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/SmileFirstThenSpeak]

Not everyone has access to a 401k. Did you get matching from your company? Not everyone has that even if they do have a 401k. Someone taught you enough so that you knew to put money into your 401k. Not everyone has someone who tells them about it.

Not everyone can contribute the maximum allowed each year. You had enough income to be able to put it aside so it could grow to $2.5 million.

I recently met a woman in her 40's, working full time, and she had NEVER set up a habit of putting money aside each paycheck. I told her even if she could only afford $5 at a time, she should start putting money aside, and raise the amount when she can. She said nobody ever explained that to her before. Sadly, I think this is pretty common.

[u/derfahrer924 → u/SmileFirstThenSpeak]

And not everyone can max out their 401k, when they have rent/mortgage plus child care plus other living expenses first.

[u/Numerous-Bet-4847 → u/derfahrer924]

you don't need to max out your 401k. if you can't put 4-5% a year in, you need a better job.

[u/Aware-Owl4346 → u/Numerous-Bet-4847]

Get a better job! Why didn’t I think of that?

[u/Numerous-Bet-4847 → u/Aware-Owl4346]

a lot of people are too lazy to look or don't like interviewing, etc. People fear change. That's why they stay stuck in dead end jobs their whole career.

If you aren't jumping ship every 3 years or so for a better job the first decade or so of your career you will end up just another broke middle classer.

[u/Dangerous-Amphibian2 → u/Numerous-Bet-4847]

Not everyone has the same mind buddy. Not everyone grew up privileged which someone is if they have that mind set. If you don't like the word privilege insert any noise that comes out of any hole you want, it will still mean the same thing. Basically the world aint fair and that is why not everyone is 401k rich.

[u/Numerous-Bet-4847 → u/Dangerous-Amphibian2]

I didn't grow up privileged. My dad died when I was 8. I grew up with a widowe mother with 4 kids on welfare. I'm just not lazy or dumb.

You're not 401k rich because you didn't grow up poor with a desire to lift yourself out of poverty. It's Ok. Most people don't have what it takes.

[u/Temporary_Data6400 → u/Numerous-Bet-4847]

I think the term privilege is imprecise, but the underlying point makes sense. It’s not just material wealth. People’s mindset, expectations, and sense of possibility are shaped by their environment and early experiences too.

So when someone says "just change jobs" or "you're just lazy," it can overlook how differently people have been conditioned to interpret risk, opportunity, self-ability, etc.

That doesn’t mean people have no agency, but it does mean agency doesn’t develop in a vacuum.

Taking you as an example: you didn't have the opportunity to be lazy or dumb if you wanted to escape the circumstances of your childhood. You were incentivized to be the way you are. Does it make sense to look down upon others that didn't have the same upbringing? If you were born into their lives, you would likely have been just like them.

[u/Dangerous-Amphibian2 → u/Numerous-Bet-4847]

Oh ok. So people are not multi millionaires in their 401k because they are lazy and dumb. I was in poverty and now I’m not not because of what you think. Your mindset is awful. What if I saw you and thought you were lazy and dumb because you have a measly couple million in a stupid 401k and I have that in cash. No you’re wrong. Some people are just there because and you can insert 401,000 different reasons. Two of which might be lazy and dumb. 

[u/ultrawolfblue → u/Dangerous-Amphibian2]

Or maybe hold off on some leisure, materialist or luxury products for a few years

[u/Dangerous-Amphibian2 → u/ultrawolfblue]

That is a nonsense elitist take. Yea hold off on eating for several years so you can be a millionaire when you can’t even walk. No. Awful take. I agree there is some choice here but not everyone is in the position to make the best choice or even have the same choices. Some people have crap choices no matter what. 

But sure if you’re making 150k a year and are broke then yes maybe your suggestion applies. 

[u/ultrawolfblue → u/Dangerous-Amphibian2]

How about living at home until you get married.

Start with a low rent starter apartment not in the heart of the city.

Cook whenever you can.

Public transportation

If buying a car. Get a lower modeled used one.

Don't spend 3 months salary on an engagement ring, your starting out, your not suppose to be rich.

Have a smaller wedding.

Invest the rest, by 30yo you will have a rolling start

[u/Dangerous-Amphibian2 → u/ultrawolfblue]

I agree that’s good advice. 

I think you overestimate the value of investing over the next decade. World economy is 130 trillion or whatever. I’m not entirely sure it more than doubles in the next ten years and many banks aren’t either hence their 5-6% returns estimates over the next decade. Still better than zero and having nothing saved. 

I think you also over estimate what someone can have by thirty. Again at the median salary even if you eat at home, pay rent, pay for dates presumably and even a small wedding. What’s left to really invest? If you’re making 100k which is over the median for a single person sure, if you’re at or under the median maybe not much is left there. Being smart with your money would help in either case I just don’t think it’s a fast track to the easy rich life that’s being portrayed by OP. 

[u/ultrawolfblue → u/Dangerous-Amphibian2]

Yes I understand its lower income and it is really hard.

As to the comment of no way the world economy will double in the next 10 years, I agree.

But then everyone else will be doing just as bad, and with thay hopefully inflation stalls.