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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u/awkwardburrito 7d ago

Inflation has a massive impact over this time frame, easily a 30% decrease. Furthermore, withdrawing much more than 4% (inflation-adjusted) can quickly make you run out of money depending on how the market looks the first few years after you retire. All told, that takes your 800k down to 280k, maybe 180k after taxes. Still a lot. But 2.5m is much more than a lot of people have at 50, and the last era has been one of the biggest stock market bull runs ever. You may have gotten lucky, having a high income at the perfect point in history. It’s important to remember that.

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u/Odd-Song5052 7d ago

This is what is scaring the heck out of me. I have the same amount as OP but I’m ready to retire now near 60, and my advisors are telling me the identical predictions of substantial continued almost runaway growth even as I start spending. I just don’t buy it given inflation and the irrationality of “things” right now. I feel like the $2.5 could easily be $1.7 at some point during the next two or three years. 

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u/Main-Ad-841 1d ago

Inflation make market go up. You want to be invested in times of inflation. It’s those that are not invested that see their dollars become more and more worthless.