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Mark, 65, has amassed more than $2 million in retirement savings by maximizing his 401(k) contributions.
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He benefited from a steady job, low cost of living and postponement of parenthood.
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Mark recommends saving early, taking advantage of Roth accounts and maintaining consistent contributions.
For many people at or near retirement age, the outlook is bleak.
One in five older Americans has no retirement savings, Social Security doesn’t really feel like a guarantee, and the retirement era is over.
While the widespread shift over the past five decades to 401(k)s for retirement savings has left some Americans unable to afford the burden of being primarily responsible for their retirement finances, others have managed to make the system work in their favor .
Mark, 65, is one of them.
Mark – whose last name is known to Business Insider but withheld for privacy reasons – retired three years ago at the age of 62. During his nearly 40-year career in geology, he was able to set aside more than $2 million for retirement, even after putting several children through college.
“You just leave it alone, and you look up 40 years later, and it’s a really nice number,” he said.
The first company he worked for in the 1980s had a pension plan, which quickly transitioned to a 401(k) in the first year he worked there. He read some articles on how to maximize the new benefit, and from that point on he said he basically made the most of it. He heard the advice that you should save aggressively in a 401(k), and that’s what he did. Then, he said, he just left it there and tried not to worry about it.
“Every now and then when there was a downturn in the market it was a little bit alarming, but whether I was a procrastinator or whatever, I didn’t move the money. I just let it sit in the same stuff,” Mark said.
Mark is the embodiment of what happens when retirement savings does what it’s supposed to do. He also managed to make everything fall into place: He said he was very blessed not to have long stretches of unemployment and to earn enough so that he could always max out his 401(k). He lived in areas with a low cost of living and didn’t have children right away, which meant he was able to build up some savings before starting parenthood.
“When it was all said and done, I ended up with over $2 million,” he said. “Never put in extra money, never take anything out, never take out a loan for the money or anything like that.”
What Mark has done well – and what he thinks others should do
In his earlier work years, Mark was surprised by the people who didn’t contribute to their 401(k) accounts, even if it was just a small amount to get the match. He thinks some people simply didn’t know much about or understand 401(k)s when transitioning from retirement.
“I’ve heard a lot of people who weren’t even taking advantage of that, and it just seemed like a no-brainer,” he said.
Of course, not every American has access to a retirement account. According to the Bureau of Labor Statistics, just under three-quarters of Americans had access to some form of retirement benefits in 2023. And of those that do, a significant portion are still not benefiting from benefits.
Some of that can be attributed to the way the benefits have changed. While Mark is a big believer in the 401(k) and it worked well for him, other employees may have been used to retirement plans. Mark is part of the cohort that has seen the pension economy move from defined benefit plans, plans like pensions that pay out lump sums, to defined contribution plans, which pay out based on how much you put in – and how the stock market is doing.
For example, after a recession in the 1980s, Mark said, “It was quite disturbing to me that I lost so much money on paper, but it came back.”
“From that point on, I thought every subsequent recession after that would come back – and it did,” he said.
Mark’s advice on retirement savings includes taking advantage of some benefits that exist now that didn’t really exist when he did his retirement planning, things like index funds and Roth accounts – after-tax savings plans that can be set up by employers offered, in the case of 401(ks), or is generally open to Americans earning under a certain amount.
“If I started now, I would put more money in the Roth accounts,” he said. He also acknowledged that he lives in an area with a low cost of living – and said if workers can do that, they should try to lower their cost of living. He does realize that certain places cost “a lot more” than other places.
But overall, Mark said he is a “pretty big proponent of the 401(k).” He said that while he knows some people have their own problems with it, he thinks what he calls almost forced saving – the ability to get it out of someone’s hands before they have a chance to spend it – is one of the most important is. “the wisest things there are.”
For him, his savings meant enormous peace of mind. Unless something very unforeseen happens, they won’t run out of money. If there is something they need to spend money on or help their children with, they can do it – and that’s because of their savings.
“If I had to tell people what to do, there’s ‘save big and save early’ – or ‘save early’, and it doesn’t have to be big, but ‘save early’ and you get all that hassle,” said Mark. “It makes a huge difference. I realize it’s the hardest time for a lot of people to save, but if you can get the money you’ve saved before it gets into your hands, I think that’s a big deal.”
Are you a boomer and are you doing well in retirement? Contact this reporter at jkaplan@businessinsider.com.
Read the original article on Business Insider
