Shame on you, Dave, if you run out of money in retirement

My employer got bought out, so all of us in our office are in-processing with our new corporate overlords. When this happens–yes, something similar has happened before–I end up giving a lot of 401(k) advice.

Yesterday I ran a 401(k) projection for one coworker, and we talked about it again at the end of the day today.

“And once you reach 50, you can kick in an extra 5 grand per year, legally,” I said. “I plan to.”

“You don’t need to,” he said. “Shame on you if you run out of money in retirement, making more per year than you make now.”

Maybe I should have mentioned that projection I showed him included those catch-up contributions. I’ll do that tomorrow.

But yeah, shame on me if I run out. That’s why I intend to make catch-up contributions whether I think I need them or not.

Why might I need them?

Well, I might not get the projected returns. I probably will. But I can’t control that. By throwing more money at the problem, I can make up for it if my annual returns end up a couple percentage points lower than they should. I don’t know what this economy’s going to look like in 30 years. And anyone who says he does is a liar.

And my projection assumed I’d live to 95. What if I make it past 100? Sure, I could slam on the brakes at 90 and start withdrawing less. But why not do both?

And what about health problems? Those can be expensive. Will I have insurance? Will I be insurable? Will the government take care of me? What if the answers are no, no, and no?

And if that’s not enough, I don’t know what inflation is going to do, and I don’t know what taxes are going to be. I’m pretty sure both will be higher than they are now. Double? Triple?

Prepare for the worst and hope for the best. That’s the best thing you can do. And if I prepare for everything to go wrong and everything goes right, then what? Well, if that happened, I’d have more money than I needed. I guarantee if that happened, more than enough people would start calling me up and asking me for some.

That’s about the only thing I know for certain, in fact: No matter how much I have to work with, people are going to be asking me for some of it. Some deserve to be told no, but not all.

So my plan is to work from ages 50 to 65 and make the maximum contribution I legally can during those years, provided I can afford to do so. And no, I won’t make any apologies whatsoever for doing that.

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