Your 401k balance

Submitted by ninaprincess on March 22, 2012 - 6:57am
Under $50K
16% (7 votes)
$50K to $100K
9% (4 votes)
$100K to $200K
26% (11 votes)
$200K to $300K
16% (7 votes)
$300K to $500K
19% (8 votes)
$500K +
14% (6 votes)
Total votes: 43
Submitted by ninaprincess on March 22, 2012 - 7:01am.

This morning my coworker who is around 50 yr-old showed me his 401k account and it has close to $1 mil. WOW. He said he maxed out the last 20+ years. I have been working for 10 years and it is around $50K. I felt really bad and increased my contribution from 6% to 12%. My company is matching 100% for the first 3% and then 50% for the next 3%.

Submitted by UCGal on March 22, 2012 - 7:28am.

Clarification please -
Is it the 401k balance with our current employer - or should we include our self directed IRAs with are the 401k funds from former employers.

Makes a difference in my case as to which box I check.

Submitted by ninaprincess on March 22, 2012 - 7:34am.

Total of all your retirement accounts. I know it is not very accurate because 401K balance is less than a comparable IRA because 401K is subject to tax upon withdrawal.

However, to keep it simple, we just sum up everything.

I haven't include my pension yet because my company said if I work another 20 years my pension pay is $1600/month. Not sure how much it is worth now. $1600 in 20 years is probably $600 in today's money. Not sure if I can collect SS.

Submitted by Coronita on March 22, 2012 - 10:20am.

I started out in 1996 and maxxed out + had employer match for some time and vested. And I haven't touched much of it, even during the market turmoils of 2001 and 2008/9....

My current full time employer allows me to select to contribute to a traditional 401k or a roth 401k.

I'm reducing my contributions starting this year to a traditional 401k, because otherwise, I will end up paying more income taxes post retirement than I do now. I contribute more to a roth 401k than a traditional 401k, with about 35% on the traditional 65% on the roth.

I may end up doing 100% on the roth 401k, if I can get enough schedule A and/or schedule E deductions this year to reduce my overall tax bill this year.

401k tax deferral isn't all that 's it's cracked up to be, as I'm finding out.

Submitted by UCGal on March 22, 2012 - 11:09am.

I haven't always been maxing - but I've been doing 10% or better for a couple of decades. (Like your coworker, I'm 50). I don't have a Million yet.

But socking it away adds up. It compounds.

Unless the market tanks... My account got hit HARD in 2008/2009. I lost almost half. I'm caught back up and a little ahead, now... but that was a big whack.

If you want to know what your pension is worth - if it were a lump sum issued today - there are calculators for that. I'm vested in a frozen pension from a former employer (that does not have a lump sum option...) and in another frozen pension that has a lump sum withdrawal option. Unfortunately, it's underfunded so you can't withdraw all of it. But I was curious if the lump sum, or the annuity payments were better. Lump sum they offer is worth about 1/3 what the annuity is worth.
Here's a pretty good calculator. Lets you pick the actuarial tables, decide if you're going to stiff your spouse, compare it to different ROI rates, pick the date you start the pension benefits (or withdraw the lump sump.)
http://www.pensionbenefits.com/calculato...

Submitted by ninaprincess on March 22, 2012 - 9:17pm.

Tried to don't how to use the pension calculator but if I leave now lump sum is $30K. If i work another 20 years, lump sum is around $320K.

Submitted by harvey on March 23, 2012 - 9:31am.

ninaprincess wrote:
This morning my coworker who is around 50 yr-old showed me his 401k account and it has close to $1 mil. WOW. He said he maxed out the last 20+ years. I have been working for 10 years and it is around $50K. I felt really bad and increased my contribution from 6% to 12%. My company is matching 100% for the first 3% and then 50% for the next 3%.

One would need some combination of a pretty high salary (above six digits over most of the past 20 years), incredible investment returns, or an extraordinarily generous company match policy to reach $1 million over 20 years.

Even over 30 years it would be tough to reach a million with typical matching policies, average returns, and a current salary in the mid $100K range.

Because of the hard limits on annual contributions and stock market returns over the past 30 years, it is very unusual for a 50 year old to have $1 million in a 401K.

Submitted by sdrealtor on March 23, 2012 - 10:16am.

Not really. If that co-worker is a long time employee of one of the tech company success stories in town (QCOM) and bought company stock in the 401K they could easily get there. The return on QCOM stock from 3/1/92 to 3/1/12 was 9,330%.

Submitted by an on March 23, 2012 - 10:18am.

Damn, this thread is making me feel poor :-(

Submitted by Coronita on March 23, 2012 - 10:26am.

AN wrote:
Damn, this thread is making me feel poor :-(

The thread about asians buying in OC made me feel poorer...

Submitted by harvey on March 23, 2012 - 10:32am.

sdrealtor wrote:
Not really. If that co-worker is a long time employee of one of the tech company success stories in town (QCOM) and bought company stock in the 401K they could easily get there. The return on QCOM stock from 3/1/92 to 3/1/12 was 9,330%.

Like I said, one would need "incredible investment returns."

Submitted by an on March 23, 2012 - 10:33am.

flu wrote:
AN wrote:
Damn, this thread is making me feel poor :-(

The thread about asians buying in OC made me feel poorer...


That thread does that to me too, that's why I didn't really participate in it :-D. So, OC have the rich Chinese & Taiwanese , the bay have tech, and LA have Hollywood. What does SD have? Now, I feel even more sad and poor.

Submitted by harvey on March 23, 2012 - 10:35am.

It's not generally a good idea to put your 401K into your employer's stock . Just ask any former Enron employee...

Submitted by Coronita on March 23, 2012 - 10:35am.

AN wrote:
flu wrote:
AN wrote:
Damn, this thread is making me feel poor :-(

The thread about asians buying in OC made me feel poorer...


That thread does that to me too, that's why I didn't really participate in it :-D. So, OC have the rich Chinese & Taiwanese , the bay have tech, and LA have Hollywood. What does SD have?

We have the Chargers... :(

Submitted by jimmyle on March 23, 2012 - 11:16am.

25 years-300 payments

    Contribution

1987 401k limit $8000
2011 401k limit $17000
$1000 a month from employee (assuming 12,000 average)
$250 a month from company (assumming 4.5% matching and average salary $66,666)
$1,250 a month total

    Return

S&P 500 return 1987-2011 = 9%
http://www.moneychimp.com/features/marke...
But be conservative and assume that he gets 6.75% return after fees.

=> $973,432

Submitted by harvey on March 23, 2012 - 11:27am.

jimmyle,

The numbers in your example are probably right (I didn't check, but sounds about right.)

But not many people who are 50 today would have been putting $8K into a 401K in 1987.

To to contribute $8K of your own income in 1987, you'd have to be making 80K and contributing 10% (or making less and contributing more than 10%, if your company even allowed that.)

80K was a very high salary back then, especially for a 25 year-old. Half of that was a pretty good salary in 1987.

Submitted by sdrealtor on March 23, 2012 - 12:32pm.

Actually one of my past clients is a former Enron employee. He was one of the smart ones who figured it all wasnt sustainable and sold out at the top. His 401K is quite a bit more than $1M.

Submitted by flyer on March 24, 2012 - 4:07pm.

We're in our early 50's, and have found that with time, and a bit of luck, seven figures has been possible.

Submitted by svelte on March 25, 2012 - 10:47am.

We've been socking away the most the law will allow for about 16 years now. We are in the top category of this poll (over half mil) at this point.

Submitted by moneymaker on March 25, 2012 - 8:48pm.

I borrowed against my 401K right before the tank in '08 which made me feel lucky, but I went into short term treasuries a little over a year ago so I missed the recent run up which makes me feel unlucky. Wish I had socked away 401K benefits from the get go but it took me 10 years to figure out it was a no brainer as long as you get some sort of company match.

Submitted by FormerSanDiegan on March 26, 2012 - 8:06am.

svelte wrote:
We've been socking away the most the law will allow for about 16 years now. We are in the top category of this poll (over half mil) at this point.

ditto.

Submitted by Coronita on March 26, 2012 - 9:42am.

moneymaker wrote:
I borrowed against my 401K right before the tank in '08 which made me feel lucky, but I went into short term treasuries a little over a year ago so I missed the recent run up which makes me feel unlucky. Wish I had socked away 401K benefits from the get go but it took me 10 years to figure out it was a no brainer as long as you get some sort of company match.

moneymaker... If you don't mind, can you explain to me what your strategy was in 08 for borrowing against your 401k? I'm interested.

I moved money from stock investments in my 401k into a money market and am sitting out the next quarter probably longer, and cash in the 401k moneymarket just plain sucks. I have the option to borrow against my 401k @4.25% for a term up to 60months for non-primary home related loans and up to 120months for primary home related loans... I've briefly read that the interest payments are paid to myself ( i think), and loan payments are deducted against my post-tax dollar paycheck... 4.25%60 months or 120months isn't exactly cheap money, but it isn't exactly expensive either ,and it's eventually paid to me myself..And the rate seems better than sticking it in a money market and do nothing... I think I can borrow against myself up to $100k if I'm not mistaken. I'd like to hear what you did with it.

Your post got me thinking last night. Assuming I borrow against my 401k, I pay 4.25% back to myself... That's the key...I'm considering using this to find another cheap rental that can do 8-10% ROI. So maybe my math is wrong, to me this would be like getting 12-14% back (the 8-10% rental and the 4.25% on the loan to myself) versus just sitting in a money market get that shitty 0.15%.

The only issue is I see there's some quarterly maintenance costs for doing a 401k loan, and you won't get any new contributions to the other funds while you're paying back the loan..But if I'm not planning to move back into funds and just plan on leaving stuff in cash, why not? What am I missing here?Thoughts?

Help.........

Submitted by an on March 26, 2012 - 9:45am.

flu wrote:
Your post got me thinking last night. Assuming I borrow against my 401k, I pay 4.25% back to myself... That's the key...I'm considering using this to find another cheap rental that can do 8-10% ROI. So maybe my math is wrong, to me this would be like getting 12-14% back (the 8-10% rental and the 4.25% on the loan to myself) versus just sitting in a money market get that shitty 0.15%.

The only issue is I see there's some quarterly maintenance costs for doing a 401k loan, and you won't get any new contributions to the other funds while you're paying back the loan..But if I'm not planning to move back into funds and just plan on leaving stuff in cash, why not? What am I missing here?


That's my thought exactly. For me, the quarterly maintenance cost is around $3-4, so it's no big deal. I might be wrong on this, but doesn't the loan repayment goes on top of your contribution? So, your paycheck is even smaller?

Submitted by Coronita on March 26, 2012 - 10:30am.

AN wrote:
flu wrote:
Your post got me thinking last night. Assuming I borrow against my 401k, I pay 4.25% back to myself... That's the key...I'm considering using this to find another cheap rental that can do 8-10% ROI. So maybe my math is wrong, to me this would be like getting 12-14% back (the 8-10% rental and the 4.25% on the loan to myself) versus just sitting in a money market get that shitty 0.15%.

The only issue is I see there's some quarterly maintenance costs for doing a 401k loan, and you won't get any new contributions to the other funds while you're paying back the loan..But if I'm not planning to move back into funds and just plan on leaving stuff in cash, why not? What am I missing here?


That's my thought exactly. For me, the quarterly maintenance cost is around $3-4, so it's no big deal. I might be wrong on this, but doesn't the loan repayment goes on top of your contribution? So, your paycheck is even smaller?

My understanding from reading last night (and I suck at reading because I didn't learn my ABC's very good during grade school, just Java and C, C++)...payroll deduction to repay the loan is after tax on top of your contributions...

But it's a wash, because the tenant's paycheck offsets (assuming he/she pays on time) that... And you can probably bump up your withholdings if you already have a big schedule A deduction from mortgage interest.

I'm already getting wammied because my w2 employer does both a traditional 401k and a roth 401k...So I'm already getting a shrunk w2 paycheck from the aftertax roth 401k deduction...

Submitted by livinincali on March 26, 2012 - 10:21am.

The only issue is I see there's some quarterly maintenance costs for doing a 401k loan, and you won't get any new contributions to the other funds while you're paying back the loan..But if I'm not planning to move back into funds and just plan on leaving stuff in cash, why not? What am I missing here?Thoughts?

Usually 401K loans are limited to a maximum of 50% of the balance or $50K. In most plans there would be no way to take a loan big enough to buy a rental outright. You could fund a down payment.

The other potential issue, is any kind of separation (voluntary or involuntary) with the company results in a 90 day balloon payment to pay off the entire loan balance. If you don't pay off the balance in those 90 days you get the standard 10% penalty plus you are taxed on the balance as income. Want to leave your job or get laid off, better have the cash on hand to pay off the loan or you're staring at a big tax bill.

There are mechanisms that can allow a IRA to be invested in Rental Property but it's not trivial and that wouldn't apply to a current 401K. You could roll a previous 401K into an IRA and do something with investment real estate.

Submitted by Coronita on March 26, 2012 - 10:33am.

livinincali wrote:

There are mechanisms that can allow a IRA to be invested in Rental Property but it's not trivial and that wouldn't apply to a current 401K. You could roll a previous 401K into an IRA and do something with investment real estate.

livingincali,

Thanks for commenting. I love this thread... Please do tell more... How does one go about taking an IRA (non-401k related) and investing in RE with it?

Submitted by livinincali on March 26, 2012 - 1:54pm.

I've never invested in real estate through an IRA, but essentially look up a Self-Directed IRA investment in real estate. There's a lot of IRS rules to prevent you from acquiring a property that you intend to use personally or that you already own as a rental property. The biggest thing is finding a custodian for your self-directed IRA that specializes in this sort of thing that is trust worthy. There's a small list of companies that actually do this kind of thing because it's more complicated than offering up some mutual funds and bonds.

Submitted by an on March 26, 2012 - 1:51pm.

flu wrote:

livingincali,

Thanks for commenting. I love this thread... Please do tell more... How does one go about taking an IRA (non-401k related) and investing in RE with it?


I thought about it and looked into it. But it's way too complicated for what it's worth. Unless you have >$500k (more like $1M) in your Roth IRA, it's not really worth the hassle, IMHO. It's not as straight forward as borrowing from your 401k.

Submitted by livinincali on March 26, 2012 - 2:02pm.

But it's way too complicated for what it's worth. Unless you have >$500k (more like $1M) in your Roth IRA, it's not really worth the hassle, IMHO. It's not as straight forward as borrowing from your 401k.

I tend to agree. Almost any real estate investment from retirement funds has significant problems. Probably just better off buying a REIT stock or some high yield dividend pay if you want to be in real estate. Most people just don't have enough in a retirement account to make it work. You'll be putting all your eggs in one basket.

Submitted by an on March 26, 2012 - 2:07pm.

livinincali wrote:
I tend to agree. Almost any real estate investment from retirement funds has significant problems. Probably just better off buying a REIT stock or some high yield dividend pay if you want to be in real estate. Most people just don't have enough in a retirement account to make it work. You'll be putting all your eggs in one basket.

I don't think it's that complicated to borrow from your 401k. Assuming you have a pretty stable job and an ability to get cash to pay the loan back if you get fired or leave. But, I agree that buying a REIT that pays high dividend will be much less complicated. You just can't own a property out right after a certain period of time.

Submitted by Coronita on March 26, 2012 - 2:10pm.

Shucks I just double checked. I can only borrow a max of $50k, as some of you said. Still, better than nothing... My plan allows you to pick which specific fund(s) to borrow from. And the payment back and separate from the contribution (you continue to contribute normally as before to your existing elections)....

I don't see too much of a downside for folks that were planning to park the money in cash anyway, minus the annoying loan application fee, and small quarterly fee.

Presumably if I do switch jobs or what have you, I have 90 days to move money around and repay the loan back.

My plan offers me a preapproval, so in theory once i submit the application electronically, the funds gets e-tranferred without 3 business days... No pre-qual, no credit check, nothing.

Any other potential issues?

Submitted by sreeb on March 26, 2012 - 8:10pm.

I think that starting in the early 80s was a big plus. The returns were good during the 80s (assuming you chose stocks) and there has been a long time to compound returns.

My 401K (now IRA) for 1980-1988 has about the same current value as my 401Ks for 1989 to date.

Submitted by livinincali on March 27, 2012 - 10:29am.

My plan offers me a preapproval, so in theory once i submit the application electronically, the funds gets e-tranferred without 3 business days... No pre-qual, no credit check, nothing.

Any other potential issues?

Can't really think of anything. They'll send you a check in the mail. I guess the only other thing to be aware of is the loan repayment comes from after tax money and isn't tax deductible in any way.

Submitted by moneymaker on March 27, 2012 - 10:08pm.

If you get as loan from a bank I think it will be paid with post tax dollars also, so in my opinion that is a non issue. If you feel the market is at a high, and I think many do(otherwise there would be a lot more money flowing into the market) then it "could make sense to borrow from a 401K". I was going to buy a house, which I think is a good use of said funds. If taxes go up in the furure and I think they will then maybe it's better to bite the bullet and pay them now. Lots of things to consider, money in a 401K is pretty protected, no one can touch it to my knowledge unless one willingly withdraws it. So though not generally recommended there are times when it makes sense.

Submitted by Coronita on March 27, 2012 - 11:31pm.

moneymaker wrote:
If you get as loan from a bank I think it will be paid with post tax dollars also, so in my opinion that is a non issue. If you feel the market is at a high, and I think many do(otherwise there would be a lot more money flowing into the market) then it "could make sense to borrow from a 401K". I was going to buy a house, which I think is a good use of said funds. If taxes go up in the furure and I think they will then maybe it's better to bite the bullet and pay them now. Lots of things to consider, money in a 401K is pretty protected, no one can touch it to my knowledge unless one willingly withdraws it. So though not generally recommended there are times when it makes sense.

So I found out that because I have a hybrid account that has both a roth401k and a traditional 401k, that if I borrow from my plan, there's really not an easy way to specify that I want the funds to come out of the traditional 401k or the funds to come out of the roth401k...They'll do it based on proportional to how much is currently in each type of account. I guess that's alright. When I pay back my loan, the interest payment will be tax deferred in the traditional 401k, and tax free in the roth 401k. I wish I borrow all of it out of the roth 401k part, so that the interest paid over 5 years would be be completely tax free.

Man, why are the U.S. tax laws so damn complicated and intricate. No wonder rich people keep getting richer and poor people keep getting poorer. So many rules, exceptions, variables to play with etc. No wonder companies like Intuit will always stay in business,

Submitted by cvmom on March 29, 2012 - 1:55pm.

I had to share this, found it so amusing. Starts slow but was really laughing by the end http://www.xtranormal.com/watch/12032078...

Submitted by harvey on March 29, 2012 - 3:30pm.

cvmom wrote:
I had to share this, found it so amusing. Starts slow but was really laughing by the end http://www.xtranormal.com/watch/12032078/a-day-in-the-life-of-a-financial-advisor

I started listening and was about to turn it off because it didn't seem very funny...and then I heard the "Suzie Orman" part. Worth the wait!

Submitted by Coronita on March 30, 2012 - 2:34pm.

I pulled the rip cord yesterday and did the loan thing.
.... And meanwhile started my refinance and am going to do a cash out refi, along with a heloc at the same time... Time to get some cheap borrowed money.......Things are going to get really interesting....

Submitted by The-Shoveler on March 30, 2012 - 3:41pm.

flu wrote:
I pulled the rip cord yesterday and did the loan thing.
.... And meanwhile started my refinance and am going to do a cash out refi, along with a heloc at the same time... Time to get some cheap borrowed money.......Things are going to get really interesting....

1) Everyone wants a piece of the ipad biz (google, Amazon etc...).
2) Iran Rumors heating up (U.S.A. turning the screws as well).
3) Rumors on Greece leaving Euro.
4) L.A. Mayor announcing significant layoffs to make up for 220 million short fall (also wants to raise retirement age to 67 for city workers).
What you got that's interesting just curious,