable car, renter.
Even with maxing all my tax advantages accounts every year, I feel like I won’t be able to hit my target of 3x salary by 40. I do have 2 kids and semi-expensive daycare with the youngest.
I wouldn't get too enamored with having to be exactly at 3X your salary by age 40 as that is just Fidelity's benchmark.

It's only a starting rule of thumb (with the usual caveats and asterisks found in the footnotes) used by Fidelity, JPMorgan, T.Rowe Price, etc... and the range of the benchmark by age 40 you should have saved is between 1.5 to 3X your salary at that time (depending on which benchmark you are reading). Currently you are at 2.53 X your current salary at age 38, so depending on how markets and your savings do over the next 2 years, it's clear that you are pretty much right on track to some of these benchmarks used by the big asset manager houses regarding the financial planning metrics they entertain.

Here are Fidelity's and T.Rowe Price's benchmarks...

Image
Fidelity: https://www.fidelity.com/viewpoints/ret ... -to-retire

Image
T.Rowe Price: https://www.troweprice.com/personal-inv ... y-now.html

Although one can certainly pick apart the details, footnotes, and asterisks of these benchmarks - they are good starting points to see where you are at this point. Kudos for $0 debt at your age!

The only thing that stood out to me in your post was the employer match. It's really too bad that your employer match is less than 1%. Is there an opportunity for that to rise as you accrue more years of service? If not, is there an opportunity for finding similar employment in your area of expertise that comes with a higher benefit at the same level of income?

CyclingDuo
"Save like a pessimist, invest like an optimist." - Morgan Housel | "Pick a bushel, save a peck!" - Grandpa
KlangFool
Posts: 31525
Joined: Sat Oct 11, 2008 12:35 pm

Re: Feel behind on 401k, net worth

Post by KlangFool »

OP,

1) Stop making after-tax contribution to the 529s.

2) How old are your kids?

3) What is your annual savings/investment?

4) What is your annual expense?

5) What is your asset allocation?

6) Your financial goal should be based on your annual expense. It has nothing to do with your gross income.

7) Until and unless you define your financial goal based on annual expense, how do you know that you are behind your goal?

KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
260chrisb
Posts: 1281
Joined: Wed Apr 28, 2010 7:26 pm

Re: Feel behind on 401k, net worth

Post by 260chrisb »

Devdabz wrote: Thu Aug 11, 2022 11:28 pm Long time lurker, I started maxing my 401k (terrible match) in the last 4 years, but still feel behind for my age. My income increased significantly in the last 5 years at my company so I’ve started to max my 401k and luckily they now offer an HSA, which I’ve maxed as well when it became available.

I recently turned 38 and with 40 around the corner, I am worried I’m behind.

Salary: 120,000 HCOL area
401k: 205,000 (employer match is less than 1% of salary)
Roth IRA: 40,000
HSA (invested): 19,000
Ibonds: 20,600
Brokerage: 19,000
2 529s (total): 28,000
Savings: 5000

No debt. 10+ old reliable car, renter.
Even with maxing all my tax advantages accounts every year, I feel like I won’t be able to hit my target of 3x salary by 40. I do have 2 kids and semi-expensive daycare with the youngest.

Thanks,
Welcome! Behind who please and why does it matter to you?? Come on, you're 38!! Keep focused and keep doing what you've been doing and get over it! In life you will always be behind somebody. Look at what you've done at 38, think about where you'll be at 48 and then 58 doing what got you to 38. Well done!
Topic Author
Devdabz
Posts: 3
Joined: Thu Aug 11, 2022 11:16 pm

Re: Feel behind on 401k, net worth

Post by Devdabz »

KlangFool wrote: Fri Aug 12, 2022 8:52 am OP,

1) Stop making after-tax contribution to the 529s.

2) How old are your kids?

3) What is your annual savings/investment?

4) What is your annual expense?

5) What is your asset allocation?

6) Your financial goal should be based on your annual expense. It has nothing to do with your gross income.

7) Until and unless you define your financial goal based on annual expense, how do you know that you are behind your goal?

KlangFool

Thanks Klangfool,

My kids are 9 and 5. I started contributing heavily at their birth to get the state deduction and have since pulled back contributing and have put the additional income into an after tax brokerage. I’m not a huge spender and usually save/invest (including pre/after tax 40-50% of my gross income.

Annual expenses about 36,000 - mainly rent, childcare, etc. with a hdhp (along with HSA investing), sometimes it’s been more due to medical/dental.

Asset allocation is overall about 80/20, factoring in ibonds (which I’ve mainly started as a tiered emergency fund with inflation rates on ibonds). I know I started late with my 401k (late 20s and 10%), so I’ve been maxing since discovering bogleheads and personal finance threads 5 years ago.

My priority of starting brokerage was to have a flexible investment tool before retirement and build it up for possibly an early retirement before 65 or layoff in my 50s, which I’ve heard could be hard to recover from.
KlangFool
Posts: 31525
Joined: Sat Oct 11, 2008 12:35 pm

Re: Feel behind on 401k, net worth

Post by KlangFool »

Devdabz wrote: Fri Aug 12, 2022 9:23 am
KlangFool wrote: Fri Aug 12, 2022 8:52 am OP,

1) Stop making after-tax contribution to the 529s.

2) How old are your kids?

3) What is your annual savings/investment?

4) What is your annual expense?

5) What is your asset allocation?

6) Your financial goal should be based on your annual expense. It has nothing to do with your gross income.

7) Until and unless you define your financial goal based on annual expense, how do you know that you are behind your goal?

KlangFool

Thanks Klangfool,

My kids are 9 and 5. I started contributing heavily at their birth to get the state deduction and have since pulled back contributing and have put the additional income into an after tax brokerage. I’m not a huge spender and usually save/invest (including pre/after tax 40-50% of my gross income.

Annual expenses about 36,000 - mainly rent, childcare, etc. with a hdhp (along with HSA investing), sometimes it’s been more due to medical/dental.

Asset allocation is overall about 80/20, factoring in ibonds (which I’ve mainly started as a tiered emergency fund with inflation rates on ibonds). I know I started late with my 401k (late 20s and 10%), so I’ve been maxing since discovering bogleheads and personal finance threads 5 years ago.

My priority of starting brokerage was to have a flexible investment tool before retirement and build it up for possibly an early retirement before 65 or layoff in my 50s, which I’ve heard could be hard to recover from.
Devdabz,

1) Your annual expense = 36K per year.

2) Your portfolio is about 300K = 8.3 times your annual expense

3) You saves about 36K per year = 1 times your annual expense.

4) Let's assume that your Financial Independence (FI) number is 30X = 30 times your annual expense.

With an average annual return rate of 5%, you would reach your number in 12 years
With an average annual return rate of 7%, you would reach your number in 10 years
With an average annual return rate of 10%, you would reach your number in 8+ years

Starting Net Worth 830%
Annual Savings 100%
Years
Annual Return 6 7 8 9 10 11 12 13
5.00% 1792% 1982% 2181% 2390% 2610% 2840% 3082% 3336%
6.00% 1875% 2087% 2313% 2551% 2804% 3073% 3357% 3659%
7.00% 1961% 2198% 2452% 2724% 3014% 3325% 3658% 4014%
8.00% 2051% 2315% 2600% 2908% 3241% 3600% 3988% 4407%
9.00% 2144% 2437% 2757% 3105% 3484% 3898% 4349% 4840%
10.00% 2242% 2566% 2923% 3315% 3747% 4221% 4743% 5318%

5) So, why do you think that you are behind?

6) As long as you do not go crazy and overspend on a house and/or college education, you would be fine.

KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
smitcat
Posts: 13304
Joined: Mon Nov 07, 2016 9:51 am

Re: Feel behind on 401k, net worth

Post by smitcat »

Devdabz wrote: Fri Aug 12, 2022 9:23 am
KlangFool wrote: Fri Aug 12, 2022 8:52 am OP,

1) Stop making after-tax contribution to the 529s.

2) How old are your kids?

3) What is your annual savings/investment?

4) What is your annual expense?

5) What is your asset allocation?

6) Your financial goal should be based on your annual expense. It has nothing to do with your gross income.

7) Until and unless you define your financial goal based on annual expense, how do you know that you are behind your goal?

KlangFool

Thanks Klangfool,

My kids are 9 and 5. I started contributing heavily at their birth to get the state deduction and have since pulled back contributing and have put the additional income into an after tax brokerage. I’m not a huge spender and usually save/invest (including pre/after tax 40-50% of my gross income.

Annual expenses about 36,000 - mainly rent, childcare, etc. with a hdhp (along with HSA investing), sometimes it’s been more due to medical/dental.

Asset allocation is overall about 80/20, factoring in ibonds (which I’ve mainly started as a tiered emergency fund with inflation rates on ibonds). I know I started late with my 401k (late 20s and 10%), so I’ve been maxing since discovering bogleheads and personal finance threads 5 years ago.

My priority of starting brokerage was to have a flexible investment tool before retirement and build it up for possibly an early retirement before 65 or layoff in my 50s, which I’ve heard could be hard to recover from.
You are saving about 1.5 years of expenses every year - you are golden.
Consider that life is a balancing act ....and that while saving too little sacrifices the future, saving too much sacrifices today.
User avatar
ruralavalon
Posts: 26353
Joined: Sat Feb 02, 2008 9:29 am
Location: Illinois

Re: Feel behind on 401k, net worth

Post by ruralavalon »

Welcome to the forum :) .

Devdabz wrote: Thu Aug 11, 2022 11:28 pm Long time lurker, I started maxing my 401k (terrible match) in the last 4 years, but still feel behind for my age. My income increased significantly in the last 5 years at my company so I’ve started to max my 401k and luckily they now offer an HSA, which I’ve maxed as well when it became available.

I recently turned 38 and with 40 around the corner, I am worried I’m behind.

Salary: 120,000 HCOL area
401k: 205,000 (employer match is less than 1% of salary)
Roth IRA: 40,000
HSA (invested): 19,000
Ibonds: 20,600
Brokerage: 19,000
2 529s (total): 28,000
Savings: 5000

No debt. 10+ old reliable car, renter.
Even with maxing all my tax advantages accounts every year, I feel like I won’t be able to hit my target of 3x salary by 40. I do have 2 kids and semi-expensive daycare with the youngest.

Thanks,
Devdabz wrote: Fri Aug 12, 2022 9:23 am
KlangFool wrote: Fri Aug 12, 2022 8:52 am OP,

1) Stop making after-tax contribution to the 529s.

2) How old are your kids?

3) What is your annual savings/investment?

4) What is your annual expense?

5) What is your asset allocation?

6) Your financial goal should be based on your annual expense. It has nothing to do with your gross income.

7) Until and unless you define your financial goal based on annual expense, how do you know that you are behind your goal?

KlangFool

Thanks Klangfool,

My kids are 9 and 5. I started contributing heavily at their birth to get the state deduction and have since pulled back contributing and have put the additional income into an after tax brokerage. I’m not a huge spender and usually save/invest (including pre/after tax 40-50% of my gross income.

Annual expenses about 36,000 - mainly rent, childcare, etc. with a hdhp (along with HSA investing), sometimes it’s been more due to medical/dental.

Asset allocation is overall about 80/20, factoring in ibonds (which I’ve mainly started as a tiered emergency fund with inflation rates on ibonds). I know I started late with my 401k (late 20s and 10%), so I’ve been maxing since discovering bogleheads and personal finance threads 5 years ago.

My priority of starting brokerage was to have a flexible investment tool before retirement and build it up for possibly an early retirement before 65 or layoff in my 50s, which I’ve heard could be hard to recover from.
You are doing great :D

You are far ahead of your peers. Your excellent savings rate and low expenses will get you a very nice retirement.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
C_Smith_777
Posts: 39
Joined: Thu Jul 22, 2021 2:40 pm
Location: NC

Re: Feel behind on 401k, net worth

Post by C_Smith_777 »

OP,

Good afternoon. I think you are right on track….at least I hope you are as I’m very close to the numbers you posted.

I’m 38 about to hit 39…wife is 38


Salary: 135K…live in a HCOL area (charlotte NC) (Single income)
TSP: 127K (maxed out)
Roth IRA 1:133K (maxed out)
Rollover IRA: 72K
Roth IRA 2: 87K (trying to max out)
HSA: Max contributions but I have a child with behavioral challenges. We empty this almost every year in medical care (We put 5k in and get 1.5k from HCP)
Brokerage: 15K

No debt aside from mortgage….$237K @ 2.25% on a 30 year. 21 years to go at current rate. Valued at $580K

10+ year old car


Kids? Yeah…I have 5 of them.

Looks to me like your crushing it.

Stay the course
Sola Deo Gloria! | IRA 1 VTI 60% VXUS 20% VGLT 20% | IRA 2 VTI 70% VXUS 15% VGIT 15% | TSP C Fund 90% / S Fund 10%
makeitcount
Posts: 288
Joined: Wed Aug 01, 2018 8:07 pm

Re: Feel behind on 401k, net worth

Post by makeitcount »

You are doing well.
"Comparison is the thief of joy."
"Yeah, well, you know, that's just like, uh, your opinion, man." - J. Lebowski
sailaway
Posts: 8217
Joined: Fri May 12, 2017 1:11 pm

Re: Feel behind on 401k, net worth

Post by sailaway »

I agree with the above. It looks like you will hit the blanket 3x by 40, your savings is already above average, the only metrics left are the most important ones: what are your actual goals and how you progressing towards them??
SuperTrooper87
Posts: 241
Joined: Tue Jan 26, 2021 5:42 am

Re: Feel behind on 401k, net worth

Post by SuperTrooper87 »

glamdring269 wrote: Fri Aug 12, 2022 7:38 am 1) My income increased at a rate that I did not expect. This made the curve impossible to achieve in my opinion. It was almost as if the more my salary increased the more I was going to have to work just to be able to not work. That made no sense at all.
For this reason I feel that tracking multiples of expenses instead of salary is a better goal. That is, as long as you are living within your means and not inflating your expenses to keep up with the Jones' as your salary goes up.

As the others have said, you are doing great. Don't worry about others. You mentioned being in a a HCOL - if you are renting, have you thought about looking at different areas to live in to help reduce expenses which would increase your savings as well as make your multiple of expenses easier to acquire?
User avatar
kelway
Posts: 391
Joined: Wed Jan 06, 2016 1:37 pm
Location: Nashville, TN, USA

Re: Feel behind on 401k, net worth

Post by kelway »

Devdabz wrote: Thu Aug 11, 2022 11:28 pm I recently turned 38 and with 40 around the corner, I am worried I’m behind.
What's sure is that if you compare yourself to bogleheads, you will quite possibly always feel behind. I'm quite sure you're well, well, well ahead of the vast majority of people who ever lived on this earth and the majority of your colleagues.
smitcat
Posts: 13304
Joined: Mon Nov 07, 2016 9:51 am

Re: Feel behind on 401k, net worth

Post by smitcat »

Another solution would be to change jobs to one that pays $80K per year - then your multiple of salary would already be met.
That is one of the reasons why a metric based on salary is not very helpful to your planning.
guyfromct
Posts: 556
Joined: Sun Mar 13, 2022 12:43 pm

Re: Feel behind on 401k, net worth

Post by guyfromct »

Most calculators and you should have X saved by Y age are garbage. The assumptions are usually a neat linear increase in salary which outside of government and mega Corp jobs with zero promotions doesn’t happen. Imagine the career of a financial analyst at a large company, they start as a financial analyst making $70k, get promoted to an SFA a few years later making $95k, then a manager making $125k, a director making $250k, a VP bringing home $500k and finally CFO making $1MM. With each big promotion they look like they’ve fallen massively behind the rule of X times salary. KlangFool is right to say it should be judged based on expenses. If you live like a manager and have saved $5MM you’re golden, if you live like a CFO and have $10MM saved you’ll have issues. I’m aiming for 25x my expenses, knowing that not all of them will continue in retirement.
JS-Elcano
Posts: 992
Joined: Wed Jun 10, 2020 7:29 pm

Re: Feel behind on 401k, net worth

Post by JS-Elcano »

Devdabz wrote: Thu Aug 11, 2022 11:28 pm Long time lurker, I started maxing my 401k (terrible match) in the last 4 years, but still feel behind for my age. My income increased significantly in the last 5 years at my company so I’ve started to max my 401k and luckily they now offer an HSA, which I’ve maxed as well when it became available.

I recently turned 38 and with 40 around the corner, I am worried I’m behind.

Salary: 120,000 HCOL area
401k: 205,000 (employer match is less than 1% of salary)
Roth IRA: 40,000
HSA (invested): 19,000
Ibonds: 20,600
Brokerage: 19,000
2 529s (total): 28,000
Savings: 5000

No debt. 10+ old reliable car, renter.
Even with maxing all my tax advantages accounts every year, I feel like I won’t be able to hit my target of 3x salary by 40. I do have 2 kids and semi-expensive daycare with the youngest.

Thanks,
I wouldn't worry about things like X x salary at a certain age. Your expenses are more relevant.

What I did when I started investing in earnest around your age (I got a late start due to graduate school/postdoc) and was worried out of my mind about my finances, I calculated my annual expenses (added up all the outflows from my accounts per year) and subtracted/added what I anticipate changing in retirement (no mortgage payment, more travel). I multiplied that number by 25 (to arrive at a 4% withdrawal rate in retirement). Then I calculated what I would have to contribute to my retirement accounts every year to reach this number assuming a 6% annual return. I realized I could reach that number at 59 with a few 100k as a buffer. I have been tracking my progress towards that goal since then and have been far less worried about my financial path and my future in general.

You will be fine too, but I would say whip out an excel sheet and make some projections.
vss317
Posts: 74
Joined: Sun Apr 13, 2014 12:02 pm

Re: Feel behind on 401k, net worth

Post by vss317 »

I never really post responses because I'm no where near as knowledgeable as others on this site, but I read a lot and ask for advice when needed. But your post hit at home.

I can tell you, you're rockin' it! My wife and I have two kiddos and we were not able to max out any of our accounts because day care expenses and what not, but we do our best to save 15% of gross income and still be able to enjoy life while we're at it. My oldest just graduated day care so we're able to max out there HSA
now and upped contributions to other accounts. Keep it up and and I hope to max out more when kiddo two graduates day care.
$=WxTxI
Posts: 160
Joined: Fri Apr 24, 2020 12:54 pm

Re: Feel behind on 401k, net worth

Post by $=WxTxI »

Devdabz wrote: Thu Aug 11, 2022 11:28 pm Long time lurker, I started maxing my 401k (terrible match) in the last 4 years, but still feel behind for my age. My income increased significantly in the last 5 years at my company so I’ve started to max my 401k and luckily they now offer an HSA, which I’ve maxed as well when it became available.

I recently turned 38 and with 40 around the corner, I am worried I’m behind.

Salary: 120,000 HCOL area
401k: 205,000 (employer match is less than 1% of salary)
Roth IRA: 40,000
HSA (invested): 19,000
Ibonds: 20,600
Brokerage: 19,000
2 529s (total): 28,000
Savings: 5000

No debt. 10+ old reliable car, renter.
Even with maxing all my tax advantages accounts every year, I feel like I won’t be able to hit my target of 3x salary by 40. I do have 2 kids and semi-expensive daycare with the youngest.

Thanks,
You're doing great.

If you change nothing and continue maxing 401k you'll end up with ~1.7m at 55 and ~3.9m at 65.

That's without additional Roth contributions, without employer match, and without increases to 401k limit.
User avatar
CyclingDuo
Posts: 6009
Joined: Fri Jan 06, 2017 8:07 am

Re: Feel behind on 401k, net worth

Post by CyclingDuo »

guyfromct wrote: Sat Aug 13, 2022 9:59 amMost calculators and you should have X saved by Y age are garbage. The assumptions are usually a neat linear increase in salary which outside of government and mega Corp jobs with zero promotions doesn’t happen. Imagine the career of a financial analyst at a large company, they start as a financial analyst making $70k, get promoted to an SFA a few years later making $95k, then a manager making $125k, a director making $250k, a VP bringing home $500k and finally CFO making $1MM. With each big promotion they look like they’ve fallen massively behind the rule of X times salary. KlangFool is right to say it should be judged based on expenses. If you live like a manager and have saved $5MM you’re golden, if you live like a CFO and have $10MM saved you’ll have issues. I’m aiming for 25x my expenses, knowing that not all of them will continue in retirement.
I wouldn't go so far as to call the multiples of salary strategy as garbage. We could say the same thing about somebody in their 30's to save X multiples of their expenses as being garbage. Why? Because it is highly unlikely that one's expenses in their 30's are going to be mirrored exactly in their 60's and beyond.

Having been through my 30's, and 40's, and 50's - it's become most accurate during the past 5+ years as empty nesters due to having settled into our lifestyle enough to know what our expenses are as a couple enough to figure out a range of multiples of expenses. Our expenses are nowhere near anything like they were in our 20's, 30's, 40's, or early 50's.

Either way of using multiple of salary or multiple of expenses in the early decades - it involves a lot of wild axx guessing. In our opinion, it gets much clearer the closer one gets to retirement age.

:sharebeer

CyclingDuo
"Save like a pessimist, invest like an optimist." - Morgan Housel | "Pick a bushel, save a peck!" - Grandpa
KlangFool
Posts: 31525
Joined: Sat Oct 11, 2008 12:35 pm

Re: Feel behind on 401k, net worth

Post by KlangFool »

CyclingDuo wrote: Sun Aug 14, 2022 9:33 am
I wouldn't go so far as to call the multiples of salary strategy as garbage. We could say the same thing about somebody in their 30's to save X multiples of their expenses as being garbage. Why? Because it is highly unlikely that one's expenses in their 30's are going to be mirrored exactly in their 60's and beyond.
CyclingDuo,

I disagreed. In order for this to be important, the person needs to be able to predict that they could retire in 60s. In their 30s, their current annual expense is a lot more important and useful. They could be unemployed across multiple recessions across 30+ years. Their portfolio size in terms of their current annual expense lets them know how long they can last if they are unemployed in the coming recession.

Someone in their 30s has a portfolio of

A) 2 X their current annual expense.

B) 10X their retirement expense in their 60s.

(A) is useful information. (B) does not help at all. (B) provides an illusion that they are doing fine.

KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
Triple digit golfer
Posts: 10433
Joined: Mon May 18, 2009 5:57 pm

Re: Feel behind on 401k, net worth

Post by Triple digit golfer »

stoptothink wrote: Fri Aug 12, 2022 7:30 am You may feel behind on this board, but I bet a small minority of your colleagues/peers are in your position.
Totally agree.

You are likely in the top 5% of people your age and maybe 15% overall. Just making up these numbers, but you're doing far, far better than most. Keep at it. You're doing great.
User avatar
drumboy256
Posts: 673
Joined: Sat Jun 06, 2020 2:21 pm

Re: Feel behind on 401k, net worth

Post by drumboy256 »

You're not behind--- also, stop using the 1970's metric of "X times income" and use "X times annual expenses" to get a more realistic view on how much you'll "need" for retirement.
Promise is one thing. Fulfilling that promise is quite another. - Sir Alex Ferguson | 20% IVV / 40% IBIT / 20% IXUS / 20% VGLT + chill
User avatar
JoMoney
Posts: 16260
Joined: Tue Jul 23, 2013 5:31 am

Re: Feel behind on 401k, net worth

Post by JoMoney »

Don't compare your savings rate, savings amount, nor willingness to spend lavish amounts on travel or watches, nor ability/willingness to find cheapest price. We have some rare breeds around here that you'll never out-do in those regards.

If "feeling behind" motivates you in a good direction, than use that to get to where you want to be... but don't compare yourself to others (especially if you're going to persistently move the goal posts higher.) Just set up a system of habits that keep making you better off than you were a year ago.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
User avatar
rocket354
Posts: 679
Joined: Mon Dec 14, 2015 11:31 am

Re: Feel behind on 401k, net worth

Post by rocket354 »

Triple digit golfer wrote: Sun Aug 14, 2022 9:58 am
stoptothink wrote: Fri Aug 12, 2022 7:30 am You may feel behind on this board, but I bet a small minority of your colleagues/peers are in your position.
Totally agree.

You are likely in the top 5% of people your age and maybe 15% overall. Just making up these numbers, but you're doing far, far better than most. Keep at it. You're doing great.
This calculator gets linked here a lot, so here it goes: https://dqydj.com/net-worth-percentile- ... ed-states/

Overall, a $337,000 net worth would be at the 71st percentile across everyone in the US according to 2020 data. That includes home equity. 337,000 outside of primary home equity would be 79.5th percentile.

In the 35-39 age range, the respective percentiles are 82/87. https://dqydj.com/net-worth-by-age-calc ... ed-states/

I don't know how much the population's financial picture has changed since then (probably less than a 2021-2020 comparison given the recent downturn), but for estimation purposes the OP is likely in the top 15% for liquid savings/investments for his age group. So OP should certainly not feel behind, and is in great shape for a nice retirement if he continues to save and invest.
invest2bfree
Posts: 1279
Joined: Sun Jan 12, 2020 8:44 am

Re: Feel behind on 401k, net worth

Post by invest2bfree »

Devdabz wrote: Fri Aug 12, 2022 9:23 am
KlangFool wrote: Fri Aug 12, 2022 8:52 am OP,

1) Stop making after-tax contribution to the 529s.

2) How old are your kids?

3) What is your annual savings/investment?

4) What is your annual expense?

5) What is your asset allocation?

6) Your financial goal should be based on your annual expense. It has nothing to do with your gross income.

7) Until and unless you define your financial goal based on annual expense, how do you know that you are behind your goal?

KlangFool

Thanks Klangfool,

My kids are 9 and 5. I started contributing heavily at their birth to get the state deduction and have since pulled back contributing and have put the additional income into an after tax brokerage. I’m not a huge spender and usually save/invest (including pre/after tax 40-50% of my gross income.

Annual expenses about 36,000 - mainly rent, childcare, etc. with a hdhp (along with HSA investing), sometimes it’s been more due to medical/dental.

Asset allocation is overall about 80/20, factoring in ibonds (which I’ve mainly started as a tiered emergency fund with inflation rates on ibonds). I know I started late with my 401k (late 20s and 10%), so I’ve been maxing since discovering bogleheads and personal finance threads 5 years ago.

My priority of starting brokerage was to have a flexible investment tool before retirement and build it up for possibly an early retirement before 65 or layoff in my 50s, which I’ve heard could be hard to recover from.

Only thing bad here is the rent. Why did you not buy a house?
36% (IRA) - Individual LT Corporate Bonds , 33%(taxable) - schy, 33%(taxable) - SCHD Dividend Growth
sailaway
Posts: 8217
Joined: Fri May 12, 2017 1:11 pm

Re: Feel behind on 401k, net worth

Post by sailaway »

invest2bfree wrote: Sun Aug 14, 2022 10:14 am


Only thing bad here is the rent. Why did you not buy a house?
OP hasn't told us their location or any other information to make that call. There are many parts of the country where renting is the financially responsible thing.
kada
Posts: 60
Joined: Sat Jan 09, 2021 1:23 pm

Re: Feel behind on 401k, net worth

Post by kada »

Doing good OP! If I were near you I'd buy you a beer. If anything I encourage you to keep an open mind on eventually INCREASING your annual spend. Not yet, but you are on track for a comfortable retirement :beer
anthonypals
Posts: 167
Joined: Mon Jul 12, 2021 1:18 pm

Re: Feel behind on 401k, net worth

Post by anthonypals »

Devdabz wrote: Thu Aug 11, 2022 11:28 pm Long time lurker, I started maxing my 401k (terrible match) in the last 4 years, but still feel behind for my age. My income increased significantly in the last 5 years at my company so I’ve started to max my 401k and luckily they now offer an HSA, which I’ve maxed as well when it became available.

I recently turned 38 and with 40 around the corner, I am worried I’m behind.

Salary: 120,000 HCOL area
401k: 205,000 (employer match is less than 1% of salary)
Roth IRA: 40,000
HSA (invested): 19,000
Ibonds: 20,600
Brokerage: 19,000
2 529s (total): 28,000
Savings: 5000

No debt. 10+ old reliable car, renter.
Even with maxing all my tax advantages accounts every year, I feel like I won’t be able to hit my target of 3x salary by 40. I do have 2 kids and semi-expensive daycare with the youngest.

Thanks,
I’m a few years younger than you and you make me feel way behind.
jello_nailer
Posts: 571
Joined: Sun Apr 07, 2019 10:20 pm

Re: Feel behind on 401k, net worth

Post by jello_nailer »

A year or so behind your goal at 40 is a rounding error. I would guess we all do in some fashion.

Tons of things can, and do, happen in the following 25 years.
I have tracked my plans in detail for over 15 years and my forecast/assumptions, the hard truth of arithmetic, don't resembled what happened.
But since what you don't measure can't be fixed (adjust your plan) you will get somewhere, and I hope for you it exceeds your wishes!

Now, if you were 62 and were 5 years behind and wanted to retire at 65, that's a whole 'nother story.

Keep up the good work.
Makaveli
Posts: 975
Joined: Mon May 19, 2014 11:18 pm

Re: Feel behind on 401k, net worth

Post by Makaveli »

Have you ever heard of the phrase 'comparison is the thief of joy'? I often apply it to my life as I'm attempting to create better habits on comparison (in many facets). I suggest creating a plan that works for you and your family and hold yourself accountable to said plan. What else is there to do?

Enjoy the journey,
Maka
smectym
Posts: 1530
Joined: Thu May 26, 2011 5:07 pm

Re: Feel behind on 401k, net worth

Post by smectym »

invest2bfree wrote: Sun Aug 14, 2022 10:14 am
Devdabz wrote: Fri Aug 12, 2022 9:23 am
KlangFool wrote: Fri Aug 12, 2022 8:52 am OP,

1) Stop making after-tax contribution to the 529s.

2) How old are your kids?

3) What is your annual savings/investment?

4) What is your annual expense?

5) What is your asset allocation?

6) Your financial goal should be based on your annual expense. It has nothing to do with your gross income.

7) Until and unless you define your financial goal based on annual expense, how do you know that you are behind your goal?

KlangFool

Thanks Klangfool,

My kids are 9 and 5. I started contributing heavily at their birth to get the state deduction and have since pulled back contributing and have put the additional income into an after tax brokerage. I’m not a huge spender and usually save/invest (including pre/after tax 40-50% of my gross income.

Annual expenses about 36,000 - mainly rent, childcare, etc. with a hdhp (along with HSA investing), sometimes it’s been more due to medical/dental.

Asset allocation is overall about 80/20, factoring in ibonds (which I’ve mainly started as a tiered emergency fund with inflation rates on ibonds). I know I started late with my 401k (late 20s and 10%), so I’ve been maxing since discovering bogleheads and personal finance threads 5 years ago.

My priority of starting brokerage was to have a flexible investment tool before retirement and build it up for possibly an early retirement before 65 or layoff in my 50s, which I’ve heard could be hard to recover from.

Only thing bad here is the rent. Why did you not buy a house?
Agree with the general tone and tenor of most responses: OP is “doing great.” But yes, flagging “rent vs. own” for OP’s consideration is useful. Also: job security? If OP and family are essentially really dependent on that job always being there, and advancing in salary year in year out, good idea to assess the level of job security, resilience to recession shocks etc. Related to “rent vs.own” in that if it came to it, I’d much rather be a homeowner than a renter in a layoff scenario.
Post Reply