Financial literacy is very important in this time. If you’re someone who’s just gotten their first job, then you should inform yourself about what a 401k is and how much money you should have.
401k(s) or 401k plans are the retirement plans that most Americans use to ensure that they have money saved up for their later years. Almost all companies ensure that their employees have some way to save up a 401k.
People have different definitions of what they think a comfortable living is, and depending on this, having enough money in your 401k for retirement can be different for different people. If you’re starting a new job or simply want a better understanding of your finances, knowing how much money you should have in your 401k by a specific age is smart.
What is a 401k?
A 401k is a savings account that allows you to invest a portion of your salary into the account every month. This account is generally set up by the company employing you and comes with many tax benefits. The money is generally used to invest in funds or mutual funds so that you can enjoy a more significant amount of savings when you finally choose to retire. Most employers also invest the same amount as you in a 401k.
Determining The Average Retirement Savings Depending On Age And How Much You Should Have
401(k) balances have a general median and average savings range for different age groups. For example, if you’re under 25, the average retirement savings you can have been around $6,000.
However, the median retirement savings that most people have by age 24 is nearly $2,500, which means that if your savings are more remarkable than this number, you’ve saved up more than 50% of your peers.
The older you grow, the more your salary is likely to increase, which means that you’re looking at a 401k savings of $280,000 at age 65. Similarly, the median retirement savings at age 65 are close to $85,000, meaning that fifty percent of people have less money than this, and fifty percent have more.
Different age brackets have different average and median retirement savings numbers. However, you must remember that having a healthy retirement life isn’t about the money you save in your 401(k).
You must invest in other income streams as you continue to work your day job. Knowing where you stand in your 401k will give you information regarding the financial decisions you must take now to prepare yourself for the future.
Do I Have Enough Money In My 401k to Retire?
Since you’re setting up your 401k as a vehicle for retirement, this is the primary account you will be looking at when you want to retire. Knowing how much is enough to retire is a personal journey.
There are certain factors that you must consider before you choose to retire. For example, you must know where you’re going to live and whether you have a property in your name.
You must also be aware of the living expenses that you will have once you’ve left your job. Do you have ways of coping with your lifestyle?
You must also set apart money for your health and medical bills as these are the significant drains of your money in old age. Before you retire, you should equip yourself with the knowledge of how to spend your 401k money and how you can withdraw money in a way that limits your taxation.