Young people who have just joined the labor market may think that they don’t have to worry about saving for retirement until later in life, the sooner you start saving for retirement, the better.
If your company offers a 401(k) plan, even if you start small, it can be an easy way to start saving for the future. Not only is your 401(k) contributions not included in taxable income, but if your company provides matching funds, you will essentially receive free funds.
For many Americans, 2020 will be a difficult year financially. Between March 2020 and January 2021
However, despite the large amount withdrawn from 401(k) accounts under the CARES Act, one-third of 401(k) depositors increased their savings rate in 2020. Fidelity also received record contributions from women in the fourth quarter of 2020.
According to Fidelity data, as of the fourth quarter of 2020, the overall average 401(k) balance is $121,500.
How much money Americans save in each age group
Fidelity also showed CNBC Make It the income of Americans of each age group in 401(k).
Below, see the average amount Americans have saved in Fidelity accounts as of the fourth quarter of 2020, as well as salary-related contributions.
How much should you save for retirement?
You should think of your retirement plan as something to do throughout your career, not just when your salary is high.
Eliza Badeau, vice president of thought leadership at Fidelity, said: “The most important thing is to start saving as early as possible and continue to save over time, because this is actually the end result of establishing a balance at retirement.”
Badeau said that although retirement may seem out of reach, it’s best to save early because it will allow you to ride through the highs and lows of the market.
Fidelity recommends that you increase your salary by 10 times when you retire. In order to achieve this goal, the company recommends consistently saving 15% of your income, including employee contributions and employer spouse.
Badeau said: “Start saving your salary. At least, if you do get a matching donation, please pay enough money to get that match so that you don’t spend any more money.”
Badeau said that even if you start small, try to increase your contribution in small increments, because you can increase your salary in your own way, up to 15% of your salary.
How much emergency cash is on hand
Badeau said that in addition to saving for retirement, from a short-term perspective, maintaining financial stability is also important so that you don’t have to invest long-term deposits.
It aims to save three to six months of living expenses through a current cash account. Badeau said that if you lose your job, you should treat it as a kind of emergency fund to keep you alive.
It may seem overwhelming to try to save so much money at once, but it’s okay to start small. Set achievable goals by saving one month at a time, and finally achieve the desired balance in your own way.
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