Personal Finance

I'm maxing out my 401(k) and profit sharing — reaching $69,000 this year — how much will I have by the time I'm 60?

Rich Duprey

Published: December 26, 2024 7:17 am

Don’t count your chickens before they’re hatched. We’ve all heard this admonition to not get over your skis in anticipating some future event. But we’ve also all probably looked at our 401(k) accounts and tried to figure out just how much money we’d have at retirement if we continued on the path we’re on, even if it is 25, 30, or even 40 years down the road.

Yet looking too far into the future is ultimately a fool’s errand because circumstances and situations can and will change dramatically over such long periods. Even looking to figure out where we will be in one year is plagued by so many variables.

I was reminded of this after reading a Redditor’s post on the r/fatFIRE subreddit, a board dedicated to financial independence and early retirement at an upper-middle-class lifestyle or better. He was looking for a simple calculator for 401(k)s that could tell him where he would be when he turns 55 or 60 if he was contributing the maximum allowed to his plan, along with the inclusion of profit-sharing contributions.

Because unforeseen events will come into play over the decades ahead, keeping it simple is the best approach.

24/7 Wall St. Key Points:

• While trying to figure out how much we will have in retirement can be a useful exercise in keeping us motivated to maintain our plan, don’t put too much stock into the results.
• A lot can and will happen over the next 25 or so years before we retire that we can’t account for so our figures are never carved into stone.
• Also: Is your 401(k) optimized for your retirement plans? (Sponsored)

A goldmine of opportunity

The 401(k) has been around since the late-1970s, but didn’t really gain any traction until 1982, after which the plans took off. They have since become the primary vehicle people use to achieve a comfortable retirement.

Where more than half of all workers had pensions at the time 401(k)s came into existence as a supplement, the situation has completely reversed and now more than half of all workers have 401(k)s or a similar retirement account. Only around 15% of workers have pensions today, and most of them are government workers.

Of the 71 million workers with access to a 401(k), they have saved some $8 trillion for their retirement. According to Fidelity Investments, there are 544,000 people with at least $1 million in their 401(k) account in the plans they administer. So putting away as much as you can into the plan is generally one of the best things you can do.

Counting up tomorrow’s dollars today

Under current 401(k) rules, a worker can save up to $23,000 a year in pre-tax contributions, with the amount rising by another $500 next year. Employers are able to also contribute to their worker’s accounts, either through a matching contribution program or a profit-sharing plan. However, the total between employee and employer contributions cannot exceed $69,000 a year.

The Redditor has the maximum allowed contributions going into his 401(k) account. He’s looking for a way to figure out how much he will have at the end on an inflation-adjusted basis after maxing out the plan every year.

Now I’m not a financial planner, so these are only my opinions, but as mentioned earlier, a lot can happen between now and retirement. The Redditor could lose his job, for instance, or his employer could run into a rough patch and reduce or eliminate any of the profits it is currently sharing.

That’s why using a simple future value calculator is probably the easiest and best.

If we assume the Redditor is 37 years old, has $500,000 in his account now, and adds $69,000 a year to his 401(k) at a 7% annual growth rate (the stock market’s 10% historical rate of return minus 3% for inflation), an FV calculator tells us that by age 55 he will have over $4 million while by age 60 his account will grow to over $6 million.

Key takeaway

Predicting how much money we will have in the future so that we can swim in the pool of gold coins like Scrooge McDuck is a fun pastime. But don’t make any serious plans based on the valuations derived from it because a lot can change between now and then.

It’s why meeting with a financial advisor is a good idea, because he can help craft a personal plan covering all your investment and savings options that will be more valuable to your retirement than an online calculator.