How much Americans saved in their 401 (k) at each age

While young people entering the workforce may think they don’t have to worry about saving for retirement later in life, the sooner you start saving for retirement the better.

If your business offers a 401 (k) plan, this can be an easy way to start saving for the future, even if you’re starting out small. Not only are your 401 (k) contributions excluded from your taxable income, but if your business offers a match, you also get free money.

For many Americans, 2020 has been a tough year financially. Between March 2020 and January 2021, approximately 1.6 million people withdrew savings from their 401 (k) plans under the CARES Act, which allowed people affected by the pandemic to withdraw up to $ 100,000 without incur the usual early withdrawal penalty, depending on retirement. provider of Fidelity plans. This represents 6.3% of eligible people using Fidelity’s workplace savings platform.

But despite the volume of withdrawals from 401 (k) accounts under the CARES Act, a third of 401 (k) savers increased their savings rate in 2020. Fidelity also saw record contributions from women. in the fourth quarter of 2020.

The overall average balance of 401 (k) stood at $ 121,500 in the fourth quarter of 2020, according to Fidelity.

Fidelity also provided CNBC Make It with insight into how much money Americans have in their 401 (k) s at each age.

Below, find out the average amount Americans saved in their Fidelity accounts in the fourth quarter of 2020, as well as the amount of their contributions compared to their salaries.

You should think of retirement planning as something you do throughout your career, not just when you have a high salary.

“The most important thing is to start saving as early as possible and consistently over time, because that’s really what ends up building your retirement balance,” says Eliza Badeau, Vice President of Thought Leadership at Fidelity.

While retirement may seem far away, it’s best to start saving early, as it helps you weather the ups and downs of the market, Badeau says.

Fidelity recommends having 10 times your salary reduced when you retire. To achieve this, the company recommends aiming to regularly save 15% of your income, including both your salary contribution and the employer’s counterpart.

“Start saving what you can on your paycheck and at least if you get a match, contribute enough to get that amount so you don’t leave money on the table,” Badeau says.

Even if you’re starting out small, try to increase your contribution in small increments as much as you can to up to 15% of your salary, Badeau says.

Along with saving for retirement, it’s also important to stabilize your finances in the short term so you don’t have to go back to the money you put aside in the long term, Badeau says.

Try to save three to six months of living expenses in a cash account. You should see this as an emergency fund to keep you afloat if you were to lose your job, Badeau says.

It might seem overwhelming to try and save so much at once, but it’s okay to start small. Set achievable goals by saving one month at a time, and eventually work to the desired balance.

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