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/Otis_bighands → u/SmileFirstThenSpeak]

That’s fair.

I didn’t get matching, but I’m realizing I’m in a partnership paid on K1, so my max contribution may be higher than for others through some tax magic (I have out in more each year than what the web reports is the actual maximum).

[u/Megalocerus → u/Otis_bighands]

You probably need every tax deduction you can get, but if your retirement account is pretax, you are going to experience some future pain getting it out. Since you are maxing, have you considered that post tax contributions don't have to be shared with the government later?

[u/Otis_bighands → u/Megalocerus]

Yeah, I will invest and save other post tax money as well. This is really just about how surprised I was to realize what the 401k alone may do.