How Much Should I Have in My 401k at Retirement?

Saving enough for retirement is one of the most important financial goals for many people. With people living longer than ever, retirement can last 20 years or more. Having adequate savings in your 401k and other accounts is crucial to maintaining your standard of living in retirement without outliving your money.

So how much should you aim to have saved in your 401k by the time you’re ready to retire? Here’s a look at general guidelines on target 401k balances based on your age and income.

401k Savings Guidelines by Age

Financial experts typically recommend saving at least 10-15% of your income for retirement starting early in your career. This includes any matching contributions from your employer.

Here are some general 401k savings benchmarks to aim for at different ages:

• By age 30: Have 1x your salary saved
• By age 40: Have 3x your salary saved
• By age 50: Have 6x your salary saved
• By age 60: Have 8x your salary saved
• By age 67: Have 10x your salary saved

So for example, if you earn $75,000 per year, you’d want to have the following accumulated in your 401k:

• Age 30: $75,000
• Age 40: $225,000
• Age 50: $450,000
• Age 60: $600,000
• Age 67: $750,000

The multiples are a good guideline, but the actual dollar amounts you need depend on your individual circumstances. If you earn a higher salary, you’ll want higher 401k balances to maintain your standard of living in retirement.

Average 401k Balances by Age

While the multiples provide a retirement savings goal, looking at average 401k balances by age can give you a benchmark for how your own savings compare.

According to a 2022 study by Fidelity Investments, the average 401k balance by age is:

• Ages 20-29: $10,500
• Ages 30-39: $38,400
• Ages 40-49: $93,400
• Ages 50-59: $160,000
• Ages 60-69: $182,100
• Ages 70+: $171,400

The median 401k balances tend to be significantly lower than the averages, indicating many people fall short of the recommended retirement savings goals.

For example, Fidelity found the median 401k balance for those aged 40-49 is $28,318, compared to the average of $93,400 for that age group.

If your own 401k balance is close to the median for your age group, you’ll likely need to increase your contribution rate to reach the recommended multiples of your salary by retirement age.

Factors That Determine How Much You’ll Need

While the general guidelines provide a starting point, several factors determine exactly how much you should have saved in your 401k by retirement age:

1. Expected retirement age – The earlier you retire, the more years your savings need to last and the bigger your 401k balance needs to be.

2. Annual retirement income needed – Estimate your desired annual income in retirement. Do you want to maintain your current standard of living? Reduce it? Your needed 401k balance is based on your annual income goal.

3. Life expectancy – The longer your retirement, the more years of income your 401k needs to provide. Plan for at least 20-30 years of retirement.

4. Social Security benefits – Your expected Social Security payments in retirement will offset some of the income you need from your 401k.

5. Other savings and investments – Add up all your assets including 401ks, IRAs, taxable accounts, pensions, etc.

6. Retirement lifestyle – Your desired travel, entertainment and housing options in retirement impact your costs.

7. Healthcare costs – Be sure to factor in Medicare premiums and out-of-pocket costs.

8. Inflation – Costs will rise over your retirement years so account for that in your income needs.

9. Rate of return on investments – Future returns may differ from historical averages. Use reasonable assumptions.

How to Increase Your 401k Savings

If you’re falling behind on retirement savings, here are some tips to boost your 401k balance:

• Contribute at least enough to get your full employer match – This is free money so don’t leave it on the table.

• Increase your contribution rate by 1-2% per year – Small increases add up over time without drastically reducing your take-home pay.

• Put any bonuses, tax refunds or extra income into your 401k – Consider these funds as additional contributions to your retirement savings when possible.

• Reduce expenses and budget more for retirement savings – Look for areas to cut back on costs so you can save more.

• Avoid 401k loans or withdrawals – This puts your retirement funds at risk. Only use 401k funds as an absolute last resort.

• Review your investment mix – Make sure your allocations are appropriate for your age and goals to help grow your 401k.

• Consolidate old 401ks into your current plan – This makes your savings easier to manage for better retirement results.

• Max out supplemental retirement accounts – Fully fund IRAs, HSAs, etc. in addition to your 401k for extra growth.

Common 401k Withdrawal Strategies in Retirement

Once you actually reach retirement age, you’ll need to start generating income from your 401k savings using one of these common withdrawal strategies:

• The 4% rule – Withdraw 4% of your 401k balance in year one of retirement, then adjust for inflation annually. This historically provides 30 years of income.

• Income-based withdrawals – Calculate your annual income needs and withdraw that fixed dollar amount each year (adjusted for inflation).

• Annuitization – Convert part or all of your 401k balance to a lifetime annuity for guaranteed income.

• Dynamic withdrawals – Base withdrawals each year on life expectancy and portfolio performance rather than a fixed percentage.

• Combination approach – Use a mix of these strategies, adjusting over time based on your needs and portfolio longevity.

No matter your approach, closely monitor your 401k balance and investment returns through your retirement years to avoid overspending. You may need to make adjustments if your withdrawals aren’t sustainable.

The Bottom Line

It takes diligent saving throughout your working years to accumulate substantial 401k balances by retirement age. The general guideline is to have 10x your salary or more in your 401k when you retire, but your specific number could vary higher or lower based on your income, age, and retirement plans.

Use the recommended 401k targets for your age group as a savings benchmark. If you find you’re below the averages, take steps to increase your 401k contributions. Consistently saving over time, avoiding withdrawals, and earning solid returns are key to building the 401k balance you’ll need to live comfortably throughout retirement.