It's hard to picture compounding as it happens. It's hard to see it as you save and all your effort seems to get you nowhere. You seem to tread water forever. I mentioned the wealth ladder by Nick Magguli before and I said it was the spending muscle. I mentioned getting lost in rung 4. All true but something interesting has happend along the way. I've gotten to see a really clear pattern of compounding.
DH started his 401k in 2005. 20 years ago. He didn't have it before even though he'd been in the US since 2000. We had no money and graduate students didn't have a 401k. But in 2005 he contributed $4870 because he started working that September I believe since he graduated in June 2005.
We also maxed out our Roth IRA contributions every year since. I started in 2003 but it was a struggle for us. In 2005 the 401k contribution was $14k and the IRA max was $4k. So we could save a total of $22k/year into retirement accounts. I haven't had a 401k until I started my own business but that's a different issue.
So since then he only missed one year of maxing out his contributions 2022 when the startup didn't offer a 401k. 2021 he contributed to his job in January before he quit. In 2023, 2024, and 2025 he's maxed out his contributions. So he's saved $375k into his 401k and into his Roth IRA $121,500. But let's call it 20 years of contributions, not quite but close. For me i've saved around $127,500 into my Roth IRA.
What does he have now? His old 401k is $1,197,300 and he has a new 401k of $52,934 (when I last checked in January 2025. So for $375k in contributions he now has $1.2m. His Roth IRA has $896,936, just shy of $900k. We did a few conversions and rollovers, but mostly it's been growth.
So this year our entire portfolio has been up around 20%. But I thought the most interesting part has been his old 401k. He has not touched it since 2021. it's been the same investment of 80% total stock market and 20% Global Stock Market. We didn't even rebalance.
2021 February - $708,978 in the total market and global market
2022 January - $847,934 - we couldn't contribute only growth
2023 January - $694,765 - that was the bad year
2024 January - $852,245 - recovery
2025 January - $1,046,748 - growth
Today 10/1/2025 - 1,197,300
Since 2021 it's been all compounding. It's hard to see when you are contributing the growth since you only see your contributions. But seeing an account we just leave alone without messing with it, without contributions it's a bit mind blowing how it's growing. From here on out a 10% year over year growth will mean in 20 years when DH is 67 mean there will be $8m in his 401k alone.
At a very conservative 5% considering we aren't going to touch it and leave it in total stock market $3.2m. So a bad 2 decades we will still have $3.2m. At 8% compound annual growth rate it is $5.6M.
But the first 20 years took his saving a lot to reach $1m. The next 20 is when it really takes off. I'm not sure if we will leave it alone or do some conversions because it'll be about 30 years before he has an RMD. At 5% he'll have $5.1m. At 8% for 30 years he'll have $12m. At 10% for 30 years $20m. That seems a bit crazy to be honest.
I'm not sure where we will end up. But the RMD on $5.1M which is the 5% conservative growth for 30 years is $194k/year. From that one account DH will have $194k RMD potentially.
Seeing this in black and white, listening to the wealth ladder. Thinking about coast fire. This is why I decided we needed to start spending. I honestly think we might have oversaved in a way I certainly didn't think was possible as we were going along.
Yes I did feel like we deprived ourselves. But I said we had to live below our means. That if we saved say 40% of our income then we only had to replace 60%. All true. And we are at our FIRE number in our 40s because of it. A very fat fire. But it was hard to picture in my 30s that we could ease up. That we could save 15% of our income and be fine and retired at 55 or 50 and live a little more lax.
I guess i'm reflecting so others can maybe think more about what they are saving for earlier. Why? And is it really necessary? I ask myself that daily now. Is it necessary to be so cognizent of money? Do i need to say I don't need it. Or is it okay to say sure we can have it.
Sure we can afford to eat it, buy it, wear it. I can unflinching pay for all school stuff and do so immediately. I can donate to the PTSA more than they ask. I am not going to waste things but i can relax about splitting a check because it's not going to ruin our monthly budget.
Honestly we don't have a budget anymore. I was never the serious budgeter, I was a pay yourself first and spend the rest and I still am. But now I am starting to lean in. I am starting to be more like we can spend all of our salary after we max out our Roth IRA, 401ks, and ESA. Why not? We are coasting to retirement. We hit our number. Every year of saving gives us nothing but excess so we need to thoughtfully spend now instead of save.
I probably could have been less harsh on myself 4 years in 2021. When DH started the startup. I was freaking out that we didn't have a 401k. That we weren't saving 15%. That we weren't able to save more than 25%. I was like "failure". I worried we were reckless. I realize and hindsight is 20/20, that if we didn't save a penny since 2021 we'd likely still be okay to retire today. That compounding and the fact we are still working would do the work for us.
I think i sort of realized it a little last summer 2024 august. But it really hit me this summer when the wealth ladder crystalized how I felt about our net worth. I felt I had "enough". That we were fine and I was fine never getting to rung 5 and hanging it up instead. And that acceptance really helped me feel enough.
It helped me accept it didn't matter and I could stop stressing about running out and being "prudent". I could stop penny pinching and looking at a budget. Instead I should breathe and say we're fine.
I hope this shines a light on others who are hoping to retire or retired about their spending.
October 2nd, 2025 at 01:44 pm 1759409073
Let me say you are doing fabulously well and that I agree it's time to ease up and enjoy what you've worked so hard to earn. Loosen the purse strings a bit.
My greatest regret is not recognizing when I was probably in my mid to late 50s that i was going to be "okay" in terms of retirement savings and that I didn't spend more and share more with my mother before she passed. Lunches out. Little splurges. Help with home improvements. My mother often struggled, financially, due to her chosen vocation, lack of education and divorces. She never asked for anything, was a very positive thinker and always saw the glass as half full. I just wish I had shared more with her, money-wise, but I was so concerned about being able to take care of myself in my own advanced years that I felt that was a luxury I couldn't afford.
I maxed out IRA and 401(k) contributions every year. Even saved beyond that in taxable accounts. Paid off a 30-yr mortgage in 17 years. I was fine with depriving myself of many things to make all that happen.
I'm very happy I'm in a solid position now, in my 60s, but I just wish I could have relaxed a little more along the way and shared my prosperity more with those I loved.
October 2nd, 2025 at 03:19 pm 1759414765
October 2nd, 2025 at 09:29 pm 1759436982
I grew up with a sense of scarcity - we were never hungry but we always had eggs for dinner on Thursdays long before ‘breakfast for dinner’ was a thing.
My mom worked hard to give us what we needed and some of what we wanted, but I knew not to ask for much because I knew the money wasn’t there.
My goal for my life was to never feel that way as an adult, and I considered the financial aspect of every decision.
I bought my first condo at 28 - I was single and even then I knew I wouldn’t marry and had to look out for myself.
From my mom I learned to save for what I wanted - to make little sacrifices to get the good big things. We wanted to go on a trip that seemed like a dream, and I realized that if I saved $20 per week, after a year I’d have $1000. In 1980, that was a lot of money but I did it.
I was able to share my financial hard work and good fortune with my mother, and that the last 30 years of her life were so much better than the preceding 50 brings me great joy.
I made good decisions career/job wise, listened to some smart people, and always saved. But I also had some wonderful adventures and experiences. More than once I’ve looked around and thought ‘that little girl would never believe that someday she would be here.’
Still, I am frugal. I shop carefully for groceries and other necessities. I no longer buy a lot of clothes - when I worked I considered my wardrobe an investment and shopping entertainment.
I see a lot of people who waste money on small cost, low value items because they think they will never be able to afford a more lavish lifestyle. They nickel and dime themselves out of financial freedom. I was able to avoid that because I prioritized saving, sensible generosity, and understanding that you can have ‘anything’ but not ‘everything.’
I retired at 58, then took a couple of part time consulting gigs until the pandemic. Now I have no real desire to travel or go many places - I’ve come to love my solitary life.
I do worry a lot about the impact to my savings on the turbulent times we are living through, but I am as well prepared as I can be and expect to be in a position to help others if everything goes off the tracks.
October 2nd, 2025 at 09:59 pm 1759438753
Just yesterday I re-ran FireCalc and used their Investigate function to see what spending level would still give us a high enough predicted success rate.
At $194,500 we have a 100% success rate.
At $207,500 we have a 95% success rate.
Our actual spending in 2024 was about $128,000.
While we're certainly not depriving ourselves with a 128K budget, and I'm not about to suddenly start spending 194K or 207K, seeing these numbers really shows me that a lot of our long time frugal habits just aren't necessary anymore. It's okay to order a drink when we go out. It's okay to get the 1-bedroom suite at the hotel instead of the standard room. It's okay to buy the theater tickets or take the private tour or buy the premium doo-dad that we've been looking at. This is what we saved for all of those years. Now is the time to enjoy it while we are still able. If we don't, we're going to end up with a $10 million portfolio when we're 80 and aren't up to spending it anymore.
October 2nd, 2025 at 10:47 pm 1759441633