Saving for retirement is one of the most crucial financial goals, but many younger Americans aren’t saving enough in their 401(k) plans.
The question is, how much should you have saved by the time you reach 35, and how does your 401(k) Savings compare to others? According to a recent survey, nearly half of workers under 35 have saved over $50,000 in their 401(k), but is that enough to retire comfortably? Let’s break down the data and see how your savings stack up.
How Much Have Americans Under 35 Saved?
A survey by GOBankingRates looked into how much money Americans between the ages of 21 and 34 have accumulated in their 401(k) accounts. The findings were enlightening and can provide context for those trying to measure their retirement progress.
According to the survey, the breakdown of 401(k) savings for this age group is as follows:
| 401(k) Savings Range | Percentage of Respondents |
|---|---|
| Less than $25,000 | 19.6% |
| $25,001 — $50,000 | 31.7% |
| $50,001 — $100,000 | 32.9% |
| $100,001 — $500,000 | 10.8% |
| $500,001 — $1 million | 0% |
| More than $1 million | 0% |
| I don’t have a 401(k) | 5.1% |
As you can see, the majority of younger workers have saved between $25,000 and $100,000. This is a good start, but let’s dive into whether this amount is enough to ensure a financially secure retirement.
Comparing 401(k) Savings to Retirement Benchmarks
While saving $50,000 or more in your 401(k) Savings may seem like a solid achievement, financial experts suggest that it may not be enough by the time you reach retirement. Fidelity, a leading financial services firm, provides some benchmarks to help guide savings goals:
- By age 30, you should have one times your annual salary saved.
- By age 35, you should have two times your annual salary saved.
- By age 40, you should have three times your annual salary saved.
For a worker earning the median income of $42,220 per year, this would mean:
- $42,220 saved by age 30
- $84,440 saved by age 35
- $126,660 saved by age 40
While many in the 21 to 34 age group are doing well with savings, many still fall short of these targets.
The Power of Starting Early
One of the most important lessons in retirement planning is the power of starting early. The sooner you begin saving, the more time your money has to grow thanks to compound interest.
If you start saving $200 per month at age 25, assuming a 7% return annually, you could accumulate around $525,000 by age 65.
However, if you wait until age 35 to start saving, you would need to contribute about $430 per month to reach the same total by retirement age.
This demonstrates how compound interest works in your favor when you start early, and why financial planners emphasize saving as early as possible, even with small amounts.
Tips for Building a Strong 401(k)
- Start Early, Even Small: Even small contributions can grow significantly over time. Starting as early as possible can have a huge impact on your retirement savings.
- Take Advantage of Employer Matching: Many employers offer matching contributions to your 401(k). Ensure you are contributing enough to take full advantage of this “free money.”
- Increase Contributions Over Time: As your salary increases, increase your 401(k) Savings contributions as well. This helps you keep pace with retirement goals.
- Consider Other Savings Options: In addition to a 401(k), consider contributing to IRAs or brokerage accounts for further retirement savings flexibility.
The 401(k) savings of Americans under 35 show promising growth, with many in this age group already saving a significant amount for their future.
However, many still fall short of the recommended savings targets. The earlier you start saving and the more consistently you contribute, the better prepared you will be for retirement.
Whether you are just starting your career or trying to catch up, it’s never too late to invest in your future. Stay proactive with your 401(k) contributions and retirement planning to ensure a comfortable and secure retirement.
What is the recommended 401(k) savings goal for someone under 35?
It’s recommended to have two times your salary saved by age 35. If you earn the median income of $42,220, this means aiming for $84,440 saved by 35.
How can I catch up if I haven’t started saving yet?
While it’s better to start early, you can catch up by increasing your monthly savings as much as possible and taking advantage of employer matching contributions.
Is it too late to start saving for retirement at 35?
It’s never too late to start saving. While starting earlier would have been more beneficial, beginning at 35 still allows you time to save and grow your investments before retirement.
