{"id":2891,"date":"2015-12-07T05:50:26","date_gmt":"2015-12-07T13:50:26","guid":{"rendered":"http:\/\/evergreensmallbusiness.com\/?p=2891"},"modified":"2019-07-01T15:34:54","modified_gmt":"2019-07-01T22:34:54","slug":"ten-million-dollar-ira-accounts","status":"publish","type":"post","link":"https:\/\/evergreensmallbusiness.com\/ten-million-dollar-ira-accounts\/","title":{"rendered":"$10,000,000 Individual Retirement Accounts and 401(k)s: Actually Possible?"},"content":{"rendered":"

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In an online forum recently, I saw someone suggest you\u00a0can accumulate a $10,000,000 \u00a0Individual Retirement Account or 401(k) account.<\/p>\n

This is clearly incorrect. But the statement got me wondering about a couple of things.<\/p>\n

First, what is the realistic maximum one can accumulate in common retirement savings vehicles like IRAs, Simple-IRAs and 401(k) plans.\u00a0 And, second, how crazy a scenario do<\/em> you need to produce a $10,000,000 result.<\/p>\n

So I\u2019m going to poke around both questions here.<\/p>\n

Maximum Possible IRA, Simple-IRA and 401(k) Plan Balances<\/h2>\n

We need to come up with a set of modeling assumptions to make the calculations, first.<\/p>\n

Accordingly, let\u2019s assume that someone starts at age 22 and saves for 45 years until full retirement at age 67. That\u2019s clearly a best case scenario, right?<\/p>\n

Also, just to give the saver an extra year of interest on every contribution, let\u2019s assume the contribution occurs at the beginning of the year rather than 15 months later when the tax return is due. \u00a0Again, this is pretty \u201cbest case\u201d\u2026 but we\u2019re talking \u201cbest case,\u201d right?<\/p>\n

Furthermore, assume that someone saves the absolute<\/em> maximum amount each year. So that\u2019s $5,500 for an IRA, $12,500 for a Simple-IRA and $18,000 for a 401(k).<\/p>\n

Let\u2019s also assume that this someone bumps savings at age 50 for the catchup amount.\u00a0That means at age 50 that the IRA contribution jumps to $6,500, the Simple-IRA contribution jumps to $15,500, and the 401(k) contribution jumps to $24,000.<\/p>\n

What\u2019s more, both Simple-IRAs and 401(k) plans usually include employer matching amounts so let\u2019s assume that the Simple-IRA participant makes $50,000 annually (roughly the average household income in the U.S.) and then gets a match equal to 3% of that $50,000, or $1,500.<\/p>\n

And let\u2019s assume that the 401(k) plan participant makes (just for giggles) $100,000 annually (roughly double the average household income in the U.S.) and then gets a safe harbor match equal to 4% of that $100,000, or $4,000.<\/p>\n

Note that no one could actually save this aggressively and regularly. And people usually don\u2019t start their careers earning the average and certainly not twice the average. But hey we\u2019re talking a best-case scenario.<\/p>\n

With that in mind, here are the maximum values I calculate:<\/p>\n