401k Savings Rates Are Going Up (What's Going On?!)

401k Savings Rates Are Going Up (What's Going On?!)
Jump start your journey with our FREE financial resources: moneyguy.com/r...
Reach your goals faster with our products: learn.moneyguy...
Subscribe on KZbin for early access and go beyond the podcast: www.youtube.co...
Connect with us on social media for more content: moneyguy.com/l...
Take the relationship to the next level and become a client: moneyguy.com/w...
Bring confidence to your wealth building with simplified strategies from The Money Guy. Learn how to apply financial tactics that go beyond common sense and help you reach your money goals faster. Make your assets do the heavy lifting so you can quit worrying and start living a more fulfilled life.

[@The-Financial-Hooper]

‘If you think the market is high now, wait til you see it 10 years from now’ - essential investing advice for the common investor to avoid the trap of timing the market… focus on your savings rate instead!

[@rebeltheharem7028]

I fall into this trap as well. But... current interest rates on HYSA's are too good right now, so I have a lot in cash that I'm slowly putting into the market. If it drops below 3%, then I will probably start ramping it up.

[@DevinSmith1486]

I mean the cape ratio is pretty much saying there isnt going to be much return at all over the next 10 years, but maybe this time is different

[@JCNY006]

My kids (18 & 20) save 100% of their summer income in ROTH and invest in broad market index fund. Their spending money is the 20% match from me … I am so proud of them 😊

[@rebeltheharem7028]

That's some good training for your kids. Teach them frugality and the power of investing and saving early.

[@LawrenceTimme]

Great

[@mrjuvy49]

WOW great parents

[@pete5691]

Thats great. I didn’t even know what a roth was until my mid to late 20’s.

[@michaelhenderson1701]

Great show guys, I am 54 and have already maxed out my 410k including the catch-up amount, and both mine and my wife's Roth IRA for 2024 as of july 1. My Hsa will max out by the end of the year. Now I am going to switch to funding my taxable brokage account with the amount I was putting into my 401k each paycheck.

[@notgivingmyemail3381]

Hope your employer didn’t have a match on your 401k. Missing out on free money would suck.

[@jeirizarry6677]

Great saving discipline but, aren’t you missing out on 401k employer contributions by funding it so early in the year? In my early 50s too and working on maxing out all I can at this stage so just curious about you are doing it

[@rapfreak7797]

@@jeirizarry6677that’s how most employer accounts work

[@philb6079]

I had a chance to max out mines last year for the first time and hopefully will in the future. I'm 43 looking at retiring at 55 hopefully.

[@Crijoe]

​@jeirizarry6677 Possibly, if they have a "per pay period" match computation. If they have an "annual computation" his match will be made whole after the year is over.

[@justgaming6245]

Who breathing into the mic 😂

[@toadyh1368]

Lol. I knew someone would comment

[@brianburton7582]

Every time

[@jimvv06]

Thought my dog was snoring next to me for a few minutes

[@hulkslayer626]

Thanks to shows like this and Calleb Hammer, i realized I have 36k in a 401k that I forfot my boss set up for me. Im 44, so I am far behind, but better than nothing and better late than never as far as trying to be financially responsible.

[@tisforthomasss]

I work for one of the top 401k record keepers in the nation and weve been SLAMMED for months. Literally can barely walk away from my desk.

[@fuckthisksksjjksdfjd]

With what, new accounts?

[@rebeltheharem7028]

I'm a lucky person, who has both a 401K and 457B. And I max out both every year along with my ROTH IRA. But its crazy, cause its around 60% of my income every year. But, I don't have kids, nor do I pay rent, and I still have enough to pay for all the things I enjoy in life, like traveling, hobbies, hanging out with friends. I would say I'm pretty lucky to be able to do that.

[@brandon8531]

I also have both (govt job)… but my savings rate isn’t nearly that high! Maybe 30% with the company match.

[@elmateo77]

Annuities are NOT magically guaranteed income. They aren't insured by the FDIC, and only last as long as the annuity provider doesn't go bankrupt. If the annuity provider is just taking your money and investing it in index funds then giving you a portion of the earnings, you'd always be better off investing the money in index funds yourself then taking the same % as income.

[@mrjuvy49]

Be careful, annuities have hidden fees, you are almost always better off buying equities while working for retirement such as BKR/B.

[@Alan-jk1yi]

Or, if the guaranteed fixed income is something that appeals to you, long term government bonds do basically the same thing, and you get the initial investment back when they mature. They technically suffer from the same weakness, but if the government goes belly up, then the insurance companies probably will too anyway. Plus, there are probably bigger things to worry about at that point.

[@johnboughner4870]

I keep telling my friends to watch the money guy show.

[@victorbaird8220]

Excellent work 😊

[@mrjuvy49]

If they do, Jamaica will be in their future and Euro cruises.

[@TuBui2]

High level, my read on this is, more 401k savings --> more money in market, stocks go up (yay for those who are in market now) --> less money in economy, inflation goes down (less yay?)

[@PopcornLover200]

I don't think 401k's are determing asset value and I highly doubt the 11% contribution rate is pumping the entire market. The $553 value of SPY (on Tuesday Jul23 2024 using rough napkin math) was determined by the 33,670,000 shares and $18,619,510,000 that moved hands. 18.6 billion dollars moved on a day when virtually no one was paid / contributing into their 401k

[@3pilot]

Thanks. Didn’t really think about dipping into emer savings if needed. Try not to touch it. But that makes sense and will undoubtedly help me maintain a higher avg savings rate in the end.

[@dkaik]

They mention the caveat that the vanguard % falls under their 25% goal. But to be fair, that vanguard figure doesn’t denote IRA/HSA savings I’d imagine and only denotes 401k savings. So actual savings rate could very well be better

[@michaelswami]

Agreed. And many of us are funding taxable brokerage accounts that also are not reflected in 401K numbers. I have Roth + Taxable Brokerage and no 401K, but I’m investing over 25%.

[@JoeFromSomewhere2303]

Yea 100%. According to the FOO not everyone should be contributing past their match to the 401k anyway. My 401k match is 50% on the first 8% so I always contribute somewhere between 8-15%, but right now it's 9%. If you count my roth, brokerage and HSA investments I'm about 25-30% invested in total.

[@pete5691]

@@JoeFromSomewhere2303Wait 100%??? How?

[@JoeFromSomewhere2303]

@@pete5691 how do I agree 100%? Pretty common phrase nowadays. There's also a symbol for it..💯

[@michaelswami]

@@pete5691 read to the end.

[@jplebihan]

Wine is indeed a lot cheaper on average in Europe. A few key factors: 1) European countries generally have lower taxes on wine compared to the US. The US imposes various federal, state, and local taxes on alcoholic beverages, which can significantly increase the final price. 2) Distribution and Import Costs: In the US, the three-tier distribution system (producer, distributor, retailer) adds extra costs. Importing European wines involves additional shipping, customs duties, and distributor fees, all contributing to higher prices. 3) Subsidies and Support: The European Union provides subsidies and support to winemakers, helping to keep production costs low. This is less common in the US. 4) Cultural Factors: Wine is an integral part of European culture, leading to higher demand and consumption. This creates economies of scale, reducing per-unit costs. In the US, while wine consumption is growing, it hasn't reached the same level of cultural integration. 5) Market Competition: The wine market in Europe is highly competitive, with numerous local producers vying for consumers' attention. This competition helps to keep prices low. In the US, the market is more consolidated, often leading to higher prices.

[@darellhunter2205]

Firmly in the messy middle and local to the Nashville area, thank you to the money guy team for putting out quality financial content.

[@flamingjune27]

Every one of Bo’s friends is wondering if they got a “Bless their heart” after a BBQ.

[@victorbaird8220]

It’s Brian Preston the money guy 😊

[@SF-fb6lv]

I really like that 'dollar fer dollar match' of the child's savings to encourage savings. Also, I GET the Socratic method, but the "walk me through it..." is really good - it forces them to examine every step of what they did thoroughly enough to actually explain it.

[@sdguy67]

Damn. I saw the title and thought it meant the max limits were going up and I got excited

[@angieharris8015]

We have a lot of vineyards in California and they are all pricier than Europe, even though it's local.

[@rusilver2]

whatever is said, Bo is sure to 'love it'!

[@cherylvargas8861]

My company matches up to 6%. Cha Ching $$$

[@cherylvargas8861]

Sad issue is employees are having to withdrawal.

[@RobertBeedle]

​@cherylvargas8861 they dont have to. They choose to. Most people dont follow the FOO.

[@burakz7646]

Nice! My company matches up to 5% dollar for dollar! Love free money!💰

[@Brucefulness]

The wine talk had me cringing. 😩 Hire me to be the in-house sommelier at Abound Wealth. 😊🙃

[@explorelife90]

I could be wrong. But Congratulations 😗 hope your journey is going well.

[@diversityhobbit]

Would not recommend until you have a years worth of emergency cash. Most people don't even have any emergency funds just CCs.

[@SF-fb6lv]

"A always, B Buying; ALways be BUYing!"

[@holdencawffle626]

It takes brass balls to ABA

[@Tigerslam327]

Bo, tell them to gain your mic up or move it more in front of you . Thanks guys for your mission!

[@Y0urTiaRica]

Oh Mika, what a pity You don't understand? You take me by the heart when you take me by the hand... Hey Mika!

[@Skibszilla]

I feel like calling them deliverables is not a great name for your younger audience. Maybe use something like "content".

[@rudyardganuelas6254]

On the wine prices: Yes, they make more wine per capita. There are many more countries that make wine even in small corners of barely arable land. Another is imported wine is taxed compared to American wine. Another is that they can just charge more for it. The American wine drinker is very insensitive to the price of wine because we consider it as a luxury item, so that is where you can have a higher profit margin, whereas the European wine drinker considers wine as a commodity.

[@MyJeffrey1970]

USPS does automatic enrollment at 5%

[@michaelswami]

One of your most powerful shows ever.

[@Vimilia]

Name game on Mika my brain went straight to lollipop, evidence of playing too much just dance growing up

[@djsnowpdx]

retirees are not excluded from always be buying. If you keep a constant allocations split between stocks and bonds, then when stocks under perform, you buy stocks with money from your bonds. That means even retirees get the smoothing effect. The more bonds you own, the smoother your stock ride.

[@rebeltheharem7028]

Well, if the idea is that they withdraw just enough to cover all their expenses this year, they won't have any left over to invest in stocks. Unless its a brokerage account and they are paid dividends more than their expenses, then I would agree 100% with you there.

[@pete5691]

I recently heard someone talk about this. You keep a certain amount in cash or bonds and then on down years you either use that money instead of selling stocks or buy into the lower market assuming you are living off of dividends.

[@CaedenV]

For the early 401k question about investing before a market crash... I feel like they are missing a few important points. 1) a 401k is a glorified cardboard box that has no value in and of itself. You get to choose (within limits of the plan) what assets you hold in the box. So if you think that stocks are an untenable bubble... Don't hold stocks in the account. You can go heavy in CDs and treasuries, if you are a metal head you can hold metals or other materials. You've got options. Saying that stocks are going to crash has little to nothing to do with adding to a 401k. These are 2 separate things. 2) if you are getting an employer match, even if the markets take a pretty epic hit, you aren't out any of your investment. If I put in $100, and my employer contributes $100, and the markets drop 50%, then I still have $100. And even if markets crash.... It's not going to stay there. You only lose when you sell. A stock can drop 50%, and bounce back 2-3 years later leaving you at 0%. That isn't the average 8% return... But it's not a 50% loss either. If it's a single stock, then the chance of that recovery is a bit more of a crap shoot. But if you are in a fund (typically your only real option in a 401k anyways) then on average it will recover if given a little time. 3) on average, markets have a major crash or correction every 7-10 years... And we had 2 back to back with the flash crash in 2020, and the downturn in 2022. The idea that we will have another major down-turn in the market in the next 5 years seems a little crazy. Now, I'm pretty sold on the idea that we are doomed for some sort of recession or slowdown when the yield curves uninvert... But that doesn't mean that the markets will crash all that much. The markets are not the economy. They generally move together on the scale of years and dwcades, but one can have major swings while the other does the opposite on the small scale. Both grow over time, but day to day and month to month... Yeah... They can seem very counter to each other.

[@nickdykstra8681]

There is a singer (more popular in Europe) named Mika!

[@nickdykstra8681]

He has a great song “Big Girls - you are beautiful”

[@mvtx87]

I loved the mom’s spaghetti Eminem reference

[@GeoffreyHiggs]

Annuities? that's anathema...I'd rather sell covered calls and cash secured puts.

[@kyleolson9636]

If you are helping your kids financially, I suggest making them invest every dollar they save based on your assistance. My wife "paid" her parents for rent, food, insurance, etc. from age 21-25 into a savings account and 401k and put a 20% down payment on her first home in her mid 20s. Sadly, that got wiped out since she bought the condo in 2007, but it's still a great idea we plan on doing with our kids.

[@pete5691]

What got wiped out? Did she lose the condo or continue to pay the mortgage because if she stills own it the value is up.

[@kyleolson9636]

@@pete5691 We sold her condo 8 years after she purchased it, and basically made enough to pay back her mortgage with a few thousand left over. So the entire 20% down payment and and everything paid towards principle didn't contribute to our net worth at all. Zillow does estimate the condo is now worth $60k more than her 2007 purchase price. But her down payment put into the S&P 500 would be worth $166k today.

[@kyopan23]

Import taxes is the answer to expensive wine in the us. Plus up charging since it's a foreign good marked as luxury

[@JessicaChungMN]

I …. Cannot stop hearing someone’s breathing lol am I alone in this?!? 11:30 ish

[@DigitalGenuis]

Where are all my 415(c) limit maxers at!?!?!?

[@MrSteelermaniac]

I have a question. I'm 55 years old. My 401K is going thru the roof. But I can't take it out until, I leave the company. How can I protect it as much as I can? If the market crashes? Thank you!!!

[@notgivingmyemail3381]

If you’re not comfortable with the amount of risk of your current investments, perhaps a portfolio reallocation is in order. You don’t have to take the money out to diversify inside the plan. If you don’t know what that means, it’s probably best to meet with a financial advisor. Depending on when you’re going to retire, might be good for someone else to take a look at your retirement plan anyway.

[@MrScootzy]

You can reallocate your investments from an equity fund to something much more defensive like a money market. I would still try to keep as much as you can in an equity fund as a money market won’t grow nearly as fast, but moving a portion to limit volatility could be good as you move to retirement. money market funds pay a few % in interest and won’t go down in value

[@kyleolson9636]

Your 401k app/site probably has tools to help reduce the risk in your 401k assets. If you are risk adverse, probably a 50/50 stock/bond ratio makes sense at your age. But remember, the stock market tanked in 2020 & and 2022, and the S&P 500 with dividends still grew 75% since the peak in 2020. Don't get completely out of stocks just because you think there is a bubble.

[@angieharris8015]

Dave Ramsey also says that you will not be taking ALLLL of your 401K at one time. Therefore, you would have time for your fund/stock to regrow again.

[@MrSteelermaniac]

@@MrScootzy Thank you so much for the information. Much appreciated! Have a great day!

[@amyisaacs3740]

You're so ridiculous. Thanks for making me laugh. 😆 "4 Non Blondes"

[@elmateo77]

Stock prices are higher because the government printed off a ton of money. That's not a bubble that has to burst at some point, it's just inflation that's probably permanent.

[@chemquests]

Nothing is permanent; it will just take a little time to reach equilibrium again. The rate of inflation has been decreasing throughout the year and will continue for a couple more. When the fed cuts rates in W4, stock prices will go up justifiably based on fundamentals. The worst is over and we are witnessing the soft landing.

[@mrjuvy49]

The FED regulates the economy $ is coming in ( old bills) and prints new money for circulation.

[@chemquests]

@@mrjuvy49& they can change the volume in circulation. They’ve been decreasing the supply for over a year now.

[@elmateo77]

@@chemquests Permanent in that prices aren't inherently going to go back to where they were 4 years ago. The rate of inflation is decreasing but I doubt we'll actually see deflation.

[@chemquests]

@@elmateo77 of course you will not see deflation but that’s worse for the economy than inflation. The fed target is 2% inflation for a healthy economy, which means there’s steady growth but not too much. Deflation is a death spiral, like Japan was fighting for decades. Wage growth will catch up to prices eventually and we’re just in a pinch that will take some time. In the long term purchasing power will stay flat to maintain GDP.

[@Funpants94]

::heavy breathing into mic::

[@FrankBurgos]

uno

[@splinefusion6986]

I don't understand the advice to lock-up in cash up to a half year's salary, losing big to depreciation for decades just to keep a FOO box checked for something that you might never touch. ACH transfers now take as little as one business day. A taxable brokerage account alongside a month or two (max) of bare-minimum expenses (don't lose the house, have food to eat) is liquid and risk-adverse enough for me. Sequence of returns risk (having to sell at a bad time because you lost income) is an acceptable price to pay to keep as many dollars invested as possible in early years.

[@Strategies2010]

Are you keeping your taxable brokerage funds in the basic money market / cash options? Otherwise if you’re selling your shares just to fund an emergency, you’re losing more than the opportunity cost loss of keeping some funds in a HYSA

[@Strategies2010]

You also said it yourself, “risk adverse for me.” I’m not ENTIRELY sure, but you aren’t every person, are you? 😂

[@Zombiebeast1995]

It is 3-6 months of expenses, not salary. And depending on how secure your job is or if you have 2 incomes you can decide on 3 or 6 months. When near retirement this would go up.

[@alcobra88]

* Rebie's nose breathing into the mic*

[@jdp486]

You mean Brian?

[@angieharris8015]

@@jdp486 No, Rebie

[@jdp486]

​@@angieharris8015 I noticed it later too and realized I was wrong

[@Bacciagalupe]

: )

[@PrinceJayMoriarty]

First lol