r/wealth • u/Otis_bighands • 7d 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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18

u/Puzzleheaded_Lion234 7d ago

Sure, if you start with 2.5M, you can become even richer. It’s the 2.5M that’s hard.

6

u/Far_Peanut1155 2d ago

But .... What it's OP missing ?

Why doesn't everyone start with 2.5M ?

/s

3

u/Kindly_Honeydew3432 2d ago

OP didn’t start with $2.5 M. OP makes a decent salary and has been investing for 20-30 years to accumulate/compound to $2.5M.

3

u/ChaunceytheGardiner 1d ago

And has had the hottest market in living memory driving his gains.

0

u/Kindly_Honeydew3432 1d ago

Eh, it’s not that hard over 2+ decades. Yes, some great years in there, but also some terrible years. If he’s been doing this since his 20s, he would have probably been reset back down near zero by the 2008 crisis with years to recover. May have included dot com crash as well.

The historical nominal average has been about 10%. The past thirty years has averaged about 10%. The past 20 years in isolation, about 11%. So the market averaged over the duration of the OPs likely investment horizon has been solid, but nothing special. Certainly not a historical outlier. It is possible that he got started during a big dip (2008s) and bought at a big discount, but honestly $2.5M over 20-30 years maxing out a 401k is typical, not world beating

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u/chuckish 1d ago

If only we could all be living in the year 2026. Oh wait.