Hitting 401k Goals/Milestones at certain ages

[montgomery212]

Do you all have certain 401k milestones do you want to hit by certain ages -- i.e. something beyond "save as much as possible as quickly as possible"? If so, would you share?

My next one (I think) is 500k by age 40. However, bc that means investing/saving another 150k (give or take) in just over 2 yrs, I'm not sure if that's a bit too "ambitious." Thoughts?

[ketchup]

I've always wanted to have $401,000 in my 401(k).

[SimpleCycle]

Do you have the ability to put in post-tax contributions?  Because otherwise you hit contribution limits that greatly reduce your control over how much money can end up in your 401k.

My approach is max the tax-deferred portion and not worry about it.

[MilesTeg]

Well there's a (tax deferred) limit that is roughly:

assumptions:

starting age: 22
yearly contribution: 18,500
average return: 7%

30: ~200k
40: ~675k
50: ~1.6m
60: ~3.4m

more is possible with company match (tax deferred too) or with post-tax contributions, but post tax dollars are probably better put in a more flexible and less expensive option (unless your 401k is particularly good on those two qualities).

Also those assumptions are pretty optimistic. Most people simple aren't going to be able to max out their 401k right out of college or every year, and the maximum contribution in years past was much lower. I'd say based on your OP that you are pretty darn close to that optimistic set of assumptions.

[neil]

As your portfolio grows, the course of the market starts to take over.  Given a start point of 350K and two lump sum "max" contributions of 18K each, it's certainly possible that you'll get the return - but there's really nothing you can do that will make the stock market give you those returns within a specific timeframe.

I started in 2003 and chose to be midcap weighted, which turned out to be fine - but from peak-trough in 2007-2009 I still saw my portfolio fall more than 50% in spite of max contributions each year.  It's great that we can invest in businesses cheaply through stock ownership.  But we pay a consequence in having the ability to appraise those assets on a daily basis.

I consider my IPS flexible as I evolve as an investor (for instance, midcap weighting has been booted from my portfolio and I've added bonds) but Article I of my IPS constitution is to increase my ownership in assets which generate economic return.  I don't have any control on what price I pay (save for market timing) and certainly have zero control on their current appraisal.  But as I accumulate more, I know I'm closer to FI than I was before, even if my portfolio says it is smaller than the last time I put money in it.

[Trifle]

I've always wanted to have $401,000 in my 401(k).

:)

[ducky19]

Well there's a (tax deferred) limit that is roughly:

assumptions:

starting age: 22
yearly contribution: 18,500
average return: 7%

30: ~200k
40: ~675k
50: ~1.6m
60: ~3.4m

more is possible with company match (tax deferred too) or with post-tax contributions, but post tax dollars are probably better put in a more flexible and less expensive option (unless your 401k is particularly good on those two qualities).

Also those assumptions are pretty optimistic. Most people simple aren't going to be able to max out their 401k right out of college or every year, and the maximum contribution in years past was much lower. I'd say based on your OP that you are pretty darn close to that optimistic set of assumptions.

Unless you're using the Mega Back Door Roth strategy where you contribute post tax dollars to your 401k up to the $55k yearly limit on total contributions, then convert them immediately to a Roth IRA. Pretty cool option for high income earners looking for an alternative to just investing in a taxable account.

https://www.madfientist.com/after-tax-contributions/

[PDXTabs]

I have the very standard goals of:
30 - 1x my salary
35 - 2x my salary
40 - 3x my salary
45 - 4x my salary
...

I'm a little behind and I'm going to miss the 35 year old goal. I'll probably just hit the 40 year old goal, and with 7% returns over the next 11 years I should blow past the 45 year old goal.

[Slow&Steady]

I have the very standard goals of:
30 - 1x my salary
35 - 2x my salary
40 - 3x my salary
45 - 4x my salary
...

I'm a little behind and I'm going to miss the 35 year old goal. I'll probably just hit the 40 year old goal, and with 7% returns over the next 11 years I should blow past the 45 year old goal.

I have used this table before, I believe I 1st saw it on Fidelity's website.  It really annoys me though, I will turn 35 this year and just took a new job with a big jump in pay.  It took my Dec retirement fund numbers from 1.34x my salary to just a little over 1x my salary.  So I will also miss the 35 year old goal from this table and that really annoys me, I know that I have put in more than my peers for pretty much all of my working life.

OP, I do have a spreadsheet with projections on it.  I get really excited when I meet or exceed those projections and a little bummed out but more motivated when I do not meet those projections.  However, they include consistent average market gains year over year so I know that there will be some years that I hit the contribution projection but not the year end total projection just because the market does whatever it is going to do.

Edited to add: this table also annoys me because my salary does not really reflect my expenses so although I think it is a simple way for "general America" to think about it never requires somebody to think about their actual expenses.  It also has the potential to make "general America" give up because all of the sacrifices they would have to make (spending they wouldn't get to do) to hit these targets.  I mean if at least 2 of us MMM readers are admitting that we are not going to hit the 35 year old target what does that mean for "general America"?

[PDXTabs]

I have the very standard goals of:
30 - 1x my salary
35 - 2x my salary
40 - 3x my salary
45 - 4x my salary
...

I'm a little behind and I'm going to miss the 35 year old goal. I'll probably just hit the 40 year old goal, and with 7% returns over the next 11 years I should blow past the 45 year old goal.

I have used this table before, I believe I 1st saw it on Fidelity's website.  It really annoys me though, I will turn 35 this year and just took a new job with a big jump in pay.  It took my Dec retirement fund numbers from 1.34x my salary to just a little over 1x my salary.  So I will also miss the 35 year old goal from this table and that really annoys me, I know that I have put in more than my peers for pretty much all of my working life.

I'm in the same boat, but I'd call that a "good problem to have."

[2Birds1Stone]

I am 30 years old and cracked 1X annual salary a few months ago.

I hope to break $100k in June, right after I turn 31.

Ideally I would like $250k in 401k before quitting my job forever.

[rpr]

I've always wanted to have $401,000 in my 401(k).

:)

And I want $403,000,000,000 in my 403 (b)  ;)

[DebtFreeinPhilly]

My goal is $600k by 40.

I am 36 with $309k in my TSP right now. At max contributions each year of $18,500, Employer match of 5%, plus 8% returns, I should be close.

Then I hit $1.2 million by 50 and I'm out!

[Full Beard]

My first goal was to have $100K by 30.

I'm now closing in on $200K.

My next goal is to have $300K by 40.

[Eric]

My goal used to be $0 in my 401k, because that means I just started a new job that pays more money.  But now I'm working my last job ever, so it's less relevant.

[LWYRUP]

I maxed out my 401(k) every year since I started working right after law school (I went straight through) plus one summer when I was a summer associate.

I will continue to max every year that I work whether I need to or not just to save on taxes. 

At some point I'll get fired or I'll FIRE myself or my kids or grandkids will be very lucky.  Or some combination or maybe all of the above.

But I have no specific number goals for that account.  Just contribution goals.   

[montgomery212]

My first goal was to have $100K by 30.

I'm now closing in on $200K.

My next goal is to have $300K by 40.

OP here - I've had similar goals/milestones as you.

Started contributing at 25 (post grad school) -- IDK exactly when I hit 100k but it was around 31-32 (the 2008-09 period was good for accumulation but kept me from hitting 100k by 30). 200k at 35.5 despite an 18 month layoff between 100k and 200k. And then because the market was on fire, 300k just 18 months later at 37.

Trying to figure out what a realistic goal is by age 40. While I'd love 19% S&P gains this year and thereafter, I just don't see it happening as we could be on the last legs of this bull market.

[use2betrix]

My goal is to have $250k in savings/investments by my 30th birthday at the end of April. Literally, the paycheck on my birthday might put it at that goal as long as the stock market doesn’t drop. I’ve increased my net worth $167k in the last two years despite not working and traveling for 8 months.

I’ve been very fortunate work wise for several years. I am not optimistic enough that I’ll continue being so fortunate. I’d like to hit 1 million at 40 and am 100% sure I could, however I am creating more of a work life balance now, taking extended weeks/months off after working long periods of 80 hour weeks (I’ve had 4 days off this year working mostly 12’s, I’m hourly so it’s worthwhile to me right now)

[monstermonster]

I think I am just commenting on this thread to punish myself, as I've only had access to a 401K for one year of my working life, and I'm turning 31 this year. My average annual salary in my working career is close to the 401K annual limit, making maxing it out and also eating food impossible.

Anyway, I always sought to have a net worth equal to my annual salary at age 30 (the "standard" goal from above) and I did manage to achieve that, depending on how you interpret annual salary. I tend to focus on savings RATE more than anything, rather than hard numbers. Always been able to stay above a 15% savings rate, getting as high as 59% when I was making the big bucks at $47K per year.

The savings rate shows the real grit, as numbers are meaningless if you have $500K in your portfolio but spend $150K per year.

[LWYRUP]

I tend to focus on savings RATE more than anything, rather than hard numbers. Always been able to stay above a 15% savings rate, getting as high as 59% when I was making the big bucks at $47K per year.

The savings rate shows the real grit, as numbers are meaningless if you have $500K in your portfolio but spend $150K per year.

I get your point but also need to push back a little.  Someone who has $500k in their portfolio and spends $150k has 3.25 times their annual living expenses saved.  Whether that's good or not depends on their goals and their age.

The person spending $150k has a problem to work on -- cutting expenses.  The person making $18k has a problem to work on -- increasing income. 

Also, both or neither may have grit.  That depends entirely on why the income or expenses are what they are.  I know plenty of high income high spending investment bankers, doctors, consultants with a lot of grit.  As an example, I watched my sister go through residency at a top program.  It did not seem like an experience for the faint of heart.  She spent more than she should and racked up debt, but honestly just getting through the day was the main goal.  Now she is paying off her debt with a high income, which was very well deserved.  Not as strategic as MMM, who retired before she got out of school, but she made choices and lived with them and has benefits and burdens accordingly. 

[monstermonster]

The person spending $150k has a problem to work on -- cutting expenses.  The person making $18k has a problem to work on -- increasing income. 

Or not, my savings rate has me on track to retire before 50, working in a field that I like, traveling to ˜10+ countries a year, and I've never held any debt, not even for college. Increasing my income would certainly be nice, but savings rate is what truly determines your readiness for retirement.

Also, both or neither may have grit.  That depends entirely on why the income or expenses are what they are.

I agree with your point about med school/residency and grit - but I think savings rate is still a much better measure than arbitrary portfolio numbers or % of salary.

[PDXTabs]

Edited to add: this table also annoys me because my salary does not really reflect my expenses so although I think it is a simple way for "general America" to think about it never requires somebody to think about their actual expenses.  It also has the potential to make "general America" give up because all of the sacrifices they would have to make (spending they wouldn't get to do) to hit these targets.  I mean if at least 2 of us MMM readers are admitting that we are not going to hit the 35 year old target what does that mean for "general America"?

I think that the biggest "problem" with the table is that it's relatively hard to double your savings in five years, but its relatively easy to increase your savings by 15% in five years (late in the table).

But so many people in the US have nothing saved for retirement. I think that it is a good reminder to save more.

[khangaroo]

I'm just over $100k in my 401(k) right now at 29. My spreadsheet tells me i'll hit $500k at age 40 and reach $1,000,000 at age 48.

Assumptions:
Max contributions every year
6% growth
Contribution limit increases $500 every 3 years