Does a 401(k) Continue to Grow After Retirement? What 81 Rolling 20-Year Periods Show

By Craig Wear, CFP® | Last reviewed: October 28, 2026

Does a 401(k) continue to grow after retirement: yes, the investments keep working, but the withdrawal rule decides whether the balance actually rises.

Yes. A 401(k) continues to grow after retirement as long as the money stays invested: the funds inside keep earning, or losing, market returns, and only new contributions stop. In Shiller’s 1926 to 2025 market data, a 60/40 portfolio ended 20 years with more purchasing power in 76.5% of periods at 3% withdrawals, but 30.9% under RMDs.

Does a 401(k) continue to grow after retirement?

A 401(k) continues to grow after retirement whenever its investment return in a given year exceeds what is withdrawn and charged in fees. Retiring changes the cash flowing in, not the market exposure: payroll deferrals and any employer match stop with the last paycheck, while the mutual funds, collective trusts or stable value fund already in the account keep their positions.

So the honest answer has three parts. The investments keep earning (or losing). The balance rises only in years when that return beats withdrawals plus fees. And the meaningful test is purchasing power, because a balance that grows 2% a year while prices rise 3% is shrinking in real terms.

What the account earns depends on the mix inside it; average return figures by allocation and age are covered in average 401(k) return by age. This page focuses on the part those figures leave out: what happens to the balance once money starts coming out.

How often does a 401(k) compound?

A 401(k) has no compounding schedule, because it is not a savings account paying a stated rate. Under SEC Rule 22c-1(b)(1), a mutual fund must compute its net asset value “no less frequently than once daily,” Monday through Friday, so the account value reprices every business day.

Compounding happens when dividends and interest paid by the funds are reinvested in more shares, which then earn their own returns. Stock funds commonly pay dividends a few times a year and bond funds often monthly, but each fund’s prospectus sets its own schedule. The mechanics of earnings inside a tax-deferred wrapper are explained in do traditional IRAs earn interest, and they work the same way in a 401(k).

The practical consequence: “compounding” in retirement is a long-run average of uneven years, not a fixed curve. In the Shiller series, a 60/40 mix lost purchasing power in 27 of the 100 calendar-year periods from 1926 to 2025, even though it averaged 5.54% a year after inflation (8.65% before inflation).

What do 100 years of market data show about growth during withdrawals?

History says a retirement portfolio usually keeps growing in real terms at a 3% withdrawal rate, does so a little more often than not at 4%, and usually does not under RMDs. The table is a Q3 tabulation of Robert Shiller’s public data set covering every 20-year window that starts in January 1926 through January 2006.

Source: Q3 tabulation of Shiller ie_data.xls (file dated October 2026). Withdrawals taken each January before that year’s return; annual rebalancing; no taxes. “1.37x” means the ending balance bought 1.37 times what the starting balance did. No window was fully depleted within 20 years.

Three readings matter for planning. First, the more conservative 40/60 mix did not protect purchasing power better over 20 years; it ended higher less often at every withdrawal rule tested. Second, the starting decade mattered more than any rule, as the next table shows. Third, a “safe” result in nominal dollars (90.1% at 4%) overstates how often the money actually kept up with prices (60.5%).

Source: Q3 tabulation of Shiller data, 60/40 mix. Counts of windows ending with a higher inflation-adjusted balance after 20 years.

Not one retirement that began in the 1960s kept its purchasing power at even a 3% draw, because high inflation in the 1970s eroded both stocks and bonds. Every 1980s start did at 3% and 4%. Someone retiring in 2026 cannot know which kind of decade lies ahead, which is why the spread of outcomes matters more than the average.

Why do RMDs make a 401(k) shrink in real terms after 73?

RMDs shrink a traditional 401(k) in real terms because the required percentage climbs every year while long-run portfolio returns do not. The divisor comes from the Uniform Lifetime Table in Treas. Reg. 1.401(a)(9)-9(c), and the required withdrawal equals the prior December 31 balance divided by that divisor (full table: Uniform Lifetime Table 2026).

Source: divisors from 26 CFR 1.401(a)(9)-9(c); comparison return is the Q3 tabulation of Shiller data.

Two statutory details change how this should be read. Under IRC section 402(c)(4)(B), an amount “required under section 401(a)(9)” is not an eligible rollover distribution, so an RMD cannot be moved back into a 401(k) or IRA. But nothing requires that the after-tax proceeds be spent. An RMD forces money out of the tax-deferred wrapper, not out of the market; a retiree who does not need it can reinvest it in a taxable brokerage account, where future dividends and gains are taxed under the ordinary taxable-account rules.

That is why the 30.9% figure describes the 401(k) itself, not total household wealth. Across the 81 windows, cumulative RMDs over 20 years had a median value of 1.17 times the starting balance in real terms (range 0.66x to 2.46x), all of it ordinary income in the year taken.

The age clock is set by IRC section 401(a)(9)(C): the applicable age is 73 for those who reach 72 after 2022 and 73 before 2033, and 75 for those who reach 74 after 2032. The IRS RMD page sets the first deadline at April 1 of the following year and a 25% excise tax on any shortfall, 10% if corrected within two years.

Worked example: an $800,000 401(k) at age 73 in 2026

Consider a hypothetical retiree born in 1953 who turns 73 in 2026 with $800,000 in a traditional 401(k) at December 31, 2025, invested 60/40. The 2026 RMD is $800,000 divided by 26.5, or $30,189, and the required rate rises every year after that. The figures below are Q3 calculations using 2026 IRS figures applied to the historical windows; they describe the past, not a promised outcome.

• Median historical window: after 20 years of RMDs the account held about $677,600 in today’s purchasing power (0.847x), while RMDs had paid out about $933,600 in today’s dollars.
• Weak window (1966 start): the account fell to about $328,000 in real terms (0.41x).
• Strong window (1982 start): the account rose to about $1,736,000 in real terms (2.17x), and the RMDs grew with it.

The tax side follows the account. Each RMD is ordinary income; for a married couple both 65 or older in 2026, the standard deduction of $32,200 plus two additional amounts of $1,650 shelters the first $35,500 of total income, and the senior deduction of up to $6,000 per person phases down by 6% of MAGI above $150,000. RMDs also count toward the income test that makes up to 85% of Social Security taxable once combined income passes $32,000 to $44,000 for joint filers. The same thresholds matter when sizing 401(k) withdrawals after 59½.

Can you keep contributing to a 401(k) after you retire?

No, not to the plan of an employer you have left; 401(k) deferrals come only out of pay from the sponsoring employer. A retiree who takes a new job can join that employer’s plan at any age, up to $24,500 for 2026 plus an $8,000 catch-up at 50 or older, or $11,250 at ages 60 to 63 (IRS Notice 2025-67).

Working longer also affects the RMD start. Section 401(a)(9)(C)(i) lets a plan delay RMDs from the current employer’s 401(k) until April 1 after the year of retirement, but clause (ii) withholds that delay from anyone who owns more than 5% of the business. The details, including why IRAs and old 401(k)s get no such delay, are in the still-working exception.

How do fees and the order of returns change post-retirement growth?

Fees and the order of returns are the two drags that decide whether a withdrawing portfolio grows. In the Q3 tabulation, a 1% annual fee turned the median 4% outcome from 1.37x to 1.01x the starting purchasing power and pushed the worst case (1966 start) down to 4 cents on the dollar in real terms. DOL’s own illustration finds a 1 point fee gap cuts a balance by 28% over 35 years; plan-level fee benchmarks are covered in 401(k) fees.

The order of returns matters because withdrawals sell shares during early losses that are never recovered. In the tabulation, 1966 and 1982 starts both faced the same 4% rule; the first ended at 0.18x and the second at 5.04x. That gap is sequence of returns risk, and how many years each withdrawal rate tends to last is modeled in how long will my money last.

Does money grow differently in the 401(k) or in a rollover IRA?

The growth rate depends on the investments and their costs, not on the account type, so the same fund grows the same way in either place. The differences are in the rules around the money, summarized below; the broader decision is covered in what to do with your 401(k) when you retire.

Sources: 26 U.S.C. 411(a)(11); IRS RMD FAQs. Older guidance often still cites the pre-2024 $5,000 cash-out threshold.

Where do Roth conversions fit if the goal is continued growth?

Roth accounts are the one place where retirement money can keep compounding for life with no required withdrawals for the original owner. The IRS states that withdrawals are not required from Roth IRAs or from designated Roth accounts in a 401(k) or 403(b) while the owner is alive, so the RMD drag shown above does not apply to converted dollars.

A conversion is taxed as ordinary income in the year it happens, which is why retirees often look at the years between retirement and age 73, when income may be lower. In the worked example, $200,000 converted before RMDs began would have cut the age-73 RMD base to $600,000 and the first RMD to $22,642. Whether that trade makes sense depends on today’s bracket versus later ones; the 2026 24% bracket tops out at $201,775 single and $403,550 joint. The mechanics are explained in what is a Roth conversion, and a financial professional can model the tax cost against the projected RMD path. Once RMDs begin, the choices for unneeded withdrawals are laid out in what to do with an unneeded RMD.

Frequently asked questions

This article is for educational purposes only and is not individualized investment, tax, or legal advice. Consult a qualified professional about your specific situation.