How Much Should People Have Saved In Their 401Ks At Different Ages

The 401k is one of the most desolately light retirement instruments ever invented. The maximum contribution amount for the year 2017 stand at just $18,000 pre-tax.

The worst is the IRA which limits you to contribute just $5,500 in pre-tax dollars for individuals making below $72,000 per year and married couples making below $119,000 per year for the year 2017.

For the time being, you have to make not more than $133,000 per year as a single or $196,000 as a married couple in 2017 for the privilege of contributing $5,500 in after-tax dollars to a Roth IRA, which I don’t recommend prior to sailing through your 401k.

As of December 2016, the average 401k balance is about $100,000 as per the Fidelity’s 12 million accounts, all thanks to an implausible total return of 32% in the S&P 500 in 2013, 13.7% rise in 2014, 1.4% rise in 2015, and a 7.8% rise for 2016. We are at new record highs and the S&P 500 is now up near enough 200% ever since the depths of the financial crisis in the month of February, 2009.

Even so, $100,000 is an extremely low amount given the median age of an American is 36.5. Additionally, the median 401k amount is closer to only $25,000. For all the educated readers who are rational and believe that to save for retirement is a necessity, I’ve projected a table that depicts how much each person should have saved in their 401k’s at age 25, 30, 35, 40, 45, 50, 55, 60 and 65.


The following are the assumptions for the below given chart:

* The Low End column accounts for lower maximum contribution amounts is available to savers above 45 years.

* The Mid End column accounts for lower maximum contribution amounts is available to savers under 45 years of age.

* The High End column accounts for savers who are below 25 years. Subsequent to the initial year, one maximizes their contribution every year to their 401k plan without failure.

* Median starting working age is 22 years. However, you can follow the number of years working as a different guideline if you graduate far along or before.

* $18,000 is used as the conservative base case maximum contribution amount for one’s entire working life. Expectantly, the government will upsurge the maximum amount of contribution over time.

* Nil after-tax income contribution, though more power to you if you’ve the disposable income to do so.

* The rate of return (RoR) assumptions vary between 0% – 10%.

* Company match assumption is between 0% – 3%.

* The Low, Mid and High columns should positively summarize regarding 80% of all the 401K contributors who max out their contributions per year.

* You are rational and not a knucklehead. Just by the way of searching this topic, you’re taking ownership of your retirement and are thinking ahead with an action plan.

By the results, we come to a conclusion that even after 38 years of steady saving, you will only have about $800,000 to $5,000,000 in your 401k in a realistic cycle of bull and bear markets. You could get fortunate and attain the high end column with a constant rate of 7%+ annual growth and company matching, but I would not count on it.

Assume that you live for 25 years after retiring at the age of 60. You only get to live on $32,000 – $100,000 per year on the low-to-mid end. If goodness forbid you live for 35 years after retirement at the age of 60 years, then you can only rely on $22,857 – $71,000. But please don’t forget that these amounts are in FUTURE dollars. If we make use of a 2% inflation rate to compute what $700,000 – $5,000,000 is worth today, its only worth around $377,000 – $2,355,000.

We are familiar that because of inflation, a dollar today will not go to the extent that a dollar 30+ years from now. The private school tuition will perhaps cost in excess of $100,000 per annum in 20 years versus $25,000 for public university tuition and $40,000 for private university tuition on average now. As a result who knows what medical, shelter, food and energy costs will cost at that time. One thing is assured, prices will be much higher.

In order to help you grow your net worth, I recommend diligently tracking your net worth with one of the plethora of free financial tools that are available online. Whatever is available for measurement, can be augmented.


Make sure that you contribute the max pre-tax income you can to your 401k for as long as you work. This is the complete MINIMUM you can do to help make certain a contented retirement. Once you’ve contributed a maximum to your 401k per year, try and contribute a minimum of 20% of your after-tax income after 401k contribution to your retirement portfolio or savings accounts.

By this way, you’ll have possibly DOUBLE the amount in total retirement saving if your household income is $100,000 or over. Where your household income is nearby $50,000, you should still see a fine 30% increase to your retirement savings if you constantly save 20% of your after-tax income.

Ensure that you treat your 401k alike the Social Security and write it off totally from your mind. Don’t suppose either accounts to be there for you at the time of your retirement, similar to how you should never presume the government to ever help you when you are in need.

Assume that 30 years from now, the government decides to elevate penalty free 401k withdrawal to 75 years from 59.5 years. Unluckily, you need the money at 60 years, and due to your withdrawal, the government levies a 30% penalty on top of the taxes you are required to pay. Do not be of the view that it can’t take place. Expect it to happen!

The only thing you can be sure of is after-tax money you have invested or kept aside. This is the reason why subsequent to maxing out your 401k, it is good to open up an after-tax brokerage account where you can steadily contribute a percentage of your paycheck every month. Thereafter, your goal should be to build as many passive income streams as likely.

It will be a difficult task, but if you practice rising your rate of savings by 1% per month until it hurts, you will find it easier than you think.

An upfront way to maximise savings is by making your 401k maximum contribution mechanical, and save every other paycheck for the rest of your working life. After you maximize your 401k and save more than 50% of your after-tax income for a minimum of 10 years in a row, you’ll be monetarily free to do whatever you want.


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Once you link all your accounts, make use of their Retirement Planning calculator that pulls your real data to give you as pure a guesstimate of your financial future as possible by means of Monte Carlo simulation algorithms. Certainly run your numbers to realise how you are doing. I have been making use of the Personal Capital since the year 2012 and have seen my net worth rise steeply during this time. Thanks to better money management!

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