Comment by lotsofpulp 2 days ago
> I tell the younger generation the same thing. Save, invest, max 401k, before you go off and party. Your older self will thank you.
401k max is $24,500. How much do you expect a person to earn to be able to max it out? And what percentile income is that at the bottom and top of the age range you consider “young”?
https://dqydj.com/income-percentile-by-age-calculator/
Tldr: you are telling almost every 20 to 30 year old to not party.
>If you are offered a 401k, you have the means to max it out.
Given rent, saving for house downpayment, student loan payments, auto loan payments, and possible childcare/healthcare costs, I don’t think we live in the same reality (based on income statistics). Perhaps you are only referring to doctors/software engineers/lawyers/IB/PE employees?
>I’m not telling you to forgo partying. I’m telling you to pay yourself first, before you do. Don’t max out a credit card for a trip. Don’t cover the table’s check when you only have $200. Be responsible, but still have fun.
This is very different than:
>Save, invest, max 401k, before you go off and party.
> Given rent, saving for house downpayment, student loan payments, auto loan payments, and possible childcare/healthcare costs, I don’t think we live in the same reality (based on income statistics).
These things all come after savings, not before. If you can't afford them using post-saving money, then you need to get a better job, or a cheaper living conditions. Easier said than done, I totally agree, especially nowadays. But that's the mentality you need to really take saving seriously.
They don’t want to hear it. They don’t understand because they haven’t hit middle aged with nothing. Experience is one hell of a teacher and I hope these young professionals realize what’s at stake. There’s no hand outs.
Rent comes after savings? Are you insane? And what if there are no better jobs that allow you to afford both rent and savings, as rent has increased for decades while wages have remained stagnant?
Why can't you just admit that millions of young people are being intentionally screwed out of what we consider to be a basic standard of living?
A younger person shouldn't max out their 401k unless they are rich. When you are young time works for you and so a maxed out 401k is a very large retirement in the future (which you might not even live to see!). The max is useful for older people who didn't start young.
Worst advice ever. Maxing out early is like throwing a boulder down a mountain as opposed to a stone. The sooner you start the better in the long run.
What they have to avoid is cashing it out when times get hard.
I have known several people who died before they reached 50. I have known a number of others who retired early because the doctor (correctly) said their cancer is incurable - they had 9 months to enjoy all that savings. I knew someone who planed a great retirement, and her health declined such that even though she lived to 76 (just under average) her entire retirement was spent making regular trips to the hospital and even when not in the hospital her pain was such that she couldn't enjoy anything in life (her husband had a few years to enjoy the savings after she died).
If you know for sure exactly how long you will live and how good your quality of life will be then the advice to max out early is probably good. However you don't know - average advice is good for average but if you are an outlier it isn't useful and you don't know. As such you need to compromise and part of that means you enjoy a little more now when you know you can, as opposed to a lot more in the future if you live that long. Exactly what they means is personal of course, but this conflict is why I would suggest a more modest retirement.
In all of those cases, all of that 401k money is freely available to use. They would be dead if it wasn’t for the fact they saved and had it. How hard is this to understand? It’s designed to trap your money on purpose so you save it because you’ll end up spending it and not having the resources for your health in the end.
Besides, once you have a healthy 401k, you’ll realize there’s things you can do with it in the short term. Like borrow for a down payment. Use it for hospital bills. Funerals. Hardship withdrawals. Even a Roth has this. Saving vs spending will always be the story of the grasshopper and the ants.
If you are offered a 401k, you have the means to max it out. People who make less than $60k aren’t usually offered 401k’s.
I’m not telling you to forgo partying. I’m telling you to pay yourself first, before you do. Don’t max out a credit card for a trip. Don’t cover the table’s check when you only have $200. Be responsible, but still have fun.