Use These 401 (K) Savings Goals Based on Your Age
When it comes to your 401 (k), it’s never too late to start saving, but how much should you save? Since your savings tend to increase as you get older, looking at average savings by age group can help track your progress if you rely on your 401 (k) for retirement. Here are some new numbers for 2020 , according to Fidelity.
It is worth noting, however, that this is not a complete assessment of your retirement readiness and does not take into account your savings, possible inheritance, or other retirement accounts. Since only 32% of Americans have a 401 (k), the retirement calculator will offer a more accurate estimate of your overall retirement savings progress. In addition, Fidelity provides averages, not medians, which means they bounce higher due to fewer millionaires in the dataset.
401 (k) residues by age
For each age group, Fidelity-recommended benchmarks are included to help you decide if you’ve met a goal or if you need to increase a percentage of your income to catch up.
Age 20-29
- Average balance 401 (k): $ 10,500
- Average contribution rate: 7% of the remuneration.
- Goal by 30: Save as much as your annual salary
It is not easy to save money in your twenties – many people are new to the job market or still in school – but it is always good to put off whatever you can as early as possible, since compound interest is definitely your friend . A dollar saved at twenty is worth the $ 10 saved at fifty.
Age 30-39 years
- Average balance 401 (k): $ 38,400
- Average contribution rate: 8% of the remuneration.
- Goal by 40: 3x your income
By the time you’re thirty, you could have gotten a promotion or made more money — and with any pay increase, you might want to automatically increase your contribution percentage so you stay on track.
Age 40-49
- Average balance 401 (k): $ 93,400
- Average contribution rate: 8% of the remuneration.
- Goal by age 50: 6 times your income
These are the years of your peak earnings, and by now your student debt has probably become more manageable or even paid off by your mid-forties .
Age 50-59
- Average balance 401 (k): $ 160,000
- Average contribution rate: 10% of the remuneration.
- Goal by age 60: 8x your income
Savings lag? Not everything is lost. The IRS allows this age group to use so-called “ additional contributions, ” whereby members can contribute an additional $ 6,000 per year into their 401 (k).
Age 60-69
- Average balance 401 (k): $ 182,100
- Contribution rate: 11% of the remuneration
- Goal by age 67: 10x your income
Many people start retiring or cut their 401 (k) balance at this age, which means that the average balance doesn’t change much. This is the age when your balance starts to drop.
Age 70-79 years
- Average balance 401 (k): $ 171,400
- Contribution rate: 12% of the remuneration.
- Goal by 79: Increase Your Income 10x
The recently adopted SECURE ACT allows people to refrain from receiving the required minimum payments (RMD) from 401 (k) to 72 years instead of 70 and a half years. Most retirees will start withdrawing money at the age of 70, so the average total balance is less than the average for the 60-69 age group.
Again, if these numbers scare you, don’t worry – they don’t necessarily represent the full picture of your finances. Then you might be wondering: how much should you save for retirement in general? Ten times your income is a general rule of thumb recommended by Fidelity, but it can increase or decrease depending on your standard of living or expenses. If you are unsure of what to aim for, contact a financial advisor who can help you refine your savings plan.
This story was originally published on November 12, 2020 and updated on March 10, 2021 with new information.