How Much You Should Have in Your 401(k) by Age

Transcript:
(00:00) now IRA and 401ks are amazing vehicles to save for long-term wealth there’s a reason people live on their IRA and 401ks in retir we want make sure you’re one of them there’s tax benefits When you put the money in you don’t pay taxes when you’re growing and building that account over 10 20 30 years maybe you have a company 401K where you work the company puts free money in and matches that and could you could be doing that for decades to grow and build your wealth now I know some of you are like M Mark I’m behind though I’m discouraged
(00:26) how do I catch up how much do you need to have in your IR 401K age 65 that’s the number we’re throwing on this to have a good retirement like a retirement you’re looking forward to not one you’re going to dread because you’re going to be you know we want you to be down at Del boka Vista you know we want you to be living the dream here all right $2 million that’s what we’re saying minimum of $2 million now why we65 865 $2 million now many of you are going to say hold it I need more than 2 million I’ve done the
(00:53) math I have a lifestyle I want to live I get it some of you live in a different part of the country 2 million would not be enough for some of you holy crap every analysis I’ve done I don’t need 2 million we get it there’s different ages Lifestyles parts of the country goals you have we get it but when you have at least 2 million you have something to fall back on but then Social Security is going to be kicking in maybe you have equity in your home maybe you have some rental properties but the point is you’ve got 2 million to feel relief
(01:20) you’re not going to be as stressed you’re going to feel more freedom to do more things to build more money at that age rather than be in Defcon 3 and M we meet so many people that don’t even have a $100,000 in savings at age 65 and it is scary yeah and you know what one of the biggest culprits is small business owners they just don’t put money in an IRA 401K they don’t live in Corporate America or one’s right there laid up for them and they reinvest their money in their business and so for many of you we’ve got some strategies cuz I know
(01:46) many of you are in that bucket we’ve got some strategies to supercharge how much you can get in and save for retirement but let me go the analytical side you did the touchy feely side that’s I’m touch Guy this is more the you know this is more the Matt and Mark sauce I’m going to be the more analytical here okay there’s something called the 4% rule I want to make sure every understand there’s a 4% rule a lot of financial advisers follow that basically says plan on living off 4% of whatever money is in your IR or 401K so if you
(02:09) got 2 million bucks you can live on 4% of that 4% of 2 million is 80 grand annually and that’s where the 2 million stays there the 2 million stays we’re not depleting it now as you get into your SE late 70s 80s ’90s that 2 million you can start depleting okay you can start accelerating that maybe you got long-term care you’re in a nursing home I thinking Royal Caribbean uh Cruise Holiday Cruise okay well let me hit the 4% rule cuz here’s what else is happening we want to assume you can at least get 6% return I’m just saying this
(02:38) is the typical financial adviser advice I’m going to give you my perspective here at 6% if I’m taking 4% I’m still growing that account 2% and why do I need to do that inflation we felt it this last year 2 million is not the same as it is going to be in 10 years so you still need that account to be growing a little bit to battle inflation now I like the 6% rule cuz I think you can get 8% we’re going to be talking about what you can invest in as kind of a default investment let’s say at the S&P 500 fund making 8% here we’re going to get into
(03:04) that but then I could be living off 6% of that so now that 2 million I’m getting 6% I can take out I still got a little 2% helping the grow it combat inflation now I’m getting 120 Grand a year I can live off of and like you said Mark Social Security is going to start kicking in maybe that’s another few thousand bucks a month now you’re at 15 grand a month uh maybe you have paid off your home and there’s some equity in it but you don’t have a housing payment either but you’ve got Equity you can maybe draw on two everyone’s in a
(03:27) different boat and situation maybe you sold your business you got the every different situation but that’s the analytical piece of it I like to think of the 6% rule not the 4% okay and I’m going to just say on the 4% what I like about it too is it’s going to typically take into account taxes because at 4% of that 2 million you’re going to have a rate of return you’re going to pull some cash out and you’re going to pay taxes and then 4% so on $2 million that means you’re living on 80,000 a year after taxes before anything else and 80,000 a
(03:54) year you’ll survive we have clients that can’t even get that type of income at that age and they’re freaking out okay so now what are the contribution amounts we’ve got this you’re going to love these calculations how much should I be saving to have a $2 million retirement at age 65 now we’re talking about in a 401k or IRA we’re not talking about any other investments just in those vehicles that tax deferred or taxfree structure 2 million if I’m age 25 starting at zero that is 600 a month 600 a month that’s
(04:21) not too bad I can do 600 a month and at age 35 it’s 1,400 a month so if I’m starting at zero at age 35 need to be putting away $1,00 a month that could be a pretty nice car payment so you know you got to start thinking like that age 45 starting at zero if you’re age 45 watching this and you got zero you need to be putting away 3500 a month now that’s a house payment of rent but yeah that’s 42 Grand a year it adds up you know it adds up it adds up and so now you’re doing a side hustle to make 3500 to just fund your retirement but you’re
(04:54) dedicated you’re determined cuz in 20 years you’re going to be 65 and you want that 2 mil so 3500 a month at age 45 if you’re age 55 that we’re at 11k a month 11,000 a month 132,000 a year we know people that are in business at age 5 55 just taking their profits to build retirement so they’re in that boat so that’s 11,000 a month going into retirement now we’re using some very complex structures CU we want it still taxer or taxfree but 600 a month, 1400 a month 3500 a month or 11,000 a month depending on those 4 Age starts at zero
(05:28) yeah and we’re assuming an 8% annual rate of return the reason we’re throwing in that is cu you can just do the boring S&P 500 that’s the big reveal on our next Point yeah I say that cuz how do those numbers add up I mean how does it add up I mean we got to you know we got to finish the equation here yeah it’s 8% 8% okay we’ll tell you big reveal is the S&P 500 whoa buckle up hold on to your butts but sometimes boring is okay guys sometimes boring is okay and so many people are thinking well I got to find the next
(05:57) Uber I got to go self-direct and find the next home run running real estate investment deal or whatever I’m doing with a self-directed IRA or 401K guys we love that we want you to do that that is a way to supercharge and accelerate your account but don’t get stuck waiting for that and do nothing start saving and contributing on these numbers like Mark said and if you’re doing it we’re assuming you can at least get 8% by doing the S&P 500 fund the numbers track out on that that’s even what Warren Buffett says do like Mark mentioned Tony
(06:23) Robbins Peter Malo they’re like if you don’t know do the S&P 500 just buy spy or whatever those funds that’s tracking that and you get an 8% and return now this is overtime of course not every year it can go up and down a little bit now here’s the difficult part when you look into these numbers because you know if you’re at 25 it’s nice and I’m only doing $600 a month $7,200 a year right and when I’m 35 I’ll be at 110k when I’m 45 I’ll be at 350k when I’m 55 I’ll be at $894,000 and I’m going to be at 2.1 million that’s 65
(06:52) yeah and let me repeat say that a different way if you already started saving at age 25 and doing approximately uh 600 a month you should be at 110 if you’re 35 right now you should be at 350 if you’re 45 years old and can continue to be doing what you’ve been doing that 600 a month and you will then be at 845,000 at age 55 assuming you followed those saving models now if you’re at age 35 and started from zero where should you be at 45 yeah if I’m at age 35 at 45 I’m going to be at 256,000 and if I’m 45 at 55 I’m going to be at 640k now
(07:29) remember here like at 45 I’m still putting in $3,500 of money every month but if I start at 25 I’m still just doing 600 cuz I got ahead of the game I got more money working for you I think Dave Ramsey calls this um The Eighth Wonder of the world compounding interest the more money you have invested now your money that made money is making money on the money that made money for you 10 years ago and it just keeps building and you have all this compounding en that’s why you’re getting less dollars in to get to the same
(07:53) result so if you’re waiting too long that’s why when you’re 55 you got to put 11k in you only got 10 years of compounding investment grow as opposed to 40 so the first principle in lesson start early when’s the best time to plant a tree yesterday when’s the second best time today you should at age 55 have between 600 and $850,000 in your IRA 41k you know we don’t know what you’ve been saving what you have with the method and all that but you should be in that $700,000 range or more at age 55 so we got to get caught up to that
(08:26) and you can look at these tables if you’re 45 right now you have been doing some savings you should really be in the $250 to $350,000 level that’s what you want to be thinking if you’re under 350,000 in Savings in your irm 41k and you’re 45 years old this is your wakeup call we can get let’s get back on track and it it doesn’t take yeah a lot uh at age 55 you should have around that 7 to 800 Grand and if you’re below that we we’ve got to have it a more serious time