401(k) Tips

How much should I have in my 401(k)s?

At least once, we’ve all looked at our 401(k)s and asked, “How much should I have in my 401(k)?” Knowing what to aim for can help you stay on track to meet your retirement goals.

3 min read

While saving for retirement, the goal is to provide yourself with a comfortable living while you relax and enjoy your later years. However, a comfortable living is different for everyone. You may find yourself looking at your 401(k) balance and asking yourself, “How much should I have in my 401(k)?”

Broken down into milestones, an excellent way to measure your 401(k) is an amount equal to your annual salary. At 30, it’s best to have a year’s salary saved worth, three years saved at 40, and five years saved at 50.

Although every retirement account contributor has different savings strategies and goals, there are ways to gauge if you have enough in your 401(k) to meet your retirement goals.

How Much Do I Need for Retirement?

This answer is different for everyone. Everyone has a different idea of what a comfortable living is and what needs and wants fit into that equation.

Likewise, the cost of living varies greatly depending on where you live. Someone living in California will need a lot more for retirement than someone living in Tulsa, Oklahoma.

A good rule of thumb to have enough to replace 80% of your annual salary each year. Additionally, you’ll want to have enough so you don’t outlive your retirement savings. This means you don’t run out of money in your retirement accounts too early and are left wondering how you’re going to fund the rest of your life.

According to the Social Security Administration, the fund that makes up the social security income reserves are expected to run dry by 2035.

This forecast puts all the more emphasis on making sure you are keeping tabs on your 401(k) and have enough.

How Much Should I Have in My 401(k) at 30?

Ideally, you have been saving for your retirement in a 401(k) as soon as you could. By 30, you’ll have had several years of savings to show in your 401(k).

Heading into your 30’s you’ll want to have saved about a year’s worth of your salary.

If you make $60,000 per year, you’ll want to have at least that amount.

Came up short? Use the next milestone at 40 and commit the next decade to increasing your contributions to make up for the lost time.

How Much Should I Have in My 401(k) at 40?

Hopefully, by 40, you’ll have nearly two decades of savings built up in your 401(k), or you’ve woken up and started picking up the pace.

When you turn 40, your 401(k) should have about three year’s worth of annual salary accumulated.

Perhaps you’ve increased your annual salary since you were 30. Instead of making $60,000 per year, you’re now making $80,000 per year. At three times this amount, you’ll want to see about $240,000 on your 401(k) statement.

Came up short again? No worries, aim to make it up by the next milestone.

How Much Should I Have in My 401(k) at 50?

With about 15 years until retirement, you’ll want to see some serious retirement savings at 50. You might start thinking about talking to an advisor about readjusting your allocations to fit your proximity to retirement.

By 50, you should be in the ballpark of having about five times your annual salary saved in your 401(k). If you’ve received a raise since 40, this amount should reflect your current salary.

If you’re shy of this mark or feel you’ll need more money during retirement, you’ll have a little over a decade to make up some ground. If you’ve adjusted your investments into more conservative categories, like bonds, this makeup will have to come from your contributions. However, once you turn 50, the IRS raises the maximum contribution limits to help catch up to your retirement goals.

Is It Too Late to Start Saving?

The good news is, no matter how old you are or how much you have saved, it’s never too late to start saving for retirement.

Depending on how aggressive you can save, you can make up some ground and still save a sizable nest egg for your retirement.

Don’t make the mistake of thinking it’s too late to do anything and end up having nothing saved for when you retire.

Things to Consider

Although these are good metrics to aim for, everyone is different. The cost of living isn’t equal for everyone. Needs and wants vary from person to person. Even the strategies for how investor manage their money is unique.

Some retirement accounts perform better than others, thus generating substantially more compounding interest. As long as you’re continuing to fund your retirement accounts consistently, you’ll be in much better shape than if you did nothing.

Lastly, make a goal to monitor your 401(k)s frequently. Annual and semi-annual checkups are best to ensure you’re saving enough and your investments are still performing how you expect.

If you have old 401(k)s with former employers, consider rolling them over to an IRA or your current 401(k). This will help you manage your retirement account easier and know precisely how much you have in your 401(k)s and IRAs.