Comment by xyzelement | Hacker News Reader

Comment by xyzelement | Hacker News Reader

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// If your 401k is maxed out it is probably wrong to save anything more in general.

This sounds like really bad advice. 401K limits are 22.5K this year. If you are making 100K and you are able to put away over 20% of it, maybe that gives you a reasonable probability of maintaining your lifestyle in retirement. If you're making good money and you're only saving 22.5K, you are probably going to take a serious hit whenever your income stops.

You are also completely undervaluing having "dry powder." Let's say interest rates go through the roof and "nobody" can afford to take out a mortgage, being the one guy with cash-on-hand will let you capture some once-in-a-lifetime real estate deals.

Also, freedom. Under your scenario, someone working a decade will have saved 220K in their 401k and that's it. Now they want to quit their job and start a business. They have to cash out their 401k just to sustain ~1 year of them not drawing a salary. Who's gonna do that? Versus, imagine the same person has a ton of additional savings - they can take the risk because it's a much smaller risk to them (longer runway)

// if there is money left over after paying for normal life enjoy it as you can't take it with you

You are probably undervaluing the "enjoyment" people get out of deep financial safety.

To say nothing of the fact there is an guarantee your tax rate once you retire will be less than it is now. In theory we all asume it will be, but like all other financial decisions, past performance should not be assumed to be future results. Factor in Uncle Sam is the tax rate decision maker and anything is possible.

In short, saving taxed income is a form of diversification.

If you max out your 401k from 25-62 you will have a nice nest egg - that is 8 million dollars assuming 10% returns and constant contributions. Realistically the max will go up over time, so you will contributing more money - inflation will eat some of the gains, but even still the extra contributions will make that up. That should make for a comfortable lifestyle if you retire early.

The key is to save all a long. If you start saving for retirement at 50, even with catch up contributions you are probably not going to have a nice retirement.

What you're saying here is that you can be OK if a lot of things go perfectly. Which is probably true. I am going to assume your math works out, but what if (1) you are unable to work a chunk of that period due to illness, unemployment, etc. Saving beyond your 401k contrib when you're able can mitigate some of this risk (2) the 10% rate is a very nice assumption. What if it doesn't hold up, or doesn't hold up for the period that matters to you. What is the impact on your life if this number ends up being 5% instead? (3) Are you under-concerned about inflation in these projections. I am not totally convinced 401k limits have risen in tandem with the real inflation rate.

So let's say your number is 2x optimistic and someone retires with 4M instead - whatever that means in a bunch of decades from now. Then you pay tax. Depending on where you live, between federal, state, and city that can be close to 50% especially if rates go up. So that leaves you with 2M. Then say you end up living to 90, that's like 71K per year take-home. I guess you can live on that today. But for example my taxes for the house are like 20KL. So almost a 1/3 of your take-home goes to that. it's not SOOOO cozy.

You should be earning returns on your investment while retired so you get more. Plus you get social security as well.

It's also possible to save another ~$30k (depending on employer match) if one's 401k offers the "mega backdoor" option. It's definitely a great option if one can afford it (after regular pre-tax 401k), as it's basically a gigantic Roth IRA (with no RMDs during retirement, like a Roth).

2013 - $220,000

2023 - $293,319.96

Federal minimum wage 2013 - $7.25 an hour

Federal minimum wage 2023 - $7.25 an hour

https://data.bls.gov/cgi-bin/cpicalc.pl

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