Retirement data

[SAJ-99]

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.

Yes, I did in the past. It’s a pretty common approach.

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

It’s a 401k, so there are no super savers. You hit the max and you’re done. As long as they are measuring the entire population of clients, average is indisputable. The point of my main post is the average’s validity the title.

 

[Bonasababy]

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.

What I see in young people is more savvy than old fogies and boomers give them credit for...and a troubling trend.

They are aware of the nations problems and frustrated that the wealthy and older won't demand a fix...so their outlook is more focused on having fun and enjoying life than saving big. They don't see a good future.

 

[brymoore]

What I see in young people is more savvy than old fogies and boomers give them credit for...and a troubling trend.

My 21 year old asked me on April 14th how to create a Roth IRA so he could max it out for 2024.

I helped him and the money was transferred in time. Admirable, but we could have done it a month earlier without the drama.

 

[Straight Arrow]

but we could have done it a month earlier without the drama.

Too early ... not "just in time".

 

[tim629]

i will say i'm impressed by the statistic especially when you consider there are people like my wife that don't add to a company 401K. it has a 3% profit share and no match, i think management fees are .5-.75% i forget and up until 4-5 years ago had terrible options. For us it is cheaper to fill our roth ira's & my SEP ira which puts us well beyond their 15% savings but obviously only 3% of 401K savings.

funny thing is that the 401K provider sends out the occasional bit of information, one of them said "on track for retirement between the 401K & Social Security we will be able to replace something like 107% of her current income... mid 30's and they were giving way too much hope

 

[Forkyfinder]

i will say i'm impressed by the statistic especially when you consider there are people like my wife that don't add to a company 401K. it has a 3% profit share and no match, i think management fees are .5-.75% i forget and up until 4-5 years ago had terrible options. For us it is cheaper to fill our roth ira's & my SEP ira which puts us well beyond their 15% savings but obviously only 3% of 401K savings.

funny thing is that the 401K provider sends out the occasional bit of information, one of them said "on track for retirement between the 401K & Social Security we will be able to replace something like 107% of her current income... mid 30's and they were giving way too much hope

401k brokers have got to be the biggest scam no one is talking about.

Im glad to have more options where i work now - many places leave you with junk

 

[Treeshark]

401k brokers have got to be the biggest scam no one is talking about.

I agree. People hear 1% fee and think it’s no big deal. In reality, that’s about 10% of a portfolio’s growth in an average year.

 

[406dn]

I agree. People hear 1% fee and think it’s no big deal. In reality, that’s about 10% of a portfolio’s growth in an average year.

When you compound the 1% drag on the savings, it's a pretty large number after a couple of decades.

The financial services industry is very well compensated for their services, likely too well.

 

[Forkyfinder]

I agree. People hear 1% fee and think it’s no big deal. In reality, that’s about 10% of a portfolio in an average growth year.

Its sad - the target date funds people get "advised" into are poo

 

[Mallardsx2]

Just my opinion....

If a person doesn't have a low cost index fund that mirrors the S&P 500, they are better off only investing in the lowest expense ratio fund that their plan offers up to their full match amount. DONT leave that match on the table. So many people do that and it is SO STUPID. PERIOD. END STOP.

Then, put the rest of their money into an IRA mirroring one of the low expense ratio 500 index funds instead of dumping more money into some crappy fund with an outrageous expense ratio....

My fund is the Spartan 500 Index. Its ratio is 0.0085% ($0.085 per $1,000). I'm not paying much of their light bill with fees and all (well, almost) of my money is compounding.......

If the 500 fails, America is failing.....Its a safe bet IMO.

 

[Treeshark]

X2 to everything in that post @Mallardsx2. Only thing I would add is that a good advisor/accountant pairing can pay for itself in spades when it comes to tax strategy.

 

[PoleX]

My company currently does their retirement plan through T. Rowe Price. They say the average is 8%.

Does that average represent individual contributions without company match? Or are they just saying the average individual regardless of company match %’s contributes 8%?

The company match policy for us is .50 for every dollar on the first 8%. So anyone wanting the entire match needs a minimum of 8% and with company match they are technically at 12%.

I’m curious if the company matches have trended down over time? I feel like my first corporate job was closer to a 6% match but maybe I’m off on that.

 

[Treeshark]

I suspect that the 8% is employee contribution only. And yes, I think it’s very likely that employer contributions have diminished over time (along with most other benefits).

 

[Big Sky Guy]

I agree. People hear 1% fee and think it’s no big deal. In reality, that’s about 10% of a portfolio’s growth in an average year.

Not a 401k, but our Simple IRA had a fund that had a ~1.46% expense ratio. When I looked it up online it was showing ~.46%. I asked my plan advisor and they explained the additional ~1% was for some sort of "insurance," whereby if say I invest $20k into the plan, the market tanks and value diminishes to $10k, then I die my beneficiary (wife) would still get $20k. I asked if there was any way to opt-out of the "insurance" and was told no, seems like a crazy premium to pay for something I don't want and 99% of folks will never use . . .

 

[Big Sky Guy]

Just my opinion....

If a person doesn't have a low cost index fund that mirrors the S&P 500, they are better off only investing in the lowest expense ratio fund that their plan offers up to their full match amount. DONT leave that match on the table. So many people do that and it is SO STUPID. PERIOD. END STOP.

Then, put the rest of their money into an IRA mirroring one of the low expense ratio 500 index funds instead of dumping more money into some crappy fund with an outrageous expense ratio....

My fund is the Spartan 500 Index. Its ratio is 0.0085% ($0.085 per $1,000). I'm not paying much of their light bill with fees and all (well, almost) of my money is compounding.......

If the 500 fails, America is failing.....Its a safe bet IMO.

Not disagreeing, just clarifying, but the max for an IRA is only $7k . . . once that's maxed out then it's back into the company plan?

i.e. Company match into lowest expense ratio fund, then max out IRA to $7k into *presumably* even lower expense ratio fund, then back into company plan?

 

[Treeshark]

once that's maxed out then it's back into the company plan?

Brokerage account may also be an option.

 

[SAJ-99]

Not a 401k, but our Simple IRA had a fund that had a ~1.46% expense ratio. When I looked it up online it was showing ~.46%. I asked my plan advisor and they explained the additional ~1% was for some sort of "insurance," whereby if say I invest $20k into the plan, the market tanks and value diminishes to $10k, then I die my beneficiary (wife) would still get $20k. I asked if there was any way to opt-out of the "insurance" and was told no, seems like a crazy premium to pay for something I don't want and 99% of folks will never use . . .

That doesn't sound true. You ultimately get to determine what you invest in. It is YOUR money. You make elections with the platform provider to determine where you want the money invested. Don't settle for that explanation.

 

[Khunter]

I guess I should be happy with my 6% employer match. Sounds like some get less.

 

[ashersdad]

I guess I should be happy with my 6% employer match. Sounds like some get less.

Same here. 6% match for me and wife gets 10% straight employer contribution regardless of what she does. I feel fortunate.

 

[Big Sky Guy]

That doesn't sound true. You ultimately get to determine what you invest in. It is YOUR money. You make elections with the platform provider to determine where you want the money invested. Don't settle for that explanation.

I understand it’s my choice but literally every fund in the plan (other than fixed 3%) is over 1% expense ratio and this was the explanation she provided when I pointed out that they were all over 1%. That’s where she said the 1% goes. Maybe it does, maybe not all of it does. What do you mean don’t settle for that?

Even for me as a peasant those fees will be several hundred dollars annually which seems ridiculous and understand at some point when I’m a millionaire like everyone on this forum it’s going to be a lot of money. My current thinking is to just move it annually into my Rollover IRA with Charles Schwab and put into low expense index fund like VOO etc. Thoughts on that? I think I would still be paying those high expenses on the annual contributions but not my entire portfolio?