A 401k account is a largely preferred option for retirement savings. It gives you the option of saving your money and investing a large sum each year, which may be used as a corpus once you retire and have no financial stability. At the moment, the current maximum amount that workers under the age of 50 may save each year is $18,500. For workers above the age of 50, the catch-up option gives even greater amounts for saving in the 401k account.
Taking 2017 into consideration, the average 401k balance of a person in savings was around $103,866. However, when the median balance was considered, it only amounted to $26,331 which implies that most Americans have saved much lesser than the average as a whole.
Use your age and other factors for evaluating your average 401k balance
To use a 401k retirement calculator, the most important feature is to consider your age. Other important factors are the amount your employer matches up to, the time period you have been employed and of course, your salary. The thumb rule that some investors suggest is saving half of your annual salary for retirement until you reach the age of 30. The average contribution rates as per your age which may help you get an estimate on the 401k retirement calculator are:
- For people aged between 20-39, the contribution is 7%.
- For the age group between 40-49, the contribution amount averages to 8%.
- For the age group between 50-59, the percentage rate of contribution is 10%.
- For the age group of 60-69, the contribution amount should average to 11%.
- For people aged between 70-79, the percentage rate of contribution is 12%.
An average calculation of 401k balance
While each case is different, there is still a thumb rule you may follow to get an estimate from your 401k retirement calculator. Assuming that you start withdrawing 4% of your savings every year right after you have retired from the next year itself, then you would need to have an average 401k balance of $103,866 for the income to last you roughly for 30 years. This also takes into consideration the inflation amounts and the increasing interest per year of the corpus collected in the 401k account. But, with the right investments and right savings, you may end up with a much higher amount that will let you lead a life comfortably without any financial hassles.