$29K in 401K at 32 years old-am I on the right track? (paying, rate)
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I just got my latest statement which got me thinking about this. I started contributing at age 25, so this represents about seven years worth of contributions. I am lucky enough to work for an employer that provides a match up to 5% which is why I was able to build up that amount in a relatively short time. Do I have enough in my 401K given my age? Not enough? If so, how far behind am I? I am expecting to retire at age 62 with a defined benefit pension in addition to my 401K.
It sort of depends on what you make and what you expect to spend in retirement. If you make $35K a year, that's pretty good. If you make $75K+ a year w/ a 5% match, I would expect a lot more in 7 years.
Actually, now that I think about it, are you contributing enough to max out your match? I mean, 7 years of absolutely 0 growth would mean $4,143 a year, and if you're getting the full match, you're putting in half that, or $2,071 a year. At 5%, that means you'd only make $41K a year. So if you make more than that, you need to find a way to increase to max out your match and get the free money.
I just got my latest statement which got me thinking about this. I started contributing at age 25, so this represents about seven years worth of contributions. I am lucky enough to work for an employer that provides a match up to 5% which is why I was able to build up that amount in a relatively short time. Do I have enough in my 401K given my age? Not enough? If so, how far behind am I? I am expecting to retire at age 62 with a defined benefit pension in addition to my 401K.
We need more info. such as your gross income and what % of your income you expect to replace in the future. I would count on replacing 80% of my gross and I would try to save as if I was going to get 0 pension. I work in the public sector and my employer is in the courts trying to cut pension benefits. One way or another, pension benefits are going to be reduced or eliminated. Count on it.
In general, you'll need 25X your spending to be able to be financially independent. If you actually end up getting a pension or Social Security, you won't need quite as much...but 25X your spending is a good number to shoot for. I'd plan for a rate of return on savings of no more than 8%.
You can play around with the savings growth projector calculator here:
It sort of depends on what you make and what you expect to spend in retirement. If you make $35K a year, that's pretty good. If you make $75K+ a year w/ a 5% match, I would expect a lot more in 7 years.
Actually, now that I think about it, are you contributing enough to max out your match? I mean, 7 years of absolutely 0 growth would mean $4,143 a year, and if you're getting the full match, you're putting in half that, or $2,071 a year. At 5%, that means you'd only make $41K a year. So if you make more than that, you need to find a way to increase to max out your match and get the free money.
I make $44,500 right now, but when I started contributing I was making $31K. Yes, I am contributing 5% which is the maximum they will match and have been since I started. I am looking at a new position and hoping to move up to $50K a year soon. Maximum income for my profession would probably be around $85K a year once I have 20-25 years in. FWIW my rate of return this year was about 15% but the money is invested aggressively in stocks for now, which I will begin to change eventually. I will get a defined benefit pension (if I max out at $85K I can expect about $34K a year) and social security-not sure how to calculate that.
I just got my latest statement which got me thinking about this. I started contributing at age 25, so this represents about seven years worth of contributions. I am lucky enough to work for an employer that provides a match up to 5% which is why I was able to build up that amount in a relatively short time. Do I have enough in my 401K given my age? Not enough? If so, how far behind am I? I am expecting to retire at age 62 with a defined benefit pension in addition to my 401K.
I am of a different opinion. I think you have done well. What sort of mix do you have in your portfolio (401k).
Are you just putting in enough to get the match or are you putting in more? Can you put in more? Are you putting in based on percentage of your pay? If not you should consider that as opposed to putting in a specific amount.
Either way keep doing what you are doing. It is going to make a difference. I can tell you that I started at age 29 and in 7 years I had just about that much as well. Now I am close to retirement and it has come a long way.
If you have no non-mortgage debt, and an adequate emergency fund, I'd say you're at least on the right track.
I agree that you shouldn't count on pensions or SS. If you get them, you will be a bit more secure, but if you count on them, and don't get them, you will be in trouble.
Location: Chapel Hill, NC, formerly NoVA and Phila
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If at all possible, I would max out on the 401(k) even if you are not getting a match from your employer. You are on the right track in that you are saving at all for your retirement, but if you can save more, even better, especially if you want to retire young. Also, as mysticaltyger said, you may not be able to count on the pension being around.
For a point of reference, I went back and looked at my financial spreadsheet. Twelve years ago, at age 33, I had about $80K in my 401(k). My salary was in the range from $20K to $45K up to that time. From age 23-33 I was maxing out my 401(k) - about 13%-15% of my salary plus a 4-5% match. Granted the market was a lot better back then, but even without the good returns, I am very thankful I started early and maxed it out. At the time I started, the company had a pension, but then they got rid of it. I also had a baby a year later and switched to part time, so I could no longer contribute to my 401(k). My philosophy is to contribute as much as you can when you can because you never know when you won't be able to do so.
I start my first real investing in the early 1970's as a teenager when the investment company i was working at part time sold me a 50 dollar a month plan.
I had no clue what it even was i owned. I just kept paying it every month.
By the 1980's i started taking an interest in investing and the money from that 50 a month plan served as a base to really start.
Well i am retiring in 16 months and have spent the last 25 years investing in everything from central park co-ops to equites.
If i can offer any advice at all it is don't stop regardless of where you think things are heading.
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