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A record number of 401 (k) holders at Fidelity Investments reached the millionaire status in 2018. Not one of them? You're in very good company: a seven-digit 401 (k) balance is the exception, not the rule.
In fact, the average balance of 401 (k) accounts at Fidelity – which holds 16.2 million 401 (k) accounts and is still ranked as the largest holder of defined contribution records – stood at 106,500 USD in September 2018.
If this still seems high, consider that averages tend to be biased by outliers, and in this case, that number is stifled by those rare millionaires. The median, which represents the middle ground between highs and lows, is only $ 24,800.
Whatever number is closest to your reality – and certainly for some, both will feel out of reach – it's important to remember that numbers like this are like train wrecks: they'll tempt you of gawk, but they will probably not offer you much exploitable information.
The median and average balance of 401 (k) at each age
A few more useful are the median and average age balances. This is because the IRS sets contribution limits for 401 accounts (k), currently $ 19,000 per year ($ 25,000 for those 50 and over).
Even though you have paid the maximum contribution each year and recorded double-digit investment returns, both of these factors are highly unlikely; combine them and you will become a superhero of retirement – it would take nearly 20 years to reach a million. This makes it unjust and sterile, for example, a 25-year-old woman to compare her balance to the average savers of all ages.
The numbers below show how 401 (k) balances increase with age, at least until participants start using their money in retirement.
20-29 years
Average balance 401 (k): $ 11,600.
Median balance 401 (k): $ 4,000.
Many of the participants in this age group start working and save for retirement. Even at this young age, it is important to prioritize your workplace retirement plan, especially if your employer pays a portion of your contributions.
Nevertheless, the general recommendations suggest to aim for a retirement balance equal to half and all of your annual salary before age 30. This group may fall short of this, although these numbers do not reflect what they could have saved elsewhere, at the individual retreat. accounts like Roth or traditional IRAs.
Learn more: IRA vs. 401 (k)
30-39 years
Average balance 401 (k): $ 43,600.
Median balance 401 (k): $ 16,500.
At this point, whether averaged or median, participants quadrupled their balances.
This is becoming increasingly important as members age: Fidelity's badysis treats each account separately, meaning that balances are not aggregated by account holder and then averaged. As people get older and spend more time in the job market, they are more likely to own more than one 401 (k), especially if they have changed jobs without failing or combining accounts. .
Need to simplify? Here's how to ride on an old 401 (k)
40-49 years
Average balance 401 (k): $ 106,200.
Median balance 401 (k): $ 36,900.
Another leap forward in this age group, with both numbers more than doubling – the last time we will see a percentage as high as the age group. This is probably at least partly the product of peak earnings years: according to the Payscale Research Society, women's wages tend to peak at 39; for men, 48 years old.
50-59 years
Average balance 401 (k): $ 179,100.
Median balance 401 (k): $ 62,700.
This group has reached the age at which catch-up contributions are allowed by the IRS: Participants aged 50 and over can pay an additional $ 6,000 a year in 2019. This can be helpful, Hail Mary, for those who feel behind, baduming additional funds are available for retirement.
60 to 69 years
Average balance 401 (k): $ 198,600.
Median balance 401 (k): $ 63,000.
Growth has slowed here, probably because the last half of this group actually draws on the balance of its 401 (k) balance to start spending the accumulated money. The rules of the IRS allow for 401 (k) distributions starting at age 59, although many people only retire later: the average age of retirement declared for Americans currently at the Retirement is 61, according to Gallup, and the full retirement age of Social Security for people in this group are 67.
As a result, the 401 (k) balances begin to decline as more and more people begin to operate their accounts. The average balance for those 70 years and over is $ 186,800; the median is $ 52,400.
What you can learn from the average of 401 (k) sales
Again, not much. It's a pretty arbitrary landmark. Overall, this may indicate how workers generally save for retirement, but it will not help you much in badyzing your own situation. It is also limited to people who have a 401 (k); many workers do not do it.
A better approach to evaluating your efforts: a retirement calculator that will give you a more personalized recommendation of how much you should have saved now and how much you will need in the end.
Finally, it should be noted that you may or may not want to put all your retirement eggs in a 401 (k) basket. Once you have acquired your employer consideration, it can be advantageous to spread your money over other retirement accounts, such as an IRA. We have a comprehensive guide to IRA here.
Learn moreArielle O'Shea is a personal finance writer at NerdWallet. His work has been presented by Esquire, Money, USA Today, Forbes and the Associated Press. Read more.
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