You could even become a millionaire if you manage your money right, particularly those who take advantage of companies who offer matching programs.
Financial services company Fidelity recently reported the number of 401(k) accounts with a $1 million balance jumped to 180,000 from 133,800 at the end of the fourth quarter of 2018. This could, in part, be due to a noticeable bump in employer contributions — which are continuing to increase in 2019.
“The average 401(k) employee contribution amount, in dollars, reached a record level of $2,370 in Q1, a 15% increase over one year earlier. In addition, the average 401(k) employer contribution, or company match, reached $1,780 in Q1, a record high and a 6% increase from one year earlier,” Fidelity stated in a May report.
401(k) plans, unlike traditional pensions, are retirement plans in which employees contribute a percentage of their earnings (pre-tax) into an account that companies often contribute to via a matching amount (to a certain percentage). But the 401(k) can suffer — or enjoy — the benefits of the market, depending on the market’s volatility.
Earlier this week, the inventor of the 401(k), Ted Benna, advised workers to start saving early.
“There’s people who make tons of money who don’t become successful at saving, and then there are others, surprisingly, who shock the heck out of me — they don’t make big bucks but they have substantial savings,” Benna said at an event run by The Wall Street Journal. “The key is learning early in life what you’re going to be.”
Katie Taylor, vice president of thought leadership at Fidelity Investments, stressed in an interview with CNBC Thursday that you “don’t need to make a million to save a million.”
According to the news site, the average 401(k) balance is $103,700. But it’s worth noting balances vary greatly depending on age.
Fidelity provided data to CNBC to determine the average amount Americans have in their retirement savings account at each age (as of the first quarter of 2019). Here’s what the company discovered.
- 20-29: $11,800
- 30-39: $42,400
- 40-49: $102,700
- 50-59: $174,100
- 60-69: $195,500
The exact amount you should aim to have in your retirement savings account depends on your lifestyle, location, among other factors. However, Fidelity told CNBC most American workers should save at least 15 percent of their income each year.
“Make sure that you’re saving at least enough to get the full match that your employer offers,” Taylor told the news site. “[Then] make a commitment to yourself that you’re going to increase your contribution by 1-2% every year until you get there.”
To see where you stack up, check out NerdWallet’s 401(k) calculator.
Fox Business’ Matt Richardson contributed to this report.