Retirement data

[WyoCoalMiner]

Your 401k doesn’t have a Roth option?

Putting it in your 401k as Roth $ would still give you tax deferral on the earnings and not subject to RMDs.

It does but its not something that I wanted to utilize. Variety of reasons. Not every investment decision I make is entirely determined by taxes.

 

[westbranch]

I understand that. I was being conservative. The article gave a breakdown below. I find it hard to believe that people are saving 13% or 15% or 17%. But one thing I missed from the first post was the employer contribution was included. So I'm subtracting 4.8% and wondering if it is any more reasonable given all the complaining about the economy the last few years. I think it is clear that there are two economies - those doing fine and those struggling. Those struggling don't have jobs with 401ks, so they aren't even in the picture (mostly). Those with jobs and 401ks seem to be doing perfectly fine, but are also probably complaining about the economy.

The details​

Average 401(k) savings rates have risen from 13.5% in 2020, according to Fidelity, the nation’s largest 401(k) administrator with about 25,000 client companies. Today’s savings rate includes a 4.8% contribution from employers, and the rest from employee contributions.

In the first quarter, 17.4% of people with 401(k) accounts at Fidelity increased their savings rate, while 5% decreased. Less than 1% stopped saving altogether.

Financial advisers generally recommend that people save about 12% to 15% of their pay annually. Higher earners generally need to save more, since Social Security replaces a smaller percentage of their preretirement income.

At Fidelity, baby boomers saved 17.2% on average, while generation X and millennials put away 15.4% and 13.5%, respectively.

Just thinking other ways these numbers are going to be skewed by high-earning, self-employed individuals. The annual compensation limit for 401k purposes was $345,000 in 2024 with $76,500 of total contributions. Physician groups, law firms, etc. where all/most of them making high 6 figures would show as 22% in the data.

And other self-employed people will throw it off depending on how they are paid. My personal contributions for 2025 are at 35.5% based on 401k / wages. But I have other income not reported as wages.

 

[SAJ-99]

Just thinking other ways these numbers are going to be skewed by high-earning, self-employed individuals. The annual compensation limit for 401k purposes was $345,000 in 2024 with $76,500 of total contributions. Physician groups, law firms, etc. where all/most of them making high 6 figures would show as 22% in the data.

And other self-employed people will throw it off depending on how they are paid. My personal contributions for 2025 are at 35.5% based on 401k / wages. But I have other income not reported as wages.

I think the use of the word Average may be a problem. I assume a normal curve, so those with high wages throwing it off are offset by lower wages but high %. Like I mentioned, when I worked for a company with a 401k, I put 100% of my wages in the 401k until I hit the annual max. I’m sure that was an outlier on the “average”. That would be cleared up through the calendar year, but just measuring Q1 data, like Fidelity did here, it would skew it.

 

[Nick87]

I would have to assume the lowest of the middle class is the majority not saving enough. Driving that wedge a little further.

 

[tormenter]

I suspect many of us might not be able to take advantage of it, but if you and or your spouse are over 50 and you have the means - PLEASE take advantage of the catch up amounts. Retirement is closer than you think once you hit 50!

 

[Bonasababy]

I know (secondhand, so I guess with a grain of salt) doctors who are living paycheck to paycheck... financial literacy is not good and doesn't appear to be getting better.

And plenty of financially literate people who simply realize that there are no golden years promised and that you can't take it with you when you go.

You need to ask the doctors what their loans are before accusing them of being financially illiterate. Might want to sit down before they tell you.

 

[Bonasababy]

I think the use of the word Average may be a problem. I assume a normal curve, so those with high wages throwing it off are offset by lower wages but high %. Like I mentioned, when I worked for a company with a 401k, I put 100% of my wages in the 401k until I hit the annual max. I’m sure that was an outlier on the “average”. That would be cleared up through the calendar year, but just measuring Q1 data, like Fidelity did here, it would skew it.

Did you ever check your plan against one that maxed out late in the year but contributed the same amount? Would seem your way loses some dollar cost averaging benefits. Simpler though

 

[SAJ-99]

Did you ever check your plan against one that maxed out late in the year but contributed the same amount? Would seem your way loses some dollar cost averaging benefits. Simpler though

I have looked at a ton of research on it, and did a lot myself. There is no material benefit in the timing of cash flows. A lot of research can be found on one-time investing versus DCA over time and there was no impact when ran through a monte carlo sims. Consequently, there is even smaller difference between every two weeks, monthly, quarterly, etc. It just ends up as noise.

The reason I did it was because if I quit or got laid off, there would be a chance I didn't save the max for that calendar year. The earlier I hit the cap, the better I felt. Companies with annual matches also like to layoff people in the later part of the year, partially so they don't have to do the company match (and bonuses) for those employees if not contractually obligated. They would never say this publicly of course, but that is a reason. I have seen some companies still pay the match, and others not.

 

[utah400elk]

I am now 2 years from my first retirement. Maybe my only retirement but I might go back to west and finish working for three years (which would complete a 2nd retirement). I should be set in retirement without having to touch my 401K.

 

[PoleX]

@SAJ-99, My wife and I started working professionally in 2014. Took a couple years to pay down some student debt but otherwise have been pretty committed to retirement investing. I threw in a similar scenario to Chat GPT as a litmus test and asked it to spit out a estimated return based on a couple assumptions:

1. Combined starting salary (2 fresh grads ~150K combined income with an assumed 3% increase annually.)
2. Maxed Contributions to both personal Roth and Company Retirement plans with 6% company match
3. All funds invested in SPY (2016-2024)

Not my scenario but wanted to model something and see what it would come up with to compare against.


I asked it to spit out an estimated "Take Home Pay" after contributions and taxes. Not sure how accurate that value is but it kind of shows, you can be retirement rich but it comes at a cost. $77,920/2 is near minimum wage take home pay(i think?). You throw in 25-35K annual mortgage expense and that's not a lot left over.

For a 5 minute exercise, I'm fairly impressed with the results. I think the number one reason people don't contribute is they don't take the time on the front end to understand the inputs and outputs. Once you understand what's required it seems easier to commit.

And to be clear, I'm not advocating that being retirement rich, cash poor is the best route. It's a reasonable option but definitely takes some forethought.

 

[Bonasababy]

@SAJ-99, My wife and I started working professionally in 2014. Took a couple years to pay down some student debt but otherwise have been pretty committed to retirement investing. I threw in a similar scenario to Chat GPT as a litmus test and asked it to spit out a estimated return based on a couple assumptions:

1. Combined starting salary (2 fresh grads ~150K combined income with an assumed 3% increase annually.)
2. Maxed Contributions to both personal Roth and Company Retirement plans with 6% company match
3. All funds invested in SPY (2016-2024)

Not my scenario but wanted to model something and see what it would come up with to compare against.
View attachment 373978

I asked it to spit out an estimated "Take Home Pay" after contributions and taxes. Not sure how accurate that value is but it kind of shows, you can be retirement rich but it comes at a cost. $77,920/2 is near minimum wage take home pay(i think?). You throw in 25-35K annual mortgage expense and that's not a lot left over.

For a 5 minute exercise, I'm fairly impressed with the results. I think the number one reason people don't contribute is they don't take the time on the front end to understand the inputs and outputs. Once you understand what's required it seems easier to commit.

And to be clear, I'm not advocating that being retirement rich, cash poor is the best route. It's a reasonable option but definitely takes some forethought.

If you have kids their needs and expenses are a real drag in the ability to max out plans as well.

DINKS have a great situation though...

 

[Irrelevant]

$77,920/2 is near minimum wage take home pay(i think?).

And I think you're wrong, min wage in WA is $16.66/hr * 2080hrs = $36,652.
WA Median income is only $47,149/yr.

 

[PoleX]

And I think you're wrong, min wage in WA is $16.66/hr * 2080hrs = $36,652.
WA Median income is only $47,149/yr.

So a take home of 78K/2 = $38.5K per a person. I stand corrected: *Close to minimum wage.

 

[elkduds]

Assuming there will be Social Security benefits to supplement in 30 years:

 

[SAJ-99]

@SAJ-99, My wife and I started working professionally in 2014. Took a couple years to pay down some student debt but otherwise have been pretty committed to retirement investing. I threw in a similar scenario to Chat GPT as a litmus test and asked it to spit out a estimated return based on a couple assumptions:

1. Combined starting salary (2 fresh grads ~150K combined income with an assumed 3% increase annually.)
2. Maxed Contributions to both personal Roth and Company Retirement plans with 6% company match
3. All funds invested in SPY (2016-2024)

Not my scenario but wanted to model something and see what it would come up with to compare against.
View attachment 373978

I asked it to spit out an estimated "Take Home Pay" after contributions and taxes. Not sure how accurate that value is but it kind of shows, you can be retirement rich but it comes at a cost. $77,920/2 is near minimum wage take home pay(i think?). You throw in 25-35K annual mortgage expense and that's not a lot left over.

For a 5 minute exercise, I'm fairly impressed with the results. I think the number one reason people don't contribute is they don't take the time on the front end to understand the inputs and outputs. Once you understand what's required it seems easier to commit.

And to be clear, I'm not advocating that being retirement rich, cash poor is the best route. It's a reasonable option but definitely takes some forethought.

You have already done more research than 99.9% of workers. If you have $900k in retirement you are well ahead of everyone else regardless of age and certainly above those at your age. Only advice is 1) don't get divorced 2) don't assume those past S&P returns will continue and 3) keep up the good work. I don;t you if you got there eating beans and franks and ramen noodles, but you are doing great.

Something I notice in the result that seems odd: the individual contribution to 401k stays static (before jumping from 36k to 39k) but below max (and you said max, but it isn't), and the company contribution keeps going up.

 

[westbranch]

So a take home of 78K/2 = $38.5K per a person. I stand corrected: *Close to minimum wage.

I don't see $6,500 a month of take home pay as comparable to someone grossing minimum wage at all. $6,500 a month of take home pay for a presumably mid to late 20s couple in 2016 would be fairly cash rich IMO. In Coeur d'Alene ID $1,000 a month got you a damn nice 2 bedroom apartment in 2016. Much different in 2024/2025, but even at $1,800/month rent now they could be saving to buy a house, have kids in the future, and have some fun money with a little budgeting.

 

[PoleX]

I don't see $6,500 a month of take home pay as comparable to someone grossing minimum wage at all. $6,500 a month of take home pay for a presumably mid to late 20s couple in 2016 would be fairly cash rich IMO. In Coeur d'Alene ID $1,000 a month got you a damn nice 2 bedroom apartment in 2016. Much different in 2024/2025, but even at $1,800/month rent now they could be saving to buy a house, have kids in the future, and have some fun money with a little budgeting.

Yeah, I can agree with that. Was more just trying to make the point it takes intentional lifestyle adjustments and planning if you commit to front loading a retirement account. And you're essentially making a pretty big bet that the loss in income now is worth it for a financially secure future (even though you may not even live to see the benefit).

I've seen people take lots of different paths. None of them necessarily wrong or worse but different. Some made some really sound real state investments cause they lived well below their means and saw their bank accounts going up fast. Others buy new trucks and campers, vacations and live a pretty lavish lifestyle now.

I'm not claiming one is better than the other. I was trying to make the point, if you don't intentionally adjust you get caught going (I make x amount of money, I can afford X) and next thing you know you're out of control on expenses and barely able to make the minimum company match on your contributions.

 

[Irrelevant]

So a take home of 78K/2 = $38.5K per a person. I stand corrected: *Close to minimum wage.

I misunderstood your initial comment. I thought you were saying that take home pay for 1 person was 78k min way, and those ~150k in your spreadsheet.

 

[pwrwgn57]

Just curious since my 401k is through Fidelity, anyone work for a company that bases their contribution to your 401k on something other than a percentage of your annual salary? The company I work for bases it on how good of a year we had as to what gets put in the following spring. Like a bonus rather than a match.

 

[sclancy27]

Average, in this context, is a shit. Median would be a better gauge as it represents the center, rather than an average skewed by super savers