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Here is what the average worker has recorded in a 401 (k)



When it comes to retirement savings, everyone's situation is different. While a person can survive with a few hundred thousand dollars over several decades, another person may need more than a million dollars to make ends meet throughout their retirement.

For this reason, comparing your 401 (k) balance to that of someone else is like comparing apples and oranges. That said, it's hard not to be curious about what your friends, neighbors and colleagues have saved for retirement.

401 (k) in gold letters

Source of the image: Getty Images.

The average participant of 401 (k) has about $ 92,000 hidden in a retirement account, reveals a new report from Vanguard. But this number is skewed by energy consumers saving a lot of money in their 401 (k), a more telling figure is the median amount saved by workers – that's only $ 22,000.

Age is another important factor to consider when considering these numbers. A 25-year-old man with $ 22,000 saved is a good start, for example, but a 60-year-old man with $ 90,000 may be in trouble. The Vanguard Report also disaggregated the average and median savings amounts by age group and found that the savings achieved varied considerably:

AgeAverage balance 401 (k)Median balance 401 (k)
Less than 25$ 4,236$ 1,427
25 to 34$ 21,970$ 8,126
35 to 44$ 61,238$ 22,123
45 to 54$ 115,497$ 40,243
55 to 64$ 171,623$ 61,739
65 and over$ 192,877$ 58,035

Data source: Vanguard's "How to Register America" ​​report for 2019.

Does this mean that if you have more than the average worker of your age, you are about to take a comfortable retirement? Not necessarily. Rather than comparing yourself to others, it is more important to calculate your individual number of retirees to assess whether you are saving enough.

Determine your unique retirement number

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "There is no single answer. how much you would have had to save when you retired, in addition to the fact that everyone lives different lifestyles, some more expensive and others more frugal, many other factors come into play, such as whether you have not a pension and how much do you hope to receive in social security benefits. "data-reactid =" 32 "> There is no single answer to what you should have saved during your retirement, in addition to the fact that everyone lives different lifestyles, some more expensive and d & rsquo; Other more frugal – there are also various other factors that come into play, such as whether or not you have a pension and how much you expect to receive social security benefits.

<p class = "web-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "One of the fastest ways to To obtain a rough estimate of what you will need to save is to use a retirement calculator. But since most calculators use slightly different algorithms, you will probably get several different results. This is not a problem because there is not a single right answer as to how much energy you need to save. "Data-reactid =" 33 "> One of the fastest ways to get a rough estimate of what you need to save is to: use a retirement calculator, but as most calculators use slightly different algorithms, you will probably get several different results, which is acceptable because there is no good answer as to the amount to save.

When entering your information, be sure to look at how the calculator determines your results. For example, does this figure in social security benefits? Otherwise, you may need to save a little less than this suggests. Does the calculator take into account inflation? If this is not the case, you may need to save more than you think.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Another way to estimate how much you should save is to use the rule of 25. This is based on the Rule of 4%, which says you can withdraw 4% of your total savings in the first year of your retirement, then adjust that amount each year thereafter to account for inflation. The rule of 25 therefore simply allows you to work backwards to determine the total amount of your savings, based on the amount you have to withdraw each year. "Data-reactid =" 35 "> Another way to estimate how much you should save using the rule of 25. This rule is based on the 4% rule, which states that you can withdraw 4% of your savings the first year of your retirement, then adjust that amount each year to take inflation into account, so the rule of 25 simply lets you work backwards to determine the total amount of your savings that you should have in place. the amount you have to withdraw each year.

So, for example, suppose you need $ 50,000 a year in retirement. You also expect to receive $ 1,500 a month (or $ 18,000 a year) in social security benefits, which will reduce the amount that must come from your personal savings to $ 32,000. Multiply that number by 25 and you will find that you will need to save around $ 800,000 when you retire. Then, if you want to check your work, take 4% of $ 800,000 for a result of $ 32,000.

How to tell if you are on track to reach your goal

So you know you need to save $ 800,000 by retirement. How do you know if you are saving enough to reach this goal? The key is to have a monthly savings goal in mind and then regularly check your progress every few years.

<p class = "web-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Most calculators will tell you what you should record each months to reach your overall retirement goal, but you can also use a compound interest calculator play with different numbers and see how your total savings would change if you saved different amounts each month. Most calculators will tell you what you should save each month to reach your overall retirement, but you can also use a compound interest calculator to play with different numbers and see how your total savings would change. if you save different amounts each month.

In this example, if you are 30 years of age without savings and you want to retire at age 67 with $ 800,000, you will need to save just over $ 400 a month to achieve this goal, assuming you earn 7% per year. year. rate of return on your investments. But if you could save only $ 300 a month, you would save about $ 577,000, all other factors remaining unchanged.

Divide your goal into smaller, more manageable goals can sometimes make the economy easier. So, instead of fixing this intimidating figure of $ 800,000, focus instead on the goal of $ 400 a month. You can also break it down further by considering it as $ 100 a week, or about $ 13 a day. While you are saving, simply take it day by day or month by month to slowly but slowly reach your big goal.

<p class = "canvas-atom-canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "In addition, do not forget to log in your progress and hold yourself accountable If you do not save one or two months, increase your savings over the next few months to catch up. Not saving a few hundred dollars may not seem like a big deal, but if you take the habit of not saving, you could end up with hundreds of thousands of dollars before you reach the point. retirement age. "Data-reactid =" 46 "> In addition, do not forget to follow your progress and hold yourself accountable.If you fail to save one or two months, increase your savings over the next few months to catching up, not saving a few hundred dollars may not seem like one If you make a habit of not saving, you could be running out of hundreds of thousands of dollars by the age of retirement .

From time to time, it is also a good idea to check your big goal to make sure it always fits your needs. Maybe you have health problems that could increase your retirement expenses, or maybe you have moved to a more expensive city and need more money than expected to maintain your lifestyle. current life. It is best to make the adjustments as soon as possible, when you still have enough time to save.

Rather than trying to keep pace with the Joneses and compare your savings to the ones your friends and colleagues have hidden, focus on what you need to succeed financially. In the end, it is your retirement that is at stake, and a more personalized approach to saving and setting goals will allow you to achieve the retirement of your dreams.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = " More from The Motley Fool "data-reactid =" 49 "> More from The Motley Fool

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