Transcript:
On this episode of the Personal Finance Podcast, how 401k sprints can make you a multimillionaire, and this is by age.
Whoa. What's up everybody? And welcome to the Personal Finance Podcast. I'm your host Andrew, founder of Master money.co. And today on the Personal Finance Podcast, we're gonna be talking through how 401k sprints can make. QA multimillionaire. If you guys have any questions, make sure you join the Master Money Newsletter by going to master money.co/newsletter and follow us on Spotify, apple Podcast, YouTube, or whatever podcast player you love listening to this podcast on it.
If you want to hop out the show, consider leaving a five star running and review on Apple. A podcast, Spotify, or your favorite podcast player. Now, today we're gonna be diving into what we call 401k sprints, and I'm gonna be introducing this new concept that I think is gonna be freeing for a lot of you out there because you are going to learn that maybe I don't have to be super disciplined for the rest of my life.
Maybe if I get hyper-focused for short periods of time, I can then build a tremendous amount of wealth, be on track to retire, and do anything I want in my life. Because you are pursuing financial freedom. That is why we are trying to ensure that we are saving for retirements and getting our money right so that we have either the option to leave a job or we can leave a job that we absolutely hate.
So freedom is the goal, and we're gonna talk through some of these 401k sprints. Now, you've most likely never heard of a 401k sprint, and this is a term that we have come up with talking through some of these focused and intentional. Periods that are for shorter periods of time, usually anywhere from five to 10 years.
But I'm gonna give you a bunch of options in this episode today where you go all in on maxing out your retirement contributions, knowing that you won't necessarily be sustainable for long term, but you're going all in for a shorter period of time and trying to save aggressively during that timeframe.
Instead of having to save extremely aggressively and trying to max out those accounts for 30 to 40 years, you may have a specific goal and you kind of know where your retirement number is going to be. And so you're willing to pick a window of time where you're gonna get ultra disciplined. You and your family are gonna buckle down and you're gonna start to saving in these retirement accounts, max those puppies out.
And then from there, let compound interest do all the heavy lifting for you. Now the power of compound interest is absolutely amazing. We're gonna show you some of the calculations today in this episode on how cool this is. Now, what this does is it flips traditional retirement ideas on its head, meaning instead of you just saving a small amount over time, which is a tremendous way to save for retirement, but instead of you saving those small amounts every single year, over time, you choose these.
Periods and you can have these short bursts of intensity that allow you if done correctly to have massive long-term results. Now, here's how this works in practice. Okay? You pick your sprint period, maybe your sprint period is even less than five years. Maybe it's five years, maybe it's seven years, maybe it's 10 years.
Or maybe even wanna just. Do a couple of years to get the ball rolling. When it comes to getting your financial life right now, during that time, what is going to happen is you're gonna contribute the maximum amount allowed into your 401k or similar accounts like your 4 0 3 B, your 4 57, your TSP, depending on what your employer sponsored plans are at where you work.
Now, once the sprint is over, you could then either pause or reduce your contributions. Or just stick to the employer match if you wanted to, if it will keep you on target to hit your retirement number. But your invested money continues to compound for decades. So you got these dollars into these retirement accounts, they're gonna continuously compound over time.
Now, some people may be saying, well, isn't this just Coast Fire? No, this is a little bit different than Coast Fire because you're picking a very short timeframe to do some of these sprints. And then you're gonna either decide, do you want to continue investing and or do you wanna take a break for a certain period of time?
So maybe you do a couple years on, couple years off. We'll talk about those scenarios too, and. It'll be more flexible for a lot more people out there. So some people may never have to contribute again. If you get really intense for five, seven, or 10 years, you may be at the point in time where you never have to contribute again.
But if you are out there and you're saying to yourself, well, I just wanna do a couple years at a time, or maybe I wanna do one year on. One year off, but I wanna get really intense for those one years on, then you can do that for sure. Now, the secret behind these 401k sprints is the time value of money.
This is what I want every single person out there to understand. The earlier and the more aggressive you get with these 401k sprints, the more time you have for these contributions to grow exponentially. So every single dollar that you invest in your twenties or thirties can be worth 10 to 20 times more in the future if you get those dollars working right.
Now, so this is why I want a lot of young people out there listening. If you can figure out ways to do some of these 401k sprints early on in your investing journey, those dollars are gonna be so much more valuable than someone who has to start in their forties or fifties. You have no idea how valuable this is gonna be.
And you're gonna see in these examples today as we go through it, how valuable these dollars truly. You have the opportunity to absolutely change your financial life just by going after some of these 401k sprints. Now, what are some examples of people who would actually be interested in a 401k sprint?
One is before a major life change. So let's say for example, you just get married. For example, my wife and I, when we got married, we knew we wanted to have kids later on down the line. During that timeframe, we decided, ooh. We're gonna have some extra income, some disposable income. We're dinks, we have dual income, no kids during that timeframe.
So maybe we should try to save as much as we possibly can during this time. And then when kids come along, obviously things are gonna get a little more expensive. So major life changes is gonna be really, really powerful. Or maybe, you know, in a couple of years you wanna buy a house, you wanna go really hard and make sure you're hitting those retirement accounts before you go out and buy a house.
Or maybe, you know, retirement's coming down the road in 10 years and you need to get the ball rolling. You're in your fifties. You wanna make sure that you have a great retirement. That's a great reason. Or maybe you feel like you're late to the retirement game. You're in your late fifties, early sixties, and you need to get the ball started.
That is another great reason. Or maybe your kids finally left the house. You're in your forties, maybe your early fifties. These major life changes are happening. They finally went away to college. They're on their own now. And now you have some extra income and you wanna do a 401k sprint as well. There's so many different reasons and major life changes that could be happening.
Secondly, is a career peak. Let's say for example, you got a big raise, you got a big promotion, and you've got these extra dollars coming in, and you wanna make sure that you are taking advantage of all the hard work that you are taking on. Meaning you are working hard day in and day out at your day job.
You don't want this money to just get wasted away. You're not working hard for no reason. You're not working hard to buy a depreciating asset like a car that goes down in value every single year. Instead, you wanna make sure that you're preserving this so that you can buy your freedom back. If that's you, that's another great reason.
Or maybe you're just early on in your career, you wanna live lean in your twenties, or you wanna live lean in your thirties and try to get some of these extra dollars working so that you can retire when you want, instead of trying to worry about this later on in life. Or you just wanna do a balance.
We're gonna talk about two on and two off sprints, and you wanna have a balanced approach to saving, but you also wanna live life a little bit. And so you wanna come up with some ideas on how you can do that. It's not about just saving every year, but you can have these short bursts of intense savings that allows you to become financially independent.
Now, first, before we talk through the 401k, I wanna make sure that everybody understands what a 401k is. This is an employer sponsored plan that you have through your workplace typically, and or if you're self-employed, you can look at a solo 401k or for those out there, there's. Roth 4 0 1 Ks, and so we're gonna go through each and every single one of these.
So the contribution limits of 2025, which is the time I'm recording, this is $23,500 for anybody under the age of 50. That's what they can contribute to their 401k. Now, if you're between the ages of 50 and 59, you can contribute up to $31,000 because this includes something called a ketchup contribution.
Now the ketchup contribution is $7,500 this year. And the beautiful thing about these are that they are going up every single. Year now, there is a new catchup contribution that's called the Super Catchup contribution thanks to secure Act 2.0. So people between ages 60 to 63 can contribute $34,750. That is something that is pretty new and a great.
Option for folks who are late to the game. Now, these apply across all, so the traditional 401k, the Roth 401k, a 4 0 3 B, A 4 57 A TSP, et cetera, all of those accounts, this will apply to across the board ketchup contributions. By the way, for those of you who can take advantage of, those are such a powerful tool 'cause they allow you to get.
Extra dollars into these accounts without having to worry so much, you can accelerate your path to wealth even late in the game. So catch contributions are another great reason to do a sprint. Let's say you do an early sprint in your twenties and then you do a sprint. Maybe you do a couple of years sprint in your thirties, then you do another sprint in your forties, and then when you hit your fifties, if you have those catch contributions, getting more dollars in there, man, it's gonna be a powerful, powerful tool that you can use.
Now, what is the difference between a traditional. Verse a Roth 401k. This is very important to note for most people because the tax treatment truly, truly matters. And so you need to understand your tax situation, and I highly recommend if you have a CPA, go to your CPA and say, Hey, which one is better for my financial situation right now?
So a traditional 401k, it means you're contributing with pre-tax contributions. Okay? So you get a tax deduction today, meaning your money grows tax deferred in a traditional 401k, and then it's taxed as ordinary income in retirement when you withdraw those contributions. Now the hope is. You have a lower income possibly in retirement, and so typically you may get a favorable tax treatment if that were the case.
Now, secondarily though is the Roth 401k. Now the Roth 401k is an amazing account because of tax free growth, so this is post-tax contributions, meaning your money's already been taxed and you contribute money to the Roth 401k, but the difference is the money in the Roth 401k grows tax free and you can pull the money out tax free.
Now one big caveat with the Roth 401k that is very, very powerful is there are no RMDs in a Roth 401k, no required minimum distributions in this Roth 401k. Very important to note, because in a traditional 401k or a traditional 4 57 or 4 0 3 B. All of those are gonna have required minimum distributions where you have to pull money from that account.
The IRS says, Hey, I want you to pay taxes at some point in time on this money, so you're gonna be required to pull money outta these accounts. And so you need to understand that. Now, how do you decide between the two? First, number one, always talk to your CPA. If you have a financial advisor in your corner, talk to them and have them look at your tax situation.
Very, very important, but some general rules of thumb. If you expect to be in a lower tax bracket in retirement, a traditional could be a great option, but if you expect to be in a higher or similar tax bracket, a Roth is a great option. Now, here's the powerful thing. We've talked about this a number of times.
Let's say for example, you max out a Roth 401k for 40 years. If you did that at a 10% rate of return, guess what's gonna happen? You're gonna have about $10 million in that Roth 401k 'cause it's incredible what happens when you max these accounts out. But here's the powerful part, about $9 million in that Roth 401k is completely tax free.
'cause they have that tax free growth. So you really wanna make sure that you're not taking this decision lightly. You've gotta look at your situation and decide between the two. And you can also do a hybrid strategy. You can split contributions between both to hedge tax risk if you wanted to go that route too.
So lot of great stuff here as we go through this now, I'm gonna go through the different types of sprints that we're gonna be talking about in this episode, and then we will go through examples of those sprints by age, because I love to give you guys examples. I want you to see what it would look like if you're in your twenties and you started to do a sprint.
Or if you're in your forties and you started to do a sprint, what is this going to look like and how much would you actually have in retirement based on specific rates of return? So first I'm gonna explain all the sprints that we're gonna go through, and then we're gonna talk through this by age. All right, so I'm gonna give you a bunch of different sprint strategies.
So the first one we're gonna be talking through is something called the five year sprint. Now a five year sprint, meaning you are going as hard as you possibly can for five straight years, trying to max out contributions in your retirement accounts and trying to just shove as much money as you possibly can in those retirement accounts.
Now there's a number of different things that you can look at here. Now. For example, if you start at age 25 and you aggressively max out your contributions for five years and then stop, by age 65, you'd have $1.5 million. So just for contributing and maxing it out for five years, you'd have 1.5. And another example is if you started at age 30, you'd have 1.4.
Or another example is if you started at age 40, you'd have $743,000. Early sprints equals maximum compounding power. But these five year sprints are something we're gonna look at by age. Then there's the seven year sprint. So if you're someone who is saying to yourself, nah, that's not enough money. When we reach that point in time where we get to say, $1.5 million, I wanna have a lot more in retirement than then we can look at a seven year sprint and we're gonna look at this middle ground to see what the difference is.
Next is a 10 year sprint. Now, this is one a lot of people in the financial independent space who are trying to retire as fast as they possibly can. They will look at these 10 year sprints and people have become completely financially independent by just really going hard for 10 years. We'll do an entire episode talking through how to become financially independent in 10 years or less.
'cause it's a very important concept that I think a lot of people are looking to do. They wanna become financially independent as fast as possible. What does that look like? And then we're also gonna talk about the two on two off cycle. So the two on two off cycle is gonna look like this. You go really hard for two years and you max out contributions in your retirement accounts.
Then you take your foot off the gas. You can either ease off for two years and or reduce your contributions to zero for two years, and then you repeat this over and over again. So this is going to allow you to. A max out contributions in certain years where you know you can go hard, you have some extra dollars on hand, maybe you just got a raise and you're kind of feel it as much, and so you can get those extra contributions into those accounts.
And then some other years, maybe you're taking the foot off the gas. Now what are some examples of people who would do a two on two off? So maybe for example, you know, you get a big bonus at the end of every year, and so some years you wanna take that bonus and you want to enjoy the money. And then some years you wanna take that bonus and you wanna make sure you're maxing out your retirement accounts so that you can prioritize freedom.
That's a great example. Or when you get a tax return every year, let's say you get a bigger tax return every single year, when that money comes in, you can decide one of two things. Do I wanna max out the rest of these accounts with this tax return, or do I wanna spend this on something that brings me value?
Now when it comes to financial windfalls, the balanced approach to those is to do the 50 50 method. Meaning 50% goes to you and you could spend it on whatever you want and 50% goes to future you, and you can put it towards retirement, emergency fund, those types of things. That's the balanced approach that I like to take.
But for some of you who want to do some sprints, you're gonna wanna take these financial windfalls and stuff them into as many investment accounts as you possibly can during those sprint. Periods. And so for some of you there a balanced approach of two on two off might be the best ways to go. Now this is gonna emphasize that consistency over time can lead to massive results if you do two on two off.
So these are the different cycles I'm going to talk about. You can creatively come up with 401k sprints that matches what your lifestyle is as well. So think through this. Maybe you wanna do. Six months on, six months off throughout the year, and you wanna split the year into two, maybe you wanna do one quarter on, one quarter off, and you wanna split the year up so you have enjoyment times and you have buckle down times where your family really buckles down.
All of these can be ways that you can creatively come up with this. And so if you have some new ideas as we go through this by age, I wanna hear them. I wanna hear what you plan on doing. And if you plan on doing some of these sprints, leave 'em in the comments on YouTube or Spotify and or you can send them over to me via email as well.
But I wanna hear what type of sprints. You are considering doing. Now let's get in to some scenarios of 401k sprints by age. Alright, let's look at these 401k sprints by age. We're gonna start off with the 20. So if you are in your twenties and you're listening right now, I want you to seriously consider this because you have so much time for your money to compound.
You have no idea how valuable each of these dollars are. We have something called the wealth. Builders Matrix, if you go to master money.co/resources and what that shows you is every single dollar you invest based on how old you are, what are those dollars gonna be worth By the age of 65, it's gonna make you rethink going out for drinks with friend and getting that $20 cocktail because if you're at the age of 25, every single dollar.
That you spend can be worth 50, 60 bucks depending on where you invest those dollars. And so making sure you just have the understanding of opportunity costs and the trade offs here can be really, really important. Now, let's dive into this. I'm gonna give you the assumptions that we have in this episode, and you can run these simulations based on how you wanna do this too.
So we did the annual return for all of these at 8% rate of return and try to keep a balanced rate of return as we went through this. The annual contribution for 2025 is. $23,500. That is how much we are putting in for these sprints. The starting balance is $0. So this person, when we go through these scenarios, they have no dollars invested yet.
So if you already have some money invested, you're gonna be ahead of the curve compared to some of these examples. Also, the employer match is excluded in these examples, so if you do get an employer match that is excluded, which is also icing on top, there's the stake and the sizzle, and what we're talking through today is we're talking through the stake.
All these extra things added on top are the sizzle for you that are gonna help you improve your situation as time goes on. Also, the contributions will stop after the sprint period. I want you to note that. So if it's a five year sprint, after five years, you stop contributing based on these scenarios to make this as accurate as possible.
And then when we go through this, you could think of this as. And your Roth, or you can think of this through your traditional, so first we're gonna do a five year sprint, starting at age 25, so age 25 to age 30, where you do a five year sprint and your total contributions are gonna be $23,500 per year.
That's over the course of five years, so you're contributing $117,500. So at the age of 65, if you did this just a five year sprint. Didn't add any more money. Just remember all the assumptions. Your balance would be $2,038,000 by the time you retire. That means your growth is gonna be $1.9 million worth of growth over that timeframe.
So if you look at the 4% rule and you withdrew 4%, which is gonna be something we're gonna be challenging in future episodes here, but when we look at the 4% rule, that means you could withdraw $81,535 per year in retirement if you wanted to do this. Doesn't count social security or anything else that you could have.
$81,535 per year just for five years of buckling down in your twenties. That is absolutely incredible. That is how powerful compound interest can be for you by putting $117,000 in this account so you get to your first a hundred K. This is why I tell you as early as possible, get to your first a hundred K because this is going to change your financial life if you can do it.
Early and often. Now, let's look at a seven year sprint where you go from age 25 to age 31. Okay? So your total contributions during that timeframe is gonna be $164,500. So you're adding two extra years here. Your final balance at 65 is $2,766,000. So you do this for two years longer, and guess what? You have $766,000 more just by buckling down for two more years, and your contributions are gonna be about an extra 50 grand right around there, roughly.
Now your growth is $2,601. So if you had this in a Roth 401k, you'd have $2.6 million that you could have grown completely tax free. Hugely powerful. Okay? And with the 4% rule, it's $110,654 is what you could spend every single year. Not counting social security, not counting pensions, not counting any other income you have, if you have rental income or any of that other stuff, that is how much you'd be able to withdraw with 4%.
Maybe you wanna go 5% that is coming up on another episode, 10 year sprint. So if you're in your twenties, you wanna do a 10 year sprint or age 25 to 35. Let's talk about it. Total contributions. $23,500. Okay. And so you have contributed in total 235. Thousand dollars. Now the cool thing is, most likely during that 10 years, the IRS is gonna increase those contribution limits 'cause they start to increase those limits when inflation happens and a lot of other different factors.
And so that is something where you actually will probably even have more in there as time goes on. Your final balance at age 65 would be 3.98. Million dollars over $1.2 million more than the seven year sprint because you got started from age 25 to 35. So let's just say for example, that you decide, I'm gonna do this.
I'm 25 now. I'm gonna do everything in my power to make sure I can earn $23,500 extra in order to put these accounts for 10 years because I wanna make sure that I have almost $4 million in this account by the time I retire. Really, really powerful stuff. Why is this powerful? Because if you get this started early, this is not contributing another dollar later on.
You could coast the rest of the way if you wanted to. This is why Coast Fire and that movement is so powerful, but this is gonna give you more flexibility. Now the growth on that is $3,753,000. So again, in a Roth 401k, that would be the growth, completely tax free. Really cool stuff. And then with the 4% rule.
You can withdraw $159,555. Now let's go one more in the twenties, which is the two on two off strategy. Okay, so two on two off, meaning you are contributing for two years. You skip two and you repeat five times for 10 years. Total contributions are over 20 years. Okay? So you're gonna do this 10 years of contributing money to your Roth 401k, and 10 years not contributing money.
So that means your total contributions are gonna be $235,000 and your final balance, because you're two on two off, is $2.931 million. So look at the difference there. A 10 year sprint where you don't do two on two off, you're going to be contributing the same amount of money, $235,000 into this account.
But if you did the 10 year sprint earlier. You would have $3.988 million, but if you did two on two off, you would only have $2.9 million, which is still a great outcome, but it's a million dollar difference if you did the sprint early on and got your money invested early and often. Very important to note.
Because getting dollars invested early is just one of the most powerful things. This is why we talk about this time is your greatest ally when it comes to investing. Now, even if you don't have a lot of time, we're gonna talk about that in a second here. If you're in your forties, if you're in your fifties, getting those investment accounts maxed out is still really powerful, and we're gonna show you here next.
So let's jump into the thirties next. All right, so if you're in your thirties, then we have something that we are looking at here. For this scenario, we're gonna assume the same exact stuff, okay? So we're gonna assume 8% compounded annually. In your thirties, we're gonna assume the annual contributions are $23,500.
Now, we're also going to look at the median investible assets for someone H 30 from the Federal Reserve data. And we're gonna look at this and say, okay, well the median investible assets for someone in their mid thirties is $37,000 according to the Federal reserves. So we're gonna assume you have $37,000 to make this realistic employer match in your thirties is gonna be excluded and contributions stop after your sprint period again.
So same exact thing as last time, except we're gonna assume that you have a starting balance somewhat in your 401k. So a lot of you out there who are in your thirties, you started investing. If you haven't started investing yet, that's completely okay. We'll get started now. Now for a five year sprint for someone again.
We know how much we're contributing $117,500. If you started between age 30 to 35, your final balance would be $1,786,000. So let's think about this for a second. Okay, so this person started five years later than the person who started at age 25 and starting five years later actually is going to cost them.
About $300,000. Okay. Which is a big, big difference in that growth because at least they still got that sprint early and often. But they already had $37,000 invested, and so because they had a little bit invested, this grew still a $300,000 difference. It'd be a much larger difference if you had a $0 balance.
Now, the seven year sprint is gonna be something where we're gonna contribute $164,500 in your thirties. Okay. And your final balance is gonna be $2.281 million, meaning with the 4% rule, you can withdraw $91,263,000. So if you're someone in your thirties and you're saying to yourself, okay, I'm getting started at age 30.
I feel like I'm behind, but you're not really, when you're in your thirties, you have so much time left. So many people in their thirties come to me and say, I didn't start yet. What do I do? And they start to panic. You are not behind. You are going to be okay, and you have so much time for your money to compound that you should not worry.
It is never too late to get started investing. I don't care if you're forties, I don't care if you're in your fifties. You can still write the ship. And so that's what this episode is trying to show you is you can write the ship, you just gotta buckle down a little bit, and that's okay if you have to buckle down a little bit.
Sometimes we have to make sacrifices. But discipline, when it comes to your finances, the way I define discipline is that you are putting your future self ahead of your current self. So if you can do that just for a couple of years, it can make a massive difference. Now, when you're in your thirties, I know you're in the messy middle.
You maybe are getting married, you maybe are having kids, maybe you have multiple kids in daycare, and it gets harder and harder as time goes on. That's okay. If we can find some years where we can hit some sprints, it's gonna massively change your retirement plan over the course of the long run. Now, let's say you took your entire thirties and you decided I'm gonna sprint my entire thirties from age 30 all the way.
Down to 39 40. Okay, so your total contributions there, there'd be $235,000 and your final balance at age 65 would be $3 million. Meaning you could withdraw $122,291,000 and the growth of your money is still $2.8 million. So your money made you $2.8 million without you having to go in and work every single day.
Really powerful stuff. Your money can work way harder than you ever can, and so I want you to remember that and get those dollars working. If you did that over the course of 20 years, you'd have $2.32 million and you'd be able to withdraw $92,000. So folks in your thirties, I want you to look at some of these takeaways here.
Okay? Even with just five years of intense saving in your thirties, you can still hit nearly $1.8 million. That's number one takeaway I want you to think about. Number two, a 10 year sprint pushes you to $3 million, despite starting with only $37,000. Really powerful stuff because for 10 years you buckle down.
You have $37,000 in that account. You buckle down, boom, get to that point in time where you're making big progress and all of a sudden it changes your life. Two on and two off still nets you $2.3 million. Proving that flexibility doesn't kill your retirement plan if you wanna have a little more flexibility.
But one thing to note is the later you start, the more you need to contribute in order to hit the same retirement goal for someone in their twenties when they started earlier than you. They don't have to work as hard as you do in your thirties, but that's okay because in your thirties, you're likely gonna be earning more money.
They're gonna have the ability to get these dollars working and investing. Next we're gonna talk about the forties. Alright, in your forties, here are some of the assumptions that we are gonna look at. 8% return. Again, annual contribution is gonna be maxing out at $23,500. The starting balance is going to be what the Federal Reserve data shows is the I median investible assets for people age 40 and above, which is $58,000 is what they're gonna be starting with in your account.
And then the employer match is excluded. Contribution stop after this sprint period, meaning you're not gonna contribute to anything else. So just remember this as we go through all these scenarios. If you continue to contribute, these numbers are gonna be much higher. But these are for these sprint periods and these shorter gaps that show you now in your forties, you got a lot of things you gotta deal with.
You got kids who are getting older. Maybe you gotta do a lot of youth sports. Your kids are going to college. You're having a lot of life changes. You have aging parents you have to take care of. And so there's a lot of things that you are dealing with during this decade, but that is okay because if you could find these sprint periods, if you got started late, it's okay.
'cause you're still gonna make a tremendous amount of wealth. Watch this. So if you started from age 40 to 45 and you put $23,500 per year, that's $117,000. Your final balance at age 65, this is the first one coming in under a million, is $951,567. So with the 4% rule, you can withdraw 38,000. $62. So if you have social security, you have some other income coming in.
That's a great starting point, is that you at least buckled down for five years and boom, you were able to produce a million dollars in retirement that you can utilize for almost $40,000 per year. Now this is at an 8% rate of return. The market returns 10%. These numbers are gonna be drastically higher. If it returns less, they're gonna be lower.
But just making sure that we note that, hey, the s and p 500 over the course of the last 30 years has returned close to 10% to investors. But we always wanna be conservative when we are planning for retirement. Now seven year sprints from age 40 to 46, your total contributions to be $164,500. And the total amount of money that you would have, your final balance would be $1,184,000, meaning you could withdraw 47,000.
$394 if you did a seven year sprint, that my friends is a much better number, I think, than a five year sprint. So if you're in your forties and you want to have a better retirement, I would sprint longer if you could, because since you're starting late, you just gotta work a little harder and you gotta contribute more money for longer periods of time.
And honestly, if you're gonna do this, I would also continue to contribute after this. But the sprint is just to get you started to get that bulk going. Now for a 10 year sprint, you would contribute again. $235,000 and your final balance at age 65 would be $1.5 million, meaning you could withdraw $62,183 per year with the 4% rule, and the growth of your money is gonna be $1.3 million.
So still a tremendous amount of money for starting in your forties. And because of this, it could be very, very. Now think about this. You're gonna get to age 50, and all of a sudden if you decide you want to continue to sprint, you have catch up contributions in your corner, meaning you can contribute even more money in these accounts than you could in your forties.
And so that's going to allow you to even pick up the pace. If you wanted to get to a three, five, $7 million retirement, there are extra things that you can do. And then two on and two off, if you did that, your final balance would be $1,313,000 and the growth would be about a million bucks, and your withdrawal would be $52,522 a year that you could withdraw in retirement.
As your income, so some key takeaways for your forties, a five year sprint can still get you to 1 million bucks. That is really, really cool and a really powerful lesson for a lot of people. It is never too late to get started. A 10 year sprint can get you close to $1.5 million. A huge chunk of retirement funding, even with a shorter compounding runway.
So even though your compounding runway is shorter, you can still get to 1.5 million with a 10 year sprint. Two on and two off still builds $1.3 million. So let's say you realize, oh, I need to get started on retirement. Well, over the course of the next 20 years, two on two off will still get you to 1.3 million, and the time is shorter.
So the contributions are gonna matter more in your forties than for somebody in their twenties. It's gonna matter a lot more for you now. And so getting more in is really, really important and buckling down. So next we're gonna jump into the fifties. So in your fifties, a lot of things are gonna happen in life.
A lot of life changes are gonna happen. A lot of shifts will happen. You're gonna really start to think about retirement, and so you wanna make sure that you are taking advantage of these catch up contributions. So in this scenario, we ran it at an 8% rate of return again. Your annual contribution's gonna go up.
We wanna give you that catchup contribution to $31,000, uh, which is the catchup contribution for 2025 is $7,500. And so the starting balance, we looked at the federal reserve's median balance for people in their fifties, which is $95,000. And so that's where your starting balance is gonna be in these calculations.
And then obviously, contributions stop after the sprint period, and employer match is excluded in this as well. So for a five year sprint, for someone who sprints for five years, from age 50 to 55, your total contributions are gonna be $155,000, and your final balance at age 65 would be $492,201, and the growth of your money would be $242,000, and you could withdraw $19,688.
So I would highly recommend for those who start in their fifties, if you're starting late, do these sprints for longer. Do 'em as long as you possibly can, so you can get to the point in time where you have a tremendous retirement. Now, if you did it for seven years, your final balance would be $603,000, and the growth of your money would be 386,000.
And the 4% withdrawal rule, you could withdraw $24,161 in that scenario. Now with a 10 year sprint, you would have $771,000 and you could withdraw $30,000 per year if you did it from age 50 to 60. This is one where if you're starting late, I would highly recommend that you do that. Now, some of you may have more contributed on that account already.
It's gonna make a big difference if you do, because this is start with $58,000. If you have a hundred grand or maybe a couple hundred grand inside of your 401k already, then this is gonna make a big, big difference to what these numbers actually are. And then two on and two off. So compounding stops at 65 so that all the cycles will complete, but two on two off would have a final balance of $677,000.
And the 4% rule would be $27,100 is what you withdraw on that money. So some key takeaways is even with five years of maxing out, you can almost have $500,000 added to your nest egg for retirement. That can make a big difference for a lot of people out there. A 10 year sprint gets you close to $800,000.
Huge difference for a lot of people out there. And even the two on and two off, get you to $680,000 during this scenario. Proof that intensity and time still works in your favor, even if you don't have as much time as you would like. And so this is where I want most people to realize it is never too late to get started.
If you're listening to this and your parents haven't caught up, for example, then send this to your parents so they understand that they could still get the ball. Rolling. Now, we're also gonna do scenarios for the sixties because people need to note that this is going to be something that you could do.
So let's look at the sixties. We're gonna do the same rate of return, 8%. The annual contribution is going to be the super catchup contribution. So $34,750 is what you can contribute. And the starting balance, the medium investible assets for people in their sixties is $145,000. Man, that's tough to hear 'cause it's not enough to retire on.
And so we're trying to change that right now for all of you, uh, and making sure that you get a higher number there. Employer matches excluded on this one too, and the contribution stop after the sprint. So a five year sprint from age 60 to 65, meaning that what would happen here, so your total contributions, because you could do $34,750 would be 430,000.
One year of $31,000, meaning it's not, or 60 is when you can start to have that super catch up contribution. So we're looking at $170,000 invested. The final balance at age 65 we $430,410. Wow. I mean, I think that is incredible and that is something where you can still withdraw $17,216. So with a seven year sprint, the final balance would be $505,000, and you could have $20,000 per year in additional income, and a 10 year sprint would be $586,000, and you could withdraw $23,457 per year plus on the two year two off, which I wouldn't recommend in your sixties.
This would be from age 60 to 80. And so really for most people, this isn't gonna work for them, but we did the scenario anyway. Your 4% withdrawal rule would be $19,200 per year is what you could have, and your final balance would be $480,000. So there's no reason if you're in your sixties and getting started, there's no reason to do two on two off.
You need to buckle down and get the ball rolling. So some key takeaways for the sixties. Even with just five years to save, you can still add nearly $430,000 translating to $17,000 per year in retirement. A 10 year sprint gets you close to $600,000 or about $23,000 a year in income. And the two on two off still can get you $20,000 per year, but you gotta do it till you're 80, which is tough.
So the Super catchup contributions under secure Act 2.0 are incredibly powerful for people in their sixties. So some final takeaways from this episode that I want everybody to understand. As we start to wrap this up is that your twenties and thirties compounding does the heavy lifting. Forties and fifties, your contributions are gonna do a lot of the heavy lifting and in your sixties, ketchups and time to income do a lot of the heavy lifting and so foremost of you out there.
The earlier you can get started, no matter how old you are, starting today is one of the most powerful things. Now, if you're planning on doing a 401k sprint, I want to hear from you. I wanna hear what you're doing also. If you wanna get coached live by me, master Money Academy is the place to be. We have the Wealth Builders journey in there that can transform your finances through the Wealth Builders journey.
So make sure you look down below. Uh, we will link up Master Money Academy. That is our community of wealth builders who are people who are trying to get their finances right. It is a great spot to be if you're doing a sprint, if you wanna stay motivated for a sprint. 'cause we do three things there. We coach you up through your finances.
Number two, we help you find a community of other people who are doing this as well, who are trying to become financially independent or trying to become folks who are financially free or just wanna have the option to leave their job if they want to. In addition, we're talking through all kinds of stuff, like how to increase your income, how to save more money.
There's so many good conversations in Master Money Academy. And then number three, we're there to motivate you. We're there to motivate you every single week so that you can stay the course, you can stay disciplined and you can reward your future self by making better financial. Decisions, so would highly encourage every single one of you to check out Master Money Academy down below.
It is a place where we are spending lots of time. There I am in there all the time chatting with people, and so it's really, really powerful. Listen, thank you guys so much for being here on this episode. I truly appreciate each and every single one of you. We will see you on the next episode.
