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To your point about retirement savings- 401k contributions max out at around $20k per year and generally increase a little bit each year. Currently it’s $22,500

To your point about retirement savings- 401k contributions max out at around $20k per year and generally increase a little bit each year. Currently it’s $22,500. If one were to max out their 401k every year from age 20 to age 55 (35 years), they’d have a whopping… $875,000 (at an average annual max of let’s say 25k). For the sake of simplicity I’m not accounting for the contribution limit increasing each year, but I’m also not accounting for inflation, meaning you can think of the 875k in 35 years as though it were today. Everybody knows you can’t comfortably retire on $875k, even with a paid-off house and a paid-off car, you’d get 20-25 years out of that amount… if you retire at 55, that only gets you to 75-80, which is close to average in the US, but average just means half of us will live to be older than that. So two takeaways here: 1. Ain’t nobody retiring at 55. 2. Retiring is realistic when the stock market delivers its trademark gains, but elsewhere in the world, index funds often net you around 0% ROI over a span of multiple decades (see Japan’s NIKKEI from 1995 to 2020- flat). I’m not forgetting about social security, our politicians are. I wish I could opt out of it.

chrisbolt 3y ago
> For the sake of simplicity I’m not accounting for the contribution limit increasing each year, but I’m also not accounting for inflation, meaning you can think of the 875k in 35 years as though it were today. You're also not accounting for any income from the principal, which even invested in bonds would mostly keep up with inflation.
apple4ever 3y ago
The rules around retirement accounts are so ridiculous. There should be no limits on contributions, for example. And they should all be treated as SIMPLE IRA's and let anybody contribute any place they like.
- rnk 3y ago
  There should be higher limits, but one reason there are limits is so that really wealthy people can't shield all their money from future taxes; we need to let people of more modest means get more gain though. Maybe you could have taxes on the pretax 401k but higher contribution limits (where withdrawals will owe taxes on the gain when you withdraw it), but some limits on roth 401ks, which are post-tax dollars with no tax at withdrawal. That's kind of a mess of a description. Try 2 - double 401k limits, but still keep some limits so we get needed taxes at withdrawal.
jandrewrogers 3y ago
Technically, the contribution limits for 401k are currently $66,000 but your employer has to do the heavy-lifting, though that won’t happen at most employers. You can thread the needle under very narrow circumstances to effect this situation by being appropriately self-employed with a number of constraints but it isn’t easy or common. The US retirement system strongly and preferentially benefits corporate lifers.
- gymbeaux 3y ago
  Hah even in tech it’s very common for a 401k match to have a 4-5 year vesting schedule and max out at under 6%. The only people contributing 66k/year to their 401k accounts are Tim Cook and Friends.
- hotnfresh 3y ago
  It benefits people who can structure things such that they and a bunch of their family members are “employed” by a “company” that just happens to do the extremely-rare thing of maxing out the employer-side contribution. At least I assume that’s the scam. Almost no one working for a normal company sees the max contribution, certainly, even high earners.

chrisbolt 3y ago

> For the sake of simplicity I’m not accounting for the contribution limit increasing each year, but I’m also not accounting for inflation, meaning you can think of the 875k in 35 years as though it were today. You're also not accounting for any income from the principal, which even invested in bonds would mostly keep up with inflation.

apple4ever 3y ago

The rules around retirement accounts are so ridiculous. There should be no limits on contributions, for example. And they should all be treated as SIMPLE IRA's and let anybody contribute any place they like.

rnk 3y ago
There should be higher limits, but one reason there are limits is so that really wealthy people can't shield all their money from future taxes; we need to let people of more modest means get more gain though. Maybe you could have taxes on the pretax 401k but higher contribution limits (where withdrawals will owe taxes on the gain when you withdraw it), but some limits on roth 401ks, which are post-tax dollars with no tax at withdrawal. That's kind of a mess of a description. Try 2 - double 401k limits, but still keep some limits so we get needed taxes at withdrawal.

jandrewrogers 3y ago

Technically, the contribution limits for 401k are currently $66,000 but your employer has to do the heavy-lifting, though that won’t happen at most employers. You can thread the needle under very narrow circumstances to effect this situation by being appropriately self-employed with a number of constraints but it isn’t easy or common. The US retirement system strongly and preferentially benefits corporate lifers.

gymbeaux 3y ago
Hah even in tech it’s very common for a 401k match to have a 4-5 year vesting schedule and max out at under 6%. The only people contributing 66k/year to their 401k accounts are Tim Cook and Friends.
hotnfresh 3y ago
It benefits people who can structure things such that they and a bunch of their family members are “employed” by a “company” that just happens to do the extremely-rare thing of maxing out the employer-side contribution. At least I assume that’s the scam. Almost no one working for a normal company sees the max contribution, certainly, even high earners.