How Much Should You Have in Your 401(k) by Age 30?

Are You on Track to Retire By Age 67 and Live Comfortably?

Piggy bank next to coins
••• Getty Images 

Saving for retirement can be a challenge at any age, but going through the process of figuring out how much money you'll need at some date in the future can really be frustrating, particularly in the early stages of your career. Fortunately, there are some helpful retirement planning benchmarks and guidelines to help you determine if you're on the right track.

The best guidance is usually to save as much as you possibly can if you're in your 20s and just getting started, but you might begin looking for a better way to track your progress over time as you grow older. Certain benchmarks can help you determine how much you should have in your retirement accounts by age 30, including those provided by Fidelity, J.P. Morgan, and T. Rowe Price. 

The Fidelity Benchmark 

 conducted a study estimating ideal retirement savings amounts at certain ages. They estimated how much you'll ideally need to save to maintain your same comfortable lifestyle during your retirement years if you want to retire at age 67.

Fidelity recommends achieving a savings factor of 1 time your salary by age 30. This estimate assumes that you save at least 15 percent of your income each year beginning at age 25, that you invest over half of your savings on average in stocks over the course of your lifetime, and that your goal is to maintain your current lifestyle.

How Your Savings Factor Compares to Other Age Groups

Ideally, you'd want to have 10 times your salary saved for retirement to retire at age 67 using the same set of assumptions. Going forward, this means that you'd have:

If Your Age is... Your total retirement savings to be "on track" to retire at 67 should be approximately...
30 1 times your annual income
35 2 times your annual income
40 3 times your annual income
45 4 times your annual income
50 6 times your annual income
55 7 times your annual income
60 8 times your annual income
67 10 times your annual income

Source: Fidelity Investments

Other Retirement Planning Benchmarks

takes a slightly different approach when calculating retirement saving benchmarks. This system indicates that a 30-year-old would be considered on track if she had saved half her annual salary.

 2018 Guide to Retirement uses a benchmarking process that also factors in an important variable—household income. This is an important consideration because income replacement rates for Social Security are generally higher for households with lower total income—Social Security will replace a smaller percentage of your income as you earn more. As a result, retirement savings factors gradually increase based on these income increases.

For example, a 30-year-old with a $50,000 gross annual income before taxes and savings would be on track with 0.3 times his income—$15,000—saved in retirement accounts. The savings factor jumps to 1.2 times his income or $120,000 if his annual gross income is $100,000. 

  • $50,000 – 0.3 times income
  • $75,000 – 0.9 times income
  • $100,000 – 1.2 times income
  • $150,000 – 1.7 times income
  • $200,000 – 2.1 times income
  • $250,000 – 2.4 times income
  • $300,000 – 2.5 times income

Source: JP Morgan Asset Management

The 80 Percent Rule

Yet another gauge is the 80 percent rule, but this one is intimidating. Calculate 80 percent of your annual salary, then multiply the result by 20, for a 20-year retirement. This is the total of how much you'll need in overall retirement savings, and yes, it's a lot. Now divide that number by how many years you have left before retirement, assuming you haven't started saving yet. 

This is how much you should save each year to reach this goal. For example, if you're earning $80,000, you'll need 80 percent of that or $64,000 a year in retirement. $64,000 over 20 years of retirement works out to 1.28 million. If you're 30 years old, have no retirement savings yet, and you expect to retire at age 62, you'd need to save $40,000 a year for the next 32 years: 1.28 million divided by 32.

Of course, you would subtract any savings you have already accumulated. 

Including Your Personal Factors

The best way to determine your ideal savings rate is to run a basic retirement calculation. It's especially important to rely on more detailed retirement estimates if you don’t plan on retiring in your 60s because most retirement planning benchmarks use a retirement beginning date of 65 or 67 in their estimates. 

You should never rely solely on benchmarks to measure your retirement savings progress, but they do provide some guidelines that can be helpful during the early stages of your working life.

Most calculators allow you to input personal variables that can affect the results, such as the age at which you started working and saving, the average rate of return on your investments, whether you also have a pension, and whether you have—or expect you might have—other investments that generate passive income. 

What Can You Do If You’re Not on Track?

Don't panic if your current retirement savings falls short of these goals. You can take some important steps to get your plan on the right track.

First, focus on your overall financial wellness and the things you have control over right now. Building a solid financial foundation often means establishing an emergency fund, paying off high interest debt, and saving at least enough in your retirement plan to capture any employer matching funds.

Next, determine how much you can potentially save. Most financial planners recommend saving between 10 percent to 20 percent of your income per year for retirement. Keep in mind these percentages don't necessarily factor in your own personal financial plans.

Participating in automatic rate increase programs that might be offered by employer-sponsored retirement plans is another great way to make small contribution increases over time. This can help you bridge any savings gaps.

Catching Up Might Not Be an Option 

Unfortunately, you can't begin throwing money frantically at your 401(k) if you've reached your 40s and you're starting to feel more than a little alarmed. As of 2019, you can contribute no more than $19,000 annually to your 401(k), according to IRS regulations. This increases to $25,000 if you're age 50 or older.

Regardless of your age, you won't be able to invest $30,000 or more a year to bring yourself back on track. That extra $6,000 is appropriately referred to as a "catchup limit," but you're not permitted to take advantage of it until you reach at least age 50. 

The $19,000 base limit is indexed for inflation so it can be expected to increase by $500 each year. The catchup limit is always $6,000 more. That's not indexed for inflation.