Posted on 04/25/2015 8:04:12 AM PDT by TurboZamboni
Got $1 million in your 401(k)? Some savers might be surprised how feasible that savings goal is if they put their mind — and their money — to it. Of course, if you don’t have $1 million saved, you’re definitely not alone. Just 0.42 percent of all 401(k) participants in the Employee Benefit Research Institute’s database had $1 million or more in their account at the end of 2013. EBRI’s data covers 26.4 million savers. Similarly, just a tad more than 72,000 retirement savers, or 0.56 percent of the 13 million plan participants in its database, had $1 million or more in their 401(k) account at the end of 2014, according to Fidelity Investments’ analysis of the plans it manages. Then there is the very worrisome data on the other side of the coin: ⦁ About 31 percent of Americans have no retirement savings and no pension, according to a recent study by Center for American Progress, citing data from the Board of Governors of the Federal Reserve System. ⦁ Most people who’ve saved some money haven’t saved much: Among households aged 55 to 65 who have retirement accounts, the median account balance was $104,000, according to the ⦁ Center’s report. But this story is aimed at those who have a comfortable salary — those who may not realize that a little focus on their retirement savings could get them to $1 million without too much trouble.
(Excerpt) Read more at dailyworth.com ...
I believe index funds are the way to go, but one can buy companies that are no brainers and substantially outperform he market. I bought Intel and Microsoft in the 90’s, both no-brainers; in recent years, I bought Starbucks, another no brainer for long-term outperformance.
Shredded on FR, but the management have to be geniuses.
They sell a Hyundai at a Lexus price, and just keep growing.
Yep. I hate his politics but Schultz is a good businessman. Was never a believer in the company until I saw the performance from 2008 through 2012. If the company could not only survive the worst downturn in 60 years but also thrive, that made this company a growth play AND a defensive plat.
I had three employers over my career, and I did indeed keep my 401K's together... simpler to manage that way.
I've always looked at it as "1. 401(k) investments are generally worse, higher cost and fewer choices than I could get on my own at a low cost broker (Vanguard, Fidelity, Schwab, etc.). 2. I would rather have control of my money rather than let someone else control it, especially if things start going bad at my current job." As soon as I leave, the money gets rolled over into my personal account. The only thing I lose is the ability to borrow against my 401(k), but I have never been tempted to do that and my last job didn't allow it anyway.
I am amazed at how financially illiterate many people are. Saving early is the key. When I left my first job after college 30 years ago I had $4K in 401K and $4K in IRA that I have kept separate from other savings as my own little experiment. My annual rate of return average over 30 years is just a bit over 12% annually and that $8K is now worth $300K.
How To Save 1 Million In Your 401K:
1) Have 1 million.
2) Don’t put it in your 401k because the government intends to steal it soon.
The only time I didn’t save was when I was out of work. Recently I have upped my savings rate to about 20%.
The stock market is one of the only ways to wealth. People need to get used to the ups and downs of the market, or else stick with CD’s which pay .0005% interest. Good luck with that strategy.
The choices in my 401k did not allow a 7% return every year, but a neighbor of ours that we became friendly with and represents Prime rich has done better than that for us (around 10% average I believe) with some ROTHs over the last 10 years that he set up for us. Since I left my job to be a stay at home mom I rolled my 401k over to him entirely.
Ugh, not Prime rich, stupid autocorrect. PriMerica.
Ha, ha, ha... that would be funny if it weren’t so true. I read an article that said the 401K blueprint can now be pronounced a failure. Now that the days of guaranteed pensions from employers are gone, there is nothing but uncertainty. I never thought I would say this, but this system works for people who make enough money to set aside. For those of modest means, there is no sweaty wad of cash left over from their expenses to stash in a 401K account. Also, the average person has neither the time nor the expertise to manage an investment account. Most people leave all their money in their employer’s stock, which didn’t work out too well for the poor folks at Enron.
It’s a shame that the US didn’t follow Chile’s lead with their equivalent to social security. People are required to set aside a certain amount while they are working, but it accumulates in their own account and it’s all theirs when they retire. It isn’t a government ponzi scheme like our Social Security system.
And the gravy train gets even better at the state level; in California, a woman who began as a low-level clerk in the BART system back in the 70s retired as a senior manager a couple of years ago. Her yearly pension tops $350,000. And that doesn't include healthcare and other benefits.
Trust me, few of these bureaucrats actually "worked" for those lavish benefits. But the taxpayers are on the hook for every dime.
To illustrate the absurdity of the generous benefit packages, I remember listening to Bob Brinker's weekend financial advice show. He took a call from a retired Michigan state trooper. One of the "bennies" from his package was the right to transfer his health care benefits to his daughter, no medical exam necessary and no questions asked. Daughter never worked a day for the state, but the folks who pay taxses in Michigan will be paying for her healthcare for years after her father is gone.
You sound like some of my relatives.
How old is your car and how long have you owned it?
My employers all set up our 401K’s in our own names (but less control until fully vested). Vanguard for the first ones, then Fidelity... I was able to move the Vanguard ones into my Fidelity account. Still 401K with the Federal rules... but I was always allowed to make the investment choices.... I thought that’s how it worked for all of them.... perhaps that was just my case.
Which is why those who successfully invest pull the money out before the spending.
I answered your question in a private reply, since I doubt our situation is that interesting to the general FR reader.
I wasn’t speaking in general terms about the person who works a blue collar job for years and tries to support a family. Somebody making $40 a year who has kids is not going to be stashing away a lot of dough. Most people don’t know much about investing anyway and are just afraid of losing their money. If we had a privatized pension system similar to Chile’s, these workers would have some sense of security.
I remember saying, “even if I only get 8% return on my CD’s I’ll be fine for retirement”
It is much easier for someone making $100,000 a year to set aside money than it is for someone making $40,000. Some people do not advance much farther than that and others suffer setbacks that diminish their income. Just telling people they ought to save isn’t going to help if their car breaks down and they don’t have the $1,000 it will take to fix it.
It is unfair to assume that everyone who doesn’t have a 401K is out spending his money on tattoes and beer.
There are many people in my company that never joined the plan. My fear is that when I do retire, most of that is going to be taken from me to pay for the others.
The old grasshopper and ant routine.
“Just 0.42 percent of all 401(k) participants in the Employee Benefit Research Institute’s database had $1 million or more in their account at the end of 2013.”
Those pesky 0.42 percenters.
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