Thread regarding Xerox Corp. layoffs

401K at Age 40

Thoughts solicited... 401K level at age 40? What's your experience with 401K at age 40 - any suggestions on how aggressive should someone be? Any other advice? Thank you!

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Post ID: @ZDOfCP5

11 replies (most recent on top)

I am the original poster - thank you all for your kind responses. it's very much appreciated!

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Post ID: @ZDOfCP5-5lic

I hit $1M in my 401K by 40. It took a little less than 20 years. I started contributing the match % on day 1 of my Xerox career. I think it was 4% at that time and I was 21. Once I started making some real sales money (7-8 years in), I upped it to 10% and left it there. I transferred it all to a Rollover IRA when I took a package last year.

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Post ID: @ZDOfCP5-3pow

One way to look at this is to ask how good a return would you need for your 401K to hit $1M by age 40.

Current IRS contribution limits are $19K/year. If those limits never increased, and you saved the full $19K every year, this i what your investments would need to earn for your balance to hit $1M by age 40:

Start at age 22: 10.4%

Start at age 25: 14.4%

Start at age 30: 27.8%

Of course, for that $1M to have the same value at age 40 as $1M has today, you would need to earn these returns above whatever inflation is. If you assume the IRS contribution limits are increased annually to adjust for inflation, and you always save the max, just hitting the returns above should get you in the ballpark.

So, not impossible if you start maxing out your 401K at age 22 and invest somewhat aggressively (10.4% isn't out of line with long-term returns from a mix of large & small stocks). If you don't start until you're older, it gets quite a bit harder.

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Post ID: @ZDOfCP5-2wyd

I wish we got 4.9% match.

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Post ID: @ZDOfCP5-1ekd

If the question is how much should you be saving in your 401K, your goal should be to max out your 401K contributions. If you can't do that all at once, increase your contribution level yearly until you get to the max, and then keep it there.

If the question is how aggressively you should invest your 401K balance at age 40, while I am by no means a financial advisor, at that age your portfolio should be heavily weighted to stocks in a low-fee fund. Hard to go wrong with spreading your money across several big index funds that are focused on different areas, and let it run; over time these have as good a performance as anything (unless you're a particularly clairvoyant investor).

If the question is how much should you have saved by age 40, that depends on when you want to retire, how much money you expect you'll need in retirement, etc. Use one of the freely available online retirement planning tools (Fidelity has a nice one, but there are many out there), they'll give you an idea of where you stand. If you're already 40, and you're asking how much you 'should have' saved by now, that's the wrong question. You've got what you've got, the real question is how much more will you need, and how will you get there.

Personal disclaimer: as I said, I'm not a financial advisor, I'm just much(!) nearer 60 than 40, and can safely say saving more earlier makes for much easier decisions later. Good luck.

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Post ID: @ZDOfCP5-1sck

It is possible but it depends upon income level and expenses of course. I am very close to retirement and even though I saved religiously for the last 22 years or so, I do wish I started sooner. It is very important to remember that although your saving goal is driven by deposits, it is also driven by TIME. At age 31, you have 30-40 years of compounding time available to you.

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Post ID: @ZDOfCP5-1zks

Is it possible to save $1,000,000 in 401k by age 40? My brother said that should be my goal. I’m only 31 and don’t see how it’s possible for me to do that, or anyone.

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Post ID: @ZDOfCP5-1pzg

Be very aggressive! The 401k is a great wealth building tool. Try listening to Dave Ramsey if you haven't already done so.

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Post ID: @ZDOfCP5-1ppw

401k is a great deal. Put in as much as possible. You will wish you started sooner.

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Post ID: @ZDOfCP5-xje

A good rule of thumb is that for every $1,000,000 you have saved you will be able to take about $50k per year in retirement. $50k per year, 20 years in retirement= $1mm

SAVE SAVE SAVE

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Post ID: @ZDOfCP5-xmu

funny that you asked that - cnbc had covered this today

https://www.cnbc.com/2019/06/19/how-much-money-americans-in-their-40s-have-in-their-401ks.html

As of the first quarter of 2019, Americans between 40 and 49 years old had an average 401(k) balance of $102,700 and were contributing 8.5% of their paychecks. Fidelity also found that employers were matching, on average, 4.9%, which put the total savings rate for 40-somethings at 13.4%.

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Post ID: @ZDOfCP5-std

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