Are you hoping for an early retirement? You may want to carefully monitor your 401K to make sure you are contributing enough to ensure you can obtain your goals.
If you manage your money right, you may even become a millionaire. Especially if you take advantage of your employer’s matching 401K programs.
A recent study from Financial services company Fidelity recently stated that the number of 401K accounts with a $1 million balance jumped to 180,000 from 133,800 at the end of the fourth quarter of 2018. This could, in part, be due to a noticeable bump in employer contributions — which are continuing to increase in 2019.
“The average 401K employee contribution amount, in dollars, reached a record level of $2,370 in Q1, a 15% increase over one year earlier. In addition, the average 401K employer contribution, or company match, reached $1,780 in Q1, a record high and a 6% increase from one year earlier,” Fidelity stated in a May report.
401K plans, unlike traditional pensions, are retirement plans in which employees contribute a percentage of their earnings (pre-tax) into an account that companies often contribute to via a matching amount (to a certain percentage). But the 401K can suffer — or enjoy — the benefits of the market, depending on the market’s volatility.
Earlier this year, the inventor of the 401K, Ted Benna, advised workers to start saving early.
“There’s people who make tons of money who don’t become successful at saving, and then there are others, surprisingly, who shock the heck out of me — they don’t make big bucks but they have substantial savings,” Benna said at an event run by The Wall Street Journal. “The key is learning early in life what you’re going to be.”
Remember – you don’t need to make a million to save a million.
According to the WSJ, the average 401K balance is $103,700. But it’s worth noting balances vary greatly depending on age.
Data was reviewed to determine the average amount Americans have in their retirement savings account at each age (as of the first quarter of 2019). Here’s what they discovered.
- 20-29: $11,800
- 30-39: $42,400
- 40-49: $102,700
- 50-59: $174,100
- 60-69: $195,500
The exact amount you should aim to have in your retirement savings account depends on your lifestyle, location, family life expectancy, and other factors. However, most American workers should try to save at least 15 percent of their income each year.
Make sure that you’re saving at least enough to get the full 401K match that your employer offers. Then make a commitment to yourself that you’re going to increase your contribution by 1-2% every year until you get your yearly retirement saving where it needs to be for a prosperous retirement.
The Bottom Line
The amount needed for retirement is different for everyone. Nevertheless, there are benchmarks you can try to hit at every decade of your life. It’s never too early in your career to put a plan together, but it’s never too late to start, either.
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