At 40 years of age, what do you think the average person's 401K balance should be?
I have a general question regarding my retirement fund. My 401K fund is now at $160K. I have been contributing to the plan since 1994 through payroll contributions. Although my salary has steadily increased, for simplicity let's say I contribute 7K a year and the company match is 50%. If you do the quick math, I am not making a whole lot of money in my plan even though I am in aggressive and risky stock funds. What is the average 401K fund amount for someone in their early 40's? (I know this varies by person, goals, contributions and more) but want a general idea if I am about average in money in a retirement plan at this age or way behind....
Answers
147 points
DCR answered 5 days ago …
There's no answer to this question b/c of the "varies by person" variables you cite. You first need to identify your goals, then do the math to figure out how to get there. It's generally accepted you should contribute the maximum amount permitted by your salary, and even then, you may end up short in the future, i.e. save as much as humanly possible.
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904 points
jillybeansisme answered 4 days ago …
It is truly unfortunate that here in the United States most people have not saved for retirement. From what I remember reading (I don't remember which investment resource it was from), the average person has $25,000 saved. That is horrendous. Consider yourself to be one of the minority to have acquired the $160K. It is NOT enough. Consider yourself lucky that your company has a match program at all in this economy -- my company used to match 50% of the first 3% of the gross annual salary an employee saved and now they don't match a dime.
If you think you might like to have at least a modest roof over your head and perhaps some food in your belly, you might want to look at what life costs you now. Figure out what you spend every month for property taxes, utilities, car insurance, technology (cell phone, internet, cable, etc.), personal insurance (what will medical insurance cost you if you were currently retired?), food, clothing, entertainment, birthday presents, holiday presents, etc. Once you have that dollar figure, calculate what you expect from Social Security (if anything), pensions (military?) and other expected monthly income if any. Whatever the difference is multiplied by 12 is the annual amount of money you need to exist. Now, how many years do you expect to live in "retirement"? Does your family seem to live to 120 or 60? This will give you an idea of how many decades you need to plan for. There are many sites (I think Schwab has it too) that will let you put the amount you currently have in your accounts and amortize it out to let you know if you are saving at a reasonable rate.
You don't want to take a disbursement larger than the legal minimum so that you don't outlast your retirement fund. When you do the calculations, though, don't presume you'll make 15% per year -- use a low figure like 5% so that you are not overestimating your rate of returns and end up in trouble. It's better to work because you want to rather than because you have to!
