Here’s what your 401(k) balance should look like, by age. Where do you fall?
Retirement: Though it may seem like a long way away for some, establishing a 401(k) is an important step in ensuring your future after your working years. Are you saving as much as you should be?
The importance of a 401(k)
Simply put, a 401(k) is a defined contribution plan where you take money from your paycheck and put it into a separate retirement savings account.
No matter how old you are, you should definitely start thinking about saving up for retirement if you haven’t already. After all, your retirement savings will fund the lifestyle you choose to adopt after you’re done working.
Retirement savings guidelines by age
While everyone’s post-retirement plans are different, there are still general guidelines you should follow to make sure your retirement savings are on the right track.
If you plan to retire by the age of 67, check out the chart below to see where you’re retirement savings should be.
Age 30: 1x your salary
Age 35: 2x your salary
Age 40: 3x your salary
Age 45: 4x your salary
Age 50: 6x your salary
Age 55: 7x your salary
Age 60: 8x your salary
Age 67: 10x your salary
Although this chart may look overwhelming, there are a few things you can do to beef up your retirement savings.
How to increase 401(k) contributions
One easy way to increase your retirement savings is to have your employer match your contributions. Make sure you’re contributing as much – or more – than your employer is willing to match. This is the closest to free money you’ll ever get.
If you’re already taking advantage of how much your employer will match in 401(k) contributions, it’s time to start getting creative.
Reevaluate your monthly budget and find wiggle room in spending categories such as like food costs, miscellaneous spending, and utilities. Then, automatically have your bank transfer that extra cash into a retirement savings account.
Another great way to save on future retirement costs is staying healthy as you age. Focus on getting ample exercise and proper nutrition, which are the building blocks for staying healthy into your retirement years. That way, you’ll spend less money on health care costs in the future.