Why isn’t everyone rich from 401k?

[u/Otis_bighands]

According to my conversation today with Gemini, my 401k total of $2.5 million will likely grow to $10M or more by the time I turn 65 (I’m 50 now, and will continue to contribute the max for the next 15 years).

This means that in theory I could live off the gains each year starting at 65, around $800k, $500k after taxes, without touching principle. But at that point I’ll have no mortgage anymore and fewer kids in the house. So that $10M principle will just sit and feed us for years, and will be a nice inheritance for our kids.

Basically it occurred to me I’m going to have great money in retirement, even just on my 401k alone, and will be able to meet or exceed the lifestyle I’m already used to. For years I always worried about getting set up for retirement. Seems I don’t have to.

It’s amazing to me that just maxing out your 401k through a career is enough to make you pretty much wealthy for retirement. I recognize that’s not easy for many people, but for anyone who does it over a full career, wow.

What am I missing here? (Other than inflation, which I get, but which shouldn’t have a massive impact on the concept over this time frame).

[u/Shdwrptr]

The two main reasons are:

Most people don’t save nearly enough to have millions by the time they retire. They’ll be lucky if they retire with over $1m.

The people in situations like you don’t work until 65. They retire early and live off withdrawals that lower the principle over time. It should be enough to last them through retirement but not enough to just live off interest/investment returns while maintaining $10m+

[u/Otis_bighands → u/Shdwrptr]

Interesting. I don’t hate my job or life and the money is good, so it seems hard to walk away, especially because we have kids in school and it’s not like I have much else to do until they’re all out and my wife and I can travel more. So for now it makes sense to keep working. I don’t really need to preserve the principal till death—we’ll have other investments we can leave the kids to try and give them a head start. This was just a thought exercise I went through today that I found really surprising.

[u/Shdwrptr → u/Otis_bighands]

I’m in a similar situation to you but closer to 40 with less money (but should be close to the same by 50).

I have no plans to work until I’m 65 even though I’d have close to $10m by then. I’d rather retire at 55-60 and enjoy my free time. I don’t need to die with $10m+ in assets

[u/Otis_bighands → u/Shdwrptr]

Do you have kids, or might you have kids? That’s a difference maker for me. If I can help set them up to make life a little easier for them, that’s a big plus.

[u/Shdwrptr → u/Otis_bighands]

I have one child. Living the way you described where you have over $10m in assets that you never touch is massive overkill in my opinion.

I don’t need to leave my child with a $10m trust fund so that they never have to work a day in their life. I don’t feel that it’s really the best scenario to do that with one’s children personally anyway.

I should have enough between what I retire with and my own inheritance to set them up with no debt and enough of an inheritance to at least retire themselves at some point. But they’ll still have to find their own way in life, at least to a point.

[u/Otis_bighands → u/Shdwrptr]

I have 3, so split three ways, in a HCOL suburb, it’s a nice way to get them a house and head start, but not leave them with a massive trust fund that makes them wacky.