Sep 21st, 2006
You know the importance of saving for retirement early, and perhaps you know that money you put into a 401(k) or IRA in your twenties is more valuable than money you contribute down the road. But how much should you have saved for retirement before turning 30?
Assuming you have been working since you were 22 or 23, at 30, your 401(k) account should equal about one year’s salary. For example, if you make $40,000 a year, you should have $40,000 saved.
Seem high? Don’t flip your lid if your account doesn’t stack up.
No two investors are alike, especially beginning investors. Your starting salary range and the number of years you have been working are going to be much bigger factors in determining your retirement savings balance at 30 than they should be at 40 or 50 when you will have had additional years to make catch-up contributions or adjust your portfolio as necessary.
Differentiating factors
You may not have much in retirement savings if you have been a student for much of your twenties, not to say those years of school won’t pay off. Higher education increases your salary expectation (and your potential to make larger 401k contributions down the road).
If you have been battling with credit card debt you also may be behind the benchmark, but with good reason. High credit card interest rates could crush even the best retirement account returns, so it’s best to use extra funds to dispatch credit card balances quickly.
That said, even indebted twenty-somethings should contribute the minimum 6% to a 401k. It’s important to develop the lifelong habit of making contributions.
And, if your employer matches contributions, not contributing is like passing up a part of your salary!
Assuming you start work at 22 and can immediately contribute to a 401(k), and your employer matches 50% of your contributions up to a maximum of 6% of your salary, you will need to contribute 10% a year to reach this goal, assuming an annual return of between 8-9%. Here is a table showing how this looks for somebody who begins working at 22 at a salary of $30k. This investor gets an 8% annual return and receives an annual 3% raise.
| Age | Salary | Aggregate Contributions & Returns |
| 22 | $30,000 | $2,700 |
| 23 | $30,900 | $5,697 |
| 24 | $31,827 | $9,017 |
| 25 | $32,781 | $12,688 |
| 26 | $33,765 | $16,742 |
| 27 | $34,778 | $21,212 |
| 28 | $35,821 | $26,133 |
| 29 | $36,896 | $31,544 |
| 30 | $38,003 | $37,488 |
Factoring in irregular income and raises
Today many twenty-somethings will work several jobs before turning 30. If this is you, it means your income will fluctuate considerably. If you are ambitious, it is also possible that your salary could as much as double between the time you start working and 30. In these cases, set an absolute 401(k) savings goal for the time you turn 30 rather than using your annual earnings as a guide. (Also, be sure to consider the impact of vesting schedules on employer-matched retirement funds).
My rule of thumb for setting a retirement saving goal? Your contributions, up to the legal 401(k) contribution limit of $15,000 (in 2008), should be just large enough to feel uncomfortable. Think about what you could contribute. If you say, “I wouldn’t miss another $100 a month,” then consider going higher until you say “that might get a little tight.” Pull back five or 10% from that discomfort zone, and invest away!
I'm David, an ex- financial journalist and recovering debtaholic. I'll help you get out of debt, get saving, and get on with life. Sound good? Please subscribe (RSS or e-mail) or follow me on Twitter.
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[...] Money Under 30 tells us How Much Should Be In Your 401k at 30? [...]
I wish I had a job that paid $30k @ 22 years old. I don’t know too many people that fall into your category.
I know this is a matter of demographics.
Raises are not what they used to be. Especially with the price of everyday items (ie gas, heating oil, food, etc) going up at a much faster rate than the 3% raise.
Did this person in your example have to buy a car or house?
I just feel this is truely unrealistic.
I’m a 26 year old single female that makes about 36,000 a year. I have been contributing money in my 401k account since I was 21 yrs old and my numbers are pretty close to the table shown above as far as income and retirement savings.
Let me also add that I had also purchased a new car when I was 21 (never again will I buy a new car, instead buy used) and then was fortuate to purchase a condo when I was 22 years old. This is very attainable you just have to budget your money right.
Now that I have paid off my car I am socking away 15% of my income into my 401k account.
Anyone can do this, you just have to prioritize what is most important to you. You may have to make some sacrifise but it it well worth it in the long run.
Wishing everyone great success and to live like noone else!
God Bless,
Vanessa C.
Orlando, FL
I’m a 30 year old married female without children that makes 44,000 a year. I have also been contributing to my 401k since I was 21 and my numbers are a little better than shown above. My savings is actually higher than my current income, so I must be doing well.
I do agree with Vanessa that it is possible for anyone to save when you prioritize, knowing however that some people whom have children will have a much more difficult time.
Making good choices in life certainly bring their rewards.
Tammy
It would be great if there was a way to plug in your salary (or combined salary if married) and age (again, average age if married) into some type of calculator to compare to your 401(k) balance. I am 42 years old and thankfully make more than $30k but still would like to do a health check on my investment balances. Does anyone know of such a calculator?
I have recently turned 30 years old, am not married and have no kids. I don’t quite match the above table, since my work life did not start as even as the table shows. I live very modestly, drive a used car, can fortunately repair it myself and I rent an upper flat. Don’t get me wrong though, I do like to travel and have fun, I just watch how much I spend.
I did not start contributing to a 401K until I was 27. I am currently at around $15,000, as I contribute 6% of $62,000 Salary and get 50% company match. I managed to also save on my own over $100,000 (started with only $50 to my name 10 years ago) and I invest it in CD’s and a IMM account at approx 5%. I don’t think I am doing too bad despite the list above.
Should I be going about my savings a different way? I’d like to get the best return, but I don’t like to risk my hard earned cash.
Regards,
Christoper
I’m 30. Working since 2000. ~55 K in retirement savings. 90 K per year in salary. It is not easy to make and save money. I encourage all to save for someday you might need it.
I started work in 2001 at age 22 and did not contribute to my 401k until 2003. After graduation, I only made 27k/year and did not have additional funds to invest–credit card debt will burn up any extra cash you may have. Fortunately, my employer matches 100% up to 6%. I currently invest 8% of my 68,000 salary and with my employer’s contribution, my monthly 401k saving is $800, which I think is good. I am almost 29 and have about $50,000 in my plan. If you can do it, I would invest as much as possible as early as you can. I regret not saving immediately after college. I also recommend increasing your saving percentage as you get wage increases, bonuses, or promotions.
I’m 30 Years old, nd i have been in the workforce for about 5 years, but cold only contribte the last four. I have about 18k in my retirement, and about 6k in savings.
My goal is to save as much as i can at an early age. I recently got a promotion, and will be making 71k. i am putting all of the extra money in retirement and a house, the best investment ever. I always wondered how i compared to others my age, i’m a litte behind most of you guys, but i still know i am doing well at this age.
HAPPY SAVING!
I’m 31 now, and I don’t stack up even close compared to my salary. My salary has double 3 times since I began working (21 years old with 16,700). I’m finally able to contribute much, much more to retirement, now that I’ve paid off loans. When I’m 40, I project that I’ll have over $200,000 in my 401(k). Oh, and I’ve since moved to a Roth 401(k) because I’m now considered an HCE (Highly Compensated Employee).
Of course, salaries are higher now in general than the were 10 years ago when I started working (keeping in mind that 16,700 was way under par even for that time). I would like to see high schools teach money management rather than some of the blow-off classes that are out there right now. That might have changed my circumstances quite a bit.
The important thing to keep in mind is that it is important to save anything you can at a young age and let compounding interest work for you. You may not see a big difference in 10 years, but down the road it will make a huge difference.
The other thing I’d like to point out is the importance of paying off debt. Just because you are contributing to your retirement doesn’t mean that you are going to be ok. The best thing you can do is get rid of that debt while you are contributing. That allows you to put much, much more away than you would otherwise.
To Chris:
If you have $100k in the bank, perhaps the best way to invest, if your currently renting, is to buy a small house or condo. If you already have your own place. Go ahead and open an investment account with the big guys, Vanguard or Fidelty. Slowly put your money into an IRA account.
If you’re going long term, you need to stay above a 6% return rate.
Im 24 years old and have been investing since ‘04 i just recently increase my contribution to 6% and have accumulated $7000 between 401k and company profit sharing. Im ignorant when it comes to these 2 accounts. What is the difference between them both and what is the best way to diversify my portfolio to get the best bang for my buck in the long run??
I’m 24 and contribute 10% into my 401k my plan. My company matches 6%, and I also contribute about $2000 annually to a roth ira. Right now my savings are around $21,000 between both these accounts. By the time I am 30, I hope to shout I have well over $100,000 between the two.
I just turned 23, and I hope to have $200k in my accounts in 6 years through regular contributions. Only time will tell if I will achieve that.
That’s a pretty good measurement. Though, some people start working later because of graduate school so they may save less and a lot of companies I know don’t have 401k matching. I’m almost 25 and have been contributing to my 401k since I graduated. So after 2.5 years I have a bit over 32k (I contributed about 10000 to 14000 a year with no matching). I am making around 90k a year now so hopefully in 5 years I will have over $100k in my 401k.
Yes, baglady, grad school is a key variable. I barely had $15k when I turned 30, having not finished my PhD until turning 28 and having acquired some school-related debts. At age 37, though, my quarterly dividends already would cover 70% of my monthly expenses (though, obviously, at this young age I still reinvest dividends rather than taking them in cash). Since I’m currently spending less than 1/3 of my monthly income, I’m estimating I’ll hit the point where dividends cover 100% of my expenses by around 41-42. At that point work really becomes all about “self-actualization”.
If I could do it all over, I still wouldn’t dream of trading in my grad school years just so I could have a job at 21 and gain an extra 7 years of compounding.
So as a former grad student I think the question of “how much you should have by age 30″ is pretty uninteresting. I’d be equally interested in asking “how much should you have in your Roth IRA by age 17?”
Baglady, your situation is very impressive, do you mind elaborating on it? What profession are you in that you are able to make 90k a year after only 2.5 years of work experience? Do you live in an area with a high cost of living? Did you have to deal with any debt (i.e. student loans)?
As for myself, I recently turned 22 and only have ~1.4k in a mixture of Roth 401k and regular 401k, but I’m planning on putting my money (~100/month) into a Roth IRA after getting the most out of my company’s 401k matching. I’m also focusing lots of my income on killing off my student loans, which I hope to pay off within a few years.
“My rule of thumb for setting a retirement saving goal? Your contributions, up to the legal maximum 15%”
I do not think there is a 15% legal maximum. My last company allowed 50% pretax, and my current allows 20%. Legal maximum was 15.5k.
I’m 25 and have been working almost 2 years. I have about 16k in my 401k and another 6k in a Roth. I think by the time I’m 30, I want 100k in retirement. My salary hopefully will also have increased to about 100k as well, if I earn my MS degree while working.
I am 42 years old. I have $130,000 in my 401k plan and my annual salary is $110,000. I know the amount in my 401k is way too low for my age but I am not sure just how high it should be. I have a high mortgage and a car payment but not too much credit card debt. I do have a large home equity loan as well. My employer only matches 25% up to 5% contributed.
I am very impressed with the posters on this site, definitely the exception than the norm in terms of savings. I am 28 make about 95k a year and have only a total of 20k in a combination of a roth 401k and a regular 401k, which I contribute 3% respectively. My employer matches 100% up to 3%. My salary has dramatically increased in the last 2 years (reason for the low amount in my 401k) and I expect it will increase at least 25-50 in the next few years. My only suggestion to everyone is to have a rainy day fund invested in a liquid product/security (cd or savings account) of about 10k. From first hand experience, life will throw you some curveballs and that 10k will provide a nice security blanket.
Hey Tom,
You’re welcome to read my blog to find out the answers to your questions.
http://baglady.dreamhosters.com
I am 31 and my wife is 30. We have been very fortunate and have been able to save approx 270,000 in retirement combined over the last 8 years.
I’ve been fastidious in my saving, not just for retirement but for my personal savings account as well.
I have $33K in retirement accounts (401K, roth, IRA) and $27K in CDs and checking accounts. Make $95K a year.
I’m 29, and am contributing 7% to 401k for only the last 2 years, was doing 3-4% for the other 5 years. I only have 13K in 401k. However, I have $20,000 in savings. I am torn over whether to put that into a RothIRA, or some other type of fund like cd’s. I only earn $30,000, with not too much leeway in terms of yearly raises. Any ideas? I was thinking of contacting Suze Orman about what to do!
I am 27 years old and my wife is 26. Combined we have approx. $180k in our 401k. I consider myself in a good position since my house is 3/4 paid of and both cars are paid off. I am actually worth something now (finally no matter how messed up that sounds).
I am closing in on 32 years old and make a little over 100k and have 105k in in 401k. It bothers my that I did not setup my 401k until I was 25 (3 years after I started working). I maxed out my 401k each of the past 3 years and plan to do that for the rest of my working career. My new company rocks they put 12% of my salary in my 401k while I put 15% (max in 2008 is 15,500 for my portion of the contributions).
“Your contributions, up to the legal maximum 15%, should be just large enough to feel uncomfortable.”
Did anyone else notice that the author made an incorrect statement here? I am 30 years old and my current 401k deferral is 23%. There is no “legal maximum” of 15%. I think he meant $15,000 (which is now $15,500).
My employer matches the first 7.5% dollar for dollar. This means that 30.5% of my salary ($20,500) is currently added to my 401k every year ($15,500 deferral + $5000 employee contribution). Between my 401(k) deferrals, my wife’s 403(b) deferrals, we avoid about $9,000 in federal tax every year. When its removed prior to direct deposit, you don’t even miss it.
The key here: LIVE BELOW YOUR MEANS.
[...] The average twenty something has less than $15,000 in retirement investments, if any at all. While your 401(k) balance may be ugly for a while, you can be assured that even if the grim economic situation continues, you [...]
Half of me congratulates most some of you on being well ahead of the curve for saving and the other half of me wonders (guesses) how insanely boring and frugle you must be.
30 yrs old and saved 270k? Jeez live a little, travel, blow some $ on nice dinners, concerts, and buy some works from emerging artists (another form of investment btw). You could get hit by a bus tomorrow and your 401k won’t follow you to the afterlife!
I agree Ryan…my wife and I save 10% each in 401k plus roths, and savings but some posters seem obsessed with saving as do some of my relatives.
FYI..you can’t take it with you. Save away people. I just try to NOT be broke. My friends who are big savers are the same people that I call cheap…never contribute to pay for gas, help out with food etc for gatherings….It really kinda stinks that they so worried about savings that they rather not contribute their portions to different events. Stinks! Trying not to stereotype but big savers and braggers typically are the ones that think they are smart sliding out of paying for the good times in life.
I am 21 years old, single and anually make $32k. I bought a new car in which I was upside down on Big Mistake!! My company offers 401k with 100% matching up to 7%. I have not started my 401k yet, I am getting married in the near future and income will almost triple. Should I wait until I get married to start my 401k and try to pay my car down as much as I can? Or should I concentrate on putting as much as I can In the 401k? I already pay extra on the car, I also need to save for house supplies for when I do get hitched, I live with my father now.Life is expensive. HELP!! Good opinions appreciated…
WOW – I thought I was doing good at 28 years, making ends meet, credit card debt free and only 20K in student loans to go…I started my 401K only this year. I was curious how I stood in the game of life with my peers and you all blew me away. However, I too agree with Ryan and Shawn. I’ve traveled this beautiful country countless times, I eat at killer restaurants, drink great wine, smoke great dope, and I surround myself with people I love, and I am enjoying every second of my “twenty-something” life – that is what counts to me I now realize.
I’m 26 years old. I make 80K and have about 15K in my 401K plan. I think that by the time I’m 30, I will make 100K and will have about 50K in my plan. Most people get help from their parents by living at home and saving money. Since I’m first generation in the USA, I had to care for myself since 17. A friend of my has 120K in his 401K and he is only 27 years old (he lived rent free for 7 years with his parents). It all depends on your situation and some people are more fortunate then others.
Hi gang, Love the blog….My name is Brian and my wife and are are 33. We have been BIG savers for years. We have about 200k total in retirement savings.
Recently, we bought/rehabbed a lake house in Wisconsin, but the best part is we just paid it off….Together we make just over 200k combinded and plan to pay off our primary residence in under 2 yrs. I prefer to save about 90% of the money we make..We take shortcuts on things so we can enjoy the bigger things.
I am 23 going on 24 and with the most recent events in the stock world, I have lost roughly 50% of my money. I am, however, not in the least bit worried about the rapid decline, but i am looking forward to the incline (it doesnt bother me to purchase when shares are cheap). As or right now i have roughly $19,000 in 401(k). I put in 12% of a $60,000 salary. My company puts in 9%. I was wondering if anyone had a hypothetical on where i would be at in terms of dollars and cents around retirement age (im shooting for 55, but who isnt?) Even if my salary stays the same and the percentages stay the same. And how much should i expect to have when i do retire? 2 mil? 3 mil? I just need to know what else i should invest and where i should invest it.
Read your article and now I’m depressed. I was right on track with where I should be, and now 19 months from “30″ my 401K was halved by the recession. Oh dangit. I know, I know, it’s shares and I’ve got loads of time to gain it all back, but it still feels awful. I worked and saved SO hard! If I was going to loose that much, I should have just bought a sportscar. At least that would have been fun!
hello, I am 28 and make 30k a year.I have 3,000 in my 401k and am maxed out on my roth ira for 08, 09.Also have emergency fund of 10k and another 30k in savings.If anyone can help me with allocating these assets plese reply.I live below my means and only buy what I need.currently in school to pursue software engineer bs.I am open to any and all investment ideas.
Hi i am 23 year old recent college grad who has been working for 5 months now making 43k (my first 13 weeks i made 40k). My company matches up to $750 and i currently only have $50 with my percentage at 3%.
Should i up my referral percentage until i reach the company match of $750 in order to maximize my company match as much as possible? what should my % be?
I appreciate the feedback.
Thank you.
Great post, thanks for the info
In response you can save a lot and also live a lot by 30. Just because someone has saved 270k by 30 doesn’t mean they haven’t spent a ton too. All depends on income…..