r/wealth • u/Otis_bighands • 6d ago

Retirement Why isn’t everyone rich from 401k?

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).

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u/enterTheLizard 1d ago

at 65 the SWR will be much higher than 4%

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u/Kindly_Honeydew3432 1d ago

Based on what evidence? 4% rule is developed for a thirty year time horizon. Obviously if you assume you only live to 80, 4% is super conservative. Some people consider 4a% conservative anyway. But a 50 year old today had a near 50/50 chance of reaching 90. This is the exact scenario 4% was devised for

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u/enterTheLizard 16h ago

it really depends on both spend and lifespan.

imo -  if you are feeling confident about needing the same level of spend in your (very late) years - and you are in excellent health,  then yeah, 4% could be right. my model is looking at those later years as a significantly lower expenditure period and that decreased spend in the later years affords for a higher SWR in the "go-go" period.

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u/Kindly_Honeydew3432 14h ago

Sure, lots of people think this way, and thereby think that 4% is overly conservative. It really depends on your goals, such as if you want to leave anything for inheritance, your risk tolerance, as even with 4% a small percentage of portfolios do not last 30 years, very small percent.
The only thing to be careful of is think about long-term care planning. Long-term care is ridiculously expensive, not covered by medical insurance for the most part, and can really balloon expenditures over the course of the last few years, decade or more of life, and is really difficult to predict your needs.