3 ms·

Why is your age range so weird? No one I've ever met had a 401k at 20, let alone maxing it out, and few actually retire at 55.

kyawzazaw 5y ago
23/24 is a more reasonable starting age
AYBABTME 5y ago
I was just going for the upper bound, assuming someone who lucks out right out of college and retires on a 401k-only strategy at exactly the 55. Knowing the upper bound is interesting to me because most people in the US don't max out their 401k and are probably not getting employer match, so their retirement story is probably not going to be anywhere near that. Meanwhile in tech (in the US), people's out of college starting salary and internships is often above this. That's a helpful comparison point - say if you want to check your privilege. Or if you're a tech worker making >120k/y and you've been saving for retirement using only your 401k, well, that'd tell you it's probably not going to be enough to finance your lifestyle expectations.
- dumbfounder 5y ago
  59.5 is the age you can pull out of your 401k without penalty. I like the exercise you did because if it doesn’t add up to something you can actually retire with then there is a big problem. But there are other big problems, most lower wage employers don’t offer 401ks because it is expensive for them to do so. So why is this a benefit only reserved for the relatively well off?
  - maxerickson 5y ago
    It is sort of limited to the relatively well off just by buying power anyway. It doesn't have matching, but for lower incomes, the Roth limit is probably high enough for the money that is available to invest.
  - AYBABTME 5y ago
    Oups! Was just a ballpark estimate.
  - dlp211 5y ago
    There are lots of ways to get money out of your 401k penalty free if you are actually retired. There is a 72t and also the rule of 55.
  - RickJWagner 5y ago
    Anyone can contribute to an IRA, or probably a Roth IRA if they're not well off. There's a path to tax-advantaged wealth for almost everyone.
marpstar 5y ago
It's not unprecedented. I worked at Best Buy when I was in high school and college (2005-2009). They offered 401K to part-time employees. When my mom found out they offered that (with matching) she basically told me I'd be a fool not to do it, so I did. When I left, I had only saved about $2,500. I rolled it into an IRA, where I've watched it grow significantly in the last 12 years.
- deleted 5y ago
  [deleted]
missedthecue 5y ago
I had a 401k at twenty, but it is worth noting that for some reason many but not all companies disallow 401k plans for employees under 21.
- eftychis 5y ago
  Isn't that age discrimination?
  - deleted 5y ago
    [deleted]
  - californical 5y ago
    Age discrimination laws only apply to those over 40 — totally legal to age discriminate anyone under 40. https://www.eeoc.gov/age-discrimination https://www.eeoc.gov/age-discrimination
    - eftychis 5y ago
      Good point... Thank you.
toomuchtodo 5y ago
I am late 30s and have been maxing out a 401k since my early 20s, rolling it out to an IRA when separating from the sponsor firm (have worked in tech since ~18). An extended family member taught me the value of pre tax compounding and living below my means.
- xyzzyz 5y ago
  It actually doesn’t matter whether you compound pre or post tax, only thing that matters is whether your tax rate changes between now and retirement.
  - otterley 5y ago
    This math doesn't seem right. Deferring taxes gives you significantly more money to invest early and take advantage of compounding. Additionally, the model is that you pay off your home mortgage before retirement, which means you need to withdraw a lot less during retirement years, which lowers your overall tax rate as well.
    - davidgay 5y ago
      > This math doesn't seem right. Deferring taxes gives you significantly more money to invest early and take advantage of compounding. No, the grandparent is correct. The tax rates and compounding are both multiplicative, so associativity leads to the consultation that only the tax rate at saving-time and retirement-time matters
    - swimfar 5y ago
      It does sound suspicious, but it works out. Let's say you have $100k to invest, have a 30% tax rate, and your investment will give you a 2x return by the time you're ready to withdraw. Pre-tax investment: Invest $100k and it becomes $200k. You pay $60k in taxes and end up with $140k. Post-tax investment: You pay $30k in taxes and invest $70k. That $70k becomes $140k.
      - deleted 5y ago
        [deleted]
sam0x17 5y ago
It's funny, I've had the opposite experiences. All my offers to have a 401k were in my early 20s, and now in my 30s I barely ever see that anymore.
colinmhayes 5y ago
This is a tech forum. Many here got 6 figure jobs out of college and have been maxing their 401k since they were 21. I'm only 25, but certainly hope I won't be working past 55.
- eppp 5y ago
  I hope I am working at something, just not the pointless stuff I have to do at work.
danachow 5y ago
Well 22 then. That’s the typical case.
foogazi 5y ago
It’s true 'If you will live like no one else, later you can live like no one else.' - Dave Ramsey

kyawzazaw 5y ago

23/24 is a more reasonable starting age

AYBABTME 5y ago

I was just going for the upper bound, assuming someone who lucks out right out of college and retires on a 401k-only strategy at exactly the 55. Knowing the upper bound is interesting to me because most people in the US don't max out their 401k and are probably not getting employer match, so their retirement story is probably not going to be anywhere near that. Meanwhile in tech (in the US), people's out of college starting salary and internships is often above this. That's a helpful comparison point - say if you want to check your privilege. Or if you're a tech worker making >120k/y and you've been saving for retirement using only your 401k, well, that'd tell you it's probably not going to be enough to finance your lifestyle expectations.

dumbfounder 5y ago
59.5 is the age you can pull out of your 401k without penalty. I like the exercise you did because if it doesn’t add up to something you can actually retire with then there is a big problem. But there are other big problems, most lower wage employers don’t offer 401ks because it is expensive for them to do so. So why is this a benefit only reserved for the relatively well off?
- maxerickson 5y ago
  It is sort of limited to the relatively well off just by buying power anyway. It doesn't have matching, but for lower incomes, the Roth limit is probably high enough for the money that is available to invest.
- AYBABTME 5y ago
  Oups! Was just a ballpark estimate.
- dlp211 5y ago
  There are lots of ways to get money out of your 401k penalty free if you are actually retired. There is a 72t and also the rule of 55.
- RickJWagner 5y ago
  Anyone can contribute to an IRA, or probably a Roth IRA if they're not well off. There's a path to tax-advantaged wealth for almost everyone.

marpstar 5y ago

It's not unprecedented. I worked at Best Buy when I was in high school and college (2005-2009). They offered 401K to part-time employees. When my mom found out they offered that (with matching) she basically told me I'd be a fool not to do it, so I did. When I left, I had only saved about $2,500. I rolled it into an IRA, where I've watched it grow significantly in the last 12 years.

deleted 5y ago
[deleted]

missedthecue 5y ago

I had a 401k at twenty, but it is worth noting that for some reason many but not all companies disallow 401k plans for employees under 21.

eftychis 5y ago
Isn't that age discrimination?
- deleted 5y ago
  [deleted]
- californical 5y ago
  Age discrimination laws only apply to those over 40 — totally legal to age discriminate anyone under 40. https://www.eeoc.gov/age-discrimination https://www.eeoc.gov/age-discrimination
  - eftychis 5y ago
    Good point... Thank you.

toomuchtodo 5y ago

I am late 30s and have been maxing out a 401k since my early 20s, rolling it out to an IRA when separating from the sponsor firm (have worked in tech since ~18). An extended family member taught me the value of pre tax compounding and living below my means.

xyzzyz 5y ago
It actually doesn’t matter whether you compound pre or post tax, only thing that matters is whether your tax rate changes between now and retirement.
- otterley 5y ago
  This math doesn't seem right. Deferring taxes gives you significantly more money to invest early and take advantage of compounding. Additionally, the model is that you pay off your home mortgage before retirement, which means you need to withdraw a lot less during retirement years, which lowers your overall tax rate as well.
  - davidgay 5y ago
    > This math doesn't seem right. Deferring taxes gives you significantly more money to invest early and take advantage of compounding. No, the grandparent is correct. The tax rates and compounding are both multiplicative, so associativity leads to the consultation that only the tax rate at saving-time and retirement-time matters
  - swimfar 5y ago
    It does sound suspicious, but it works out. Let's say you have $100k to invest, have a 30% tax rate, and your investment will give you a 2x return by the time you're ready to withdraw. Pre-tax investment: Invest $100k and it becomes $200k. You pay $60k in taxes and end up with $140k. Post-tax investment: You pay $30k in taxes and invest $70k. That $70k becomes $140k.
    - deleted 5y ago
      [deleted]

sam0x17 5y ago

It's funny, I've had the opposite experiences. All my offers to have a 401k were in my early 20s, and now in my 30s I barely ever see that anymore.

colinmhayes 5y ago

This is a tech forum. Many here got 6 figure jobs out of college and have been maxing their 401k since they were 21. I'm only 25, but certainly hope I won't be working past 55.

eppp 5y ago
I hope I am working at something, just not the pointless stuff I have to do at work.

danachow 5y ago

Well 22 then. That’s the typical case.

foogazi 5y ago

It’s true 'If you will live like no one else, later you can live like no one else.' - Dave Ramsey