401k is one of the most common investment vehicles that are used by Americans to save for retirement. The 401k is a plan that is employer sponsored which allows you to save for retirement in a tax-sheltered way to help maximize your retirement dollars. If your employer is offering a 401k and you are not utilizing it, you are likely to lose a big deal – especially if your employer matches your contributions. While the 401k is one of the best available retirement saving options for many folks, only 32% of Americans are taking benefit of it, according to the U.S. Census Bureau.
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It is constantly being reminded that there is a retirement crisis in America, nearly two in five pre-retirees have no money saved for retirement. While a majority of Americans who work in full-time or part-time employment participate in an employer-sponsored retirement program, just 21% max it out. So one needs to know in terms of how much people actually have saved in their 401k plans, and how does this stack up against what they could have saved if they were maxing out their 401k’s every year?
Also Read : Tax saving By Investments
401k Savings Potential by Age
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The average 401k savings potential by age, based on several assumptions, is stated below. It can be used as a guide for calculating your total retirement balance, including your IRA, Roth IRA, and after-tax savings. While the amount stated is for single person, it can also be used as a guide for a married couple if one spouse decides to no longer work.
An average 401k balance should be at the age less than 25, $4154. Between 25 and 34 the average balance should be $22,256. Between 35 and 44 it should be $61,631. From 45 to 54 the average balance should be $111,699 and from 55 to 64 balance should be $1,78,963 and for those above 65 of age should have an average balance of $1,96,907.
What needs to be considered when it comes to retirement savings in 401k?
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The first and foremost things is save early and aggressively even it is difficult to make it to 401k you must do it to the maximum. If you get appraisal or rise in salary, immediately try to put 50% of it to 401k. Also do not rely only on social security when it comes to retirement. The other most important thing to be considered is having proper planning as to age of retirement. One needs to be realistic while planning for retirement and should save accordingly. You savings objectives will be different based on your plans to retire.
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Also accurate estimation should be done regarding cost of living after retirement so as to save accordingly. Also one should try to develop other sources of income in order to earn more and save more and try to leverage all resources. An online retirement planner tools can help to determine amount for the same. Proper understanding of your spending, savings, lifestyle etc. is crucial in overall retirement planning.