If you have a 401(k) plan with your employer, you may want to contribute as much as you can to maximize your retirement savings. But, how much do you need to contribute to have enough in retirement? It will depend on where you are in your career and your age.
Usually, when you enroll for a 401(k) account, your employer will automatically deduct part of your paycheck and deposit the funds in your 401(k). The money will be allocated to specific investment options that you picked.
How much can you contribute to a 401(k) in 2024?
For 2024, the elective deferral limit for employees who participate in an employer-sponsored 401(k) plan is $23,000, up from $22, 500 in 2023. If you are age 50 or older, you can contribute an additional catch-up contribution of $7,500, for a total of $30,500.
If the company offers an employer match, the combined employee and employer contributions limit is $69,000, up from $66,000 in 2023. For people age 50 or older, the combined limit goes up to $76,500.
What is a good percentage to put in 401k?
Most retirement experts recommend that you contribute 10% to 15% of your paycheck toward your 401(k) account each year. This percentage should include both the employee contributions and the employer match.
If you can afford a higher percentage contribution, the better; however, you should watch out so that you don’t exceed the allowed maximum contribution.
If your employer offers a match, you should contribute as much as possible to collect the full match.
Is 7% too much for 401K?
The ideal contribution rate for 401(k) may depend on your age, income, budget, and financial goals, but a sweet spot is 10% to 15%. Consider your overall financial goals, including your short-term needs, emergency savings, and long-term goals so that you strike a balance with your retirement savings goals.
If your employer offers a match, you should contribute enough to collect the full match. For example, if your employer offers a 7% dollar-for-dollar match, you should put in at least 7% to get the maximum match. You should take full advantage of the company match because it is essentially free money offered by your employer. This will add up to 14% contribution of your paycheck.
If you start saving for retirement early in life, you will have a long time horizon for your money to compound, and you can increase contributions over time as you free up more money. However, if you start later in life, especially in your 40s and 50s, you may need to contribute as much as you can (or max out) to make up for the lost time.
How much should I have in my 401k at 25 to 30?
Based on data from Empower, the average 401(k) balance for ages 25 to 30 is $16,371, whereas the median 401(k) balance is $6,164. Once you get your first job, you should try to save as much as you can to benefit from the compounding effect earlier.
By age 30, Fidelity recommends saving the equivalent of one year’s salary in your 401(k) plan. For example, if your annual income is $48,000, you should target to have saved $48,000 in your 401(k) account by age 30.
How much should I have in my 401k at 30 to 35?
The average 401(k) balance for workers aged 30 to 35 who are enrolled in Empower is $33,135, with a median 401(k) balance of $12,169. If you started saving for your retirement late, you should try increasing the contribution percentage by a couple of points.
So, if you contribute 7% of your paycheck to your 401(k), you can increase this percentage to 8 – 10%. Also, if you get a bonus payment or a raise during the year, you can increase the contribution percentage up to the annual contribution limit.
How much should I have in my 401k at 35 to 40?
The average 401(k) balance for workers aged 35 to 40 is $59,399, with the median 401(k) balance at $12,169. By age 40, Fidelity recommends having retirement savings of three times your salary to be financially secure in your retirement.
Additionally, in this age bracket, you still have about 20 years remaining before the traditional retirement age. You should make the most of your retirement savings opportunities, since you may be in mid-level or senior management.
How much should I have in my 401k at 40 to 45?
Workers in the age 40 to 45 bracket have an average 401(k) balance of $90,774 and a median 401(k) balance of $26,989. At this age, most workers have lots of financial obligations such as family-related costs, mortgage payments, and education costs, but it is a good time to scale up 401(k) contributions.
You should aim to max out your 401(k) contributions every year up to the annual 401(k) contribution limit and use the excess funds to contribute to other retirement plans like a Roth IRA. You should take advantage of the years of potential compounding growth.
How much should I have in my 401k at 45 to 50?
Workers in this age bracket have an average 401(k) balance of $123,686, while the median 401(k) balance is $33,605. At this age, you may be getting a fatter paycheck, and you are in a position to max out your retirement contributions to your 401(k), IRA, and other retirement plans you have.
By age 50, Fidelity recommends that you should aim to have saved a multiple of six times your current salary. So, if you currently earn $80,000, you should aim to have saved up to $480,000 by age 50. You have about a decade remaining to your retirement, and you should boost your savings rate as much as you can.
How much should I have in my 401k at 50 to 55?
Workers who are aged 50 to 55 have an average 401(k) balance of $161,869, with a median 401(k) balance of $43,395. Once you reach age 50, you become eligible to make catch-up contributions. For 2024, you can contribute an extra $7,500 per year to your 401(k) account, in addition to the regular $23,000 contribution. In total, you can contribute $30,500 to your 401(k) in 2024.
If you also have a traditional or Roth IRA, you will be able to contribute an additional $1,000 as a catch-up contribution, in addition to the regular $7,000 contribution limit (up from $6,500 in 2023).
How much should I have in my 401k at 55 to 60?
Workers in this age have an average 401(k) balance of $199,743, with a median 401(k) balance of $55,464. By age 60, you should aim to have saved a multiple of 8 times your yearly salary. So, if your annual salary is $100,000, you should aim to have saved about $800,000 by age 60.
Since you are almost retiring, you should ensure you are well-diversified in your asset allocation. Apart from stocks, you should invest in other assets like bonds, cash equivalents, and real estate to help you protect your investments from market volatility.
How much should I have in my 401k at 60 to 65?
Workers in this age have an average 401(k) balance of $198,194 and a median 401(k) balance of $53,300. At this age, you should have an idea of how retirement will look like for you, based on the amount you have saved.
If you decide to retire at the conventional retirement age of 62, you will have two more years to contribute to your 401(k). However, if you are still energetic and in good health, you can keep working and contributing to your 401(k) account for as long as possible.
How much should I have in my 401k at 65 to 70?
The average 401(k) balance for people ages 65 to 70 is $185,858, while the median 401(k) balance is $43,142. Most notably, at this age, most people have retired, and have started drawing from their 401(k) plans.
Once you reach this age, you should draft a plan on how you will withdraw money from 401(k) to make sure it lasts a longer time. You should also consider the amount you will be receiving from Social Security, and costs you expect to incur in retirement such as Medicare and property taxes.
What percentage are 401k millionaires?
Retirement-account millionaire’s club is rare, and only a small percentage of 401(k) participants reach this milestone. According to a report by Fidelity, only about 2.5% of its 401(k) accounts have balances of at least $1 million, as of August 2023. This represents only about 378,000 participants of its 45 million retirement accounts. In comparison, IRA millionaires make up 2.5% of Fidelity’s IRA accounts, or 350,000, as of August 2023.
Joining the 401(k) millionaires club is a marathon, not a sprint. It requires years of consistent contributions, taking advantage of employer matching contributions, and allocating retirement money to the right asset classes. You should also avoid premature withdrawals if you want to become a 401(k) millionaire.
According to a CNBC estimate, if you are age 25 and you want to retire as a 401(k) millionaire at age 60, you should contribute at least $666 per month over your working years, assuming a 7% annual rate of return. However, if you take a 5% rate of return, you would need to save $1,056 per month consistently to retire with at least $1.2 million 401(k) balance at age 60.