We’ve written a lot about savings and investment strategies in this space over the past several years, usually because studies indicate that many Americans are falling woefully behind on where they should be with retirement or don’t have adequate savings to fund even a small emergency expense. This post is in response to another similar study that was recently conducted by Fidelity, based on data from its retirement platform. Specifically, it assessed the average retirement savings amount that Americans in their thirties have tucked away.
And the findings, to an extent, are somewhat positive. Fidelity found that the average 401K balance for Americans ages 30 to 39 is $50,800 and the average contribution rate toward these savings is 8.3 percent. However, whether these Americans are on track with what financial experts suggest having saved at this point in their lives largely revolves around how much they earn. Let’s take a closer look at what certain benchmarks young Americans should be hitting when it comes to their retirement savings goals.
How Much Should You Save for Retirement?
So is that $50,800 average 401K amount good for someone in their thirties? It depends.
You see, the experts recommend having the equivalent of your annual salary saved by the time you’re 30 years old. So, for instance, if you’re earning $45,000 by the time you hit 30, you should have about the same amount in a 401K or IRA. But if you’re 39, earning $70,000 per year and only have the average $50,800 tucked away, you have some catching up to do.
Over the long term, it’s recommended that Americans aim to save up to 10 times their salary toward retirement. In order to do this, Americans should shoot to have the equivalent of their salary saved by 30, three times their salary saved by 40, six times their salary saved by 50, eight times their salary saved by 60 and then — ideally — 10 times their salary saved by the time they hit 67 years of age.
Smart Savings Strategies
So how can you start saving for retirement and get your savings goals back on track if they’ve veered off course? Here’s a look at some tips and strategies:
- Start saving immediately. As soon as you get your first job out of college, start allotting funds toward your 401K. Even if it’s just a little, it helps.
- At a minimum, save as much as your company will match. For instance, if your company matches up to 3 percent of your 401K contribution, make sure you’re at least contributing 3 percent to receive the full company match.
- Increase your contribution every year. Even if you don’t receive a pay increase, try to at least increase your contribution by a percentage point annually. If you receive a raise or are due a big bonus, consider contributing even more.
So based on suggested retirement savings goals, how do you stack up?