Here is the average IRA balance and 401 (k): How does yours compare?
YesYou probably know that saving for retirement is crucial, and if you didn’t, here’s a sweet but necessary wake-up call. Social Security will only replace about 40% of your pre-retirement income if you have an average income, and most seniors need about twice that amount to maintain a comfortable lifestyle. If you want to avoid money problems during retirement, independent savings are your passport.
Now, if you are already used to financing a 401 (k) or IRA, you might be curious about how your balance compares to that of the average saver. And to that end, Fidelity has a few answers.
Pension plan balances have skyrocketed
Last year, retirement accounts were hit hard when the coronavirus outbreak first hit. The stock market fell in March 2020, leaving many older workers wondering if their retirement plans would be in jeopardy.
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Fortunately, that did not happen, not least because the stock market recovered incredibly quickly. And now pension plan balances have not only recovered from last year’s downturn, but have also risen to exceed highs reached before the pandemic began.
So where are these balances? The average 401 (k) balance reached $ 123,900 in the first quarter of 2021, according to Fidelity. During this time, the average IRA balance reached $ 130,000.
In addition to the increase in plan balances, there are now a record number of retirement savers with $ 1 million or more in a 401 (k) or IRA. And this has just emerged from a year not only volatile from a stock market perspective, but also marked by general economic uncertainty.
How to boost your retirement plan
If you are in your 30s or 40s with a 401 (k) or IRA balance comparable to that of the average American, you may be in pretty good shape, as you still have plenty of time to build on that balance and grow. in an even greater sum. But if you’re in your 50s with $ 123,900 to $ 130,000 in retirement savings, you may need to increase your contributions.
Likewise, if you’re younger but have nowhere near the average 401 (k) or IRA balance, you may need to rethink how you spend. Either way, budgeting will help you manage your money better and make it easier to create a bigger savings margin.
Putting the process on autopilot will also help, as that way you will be funding your retirement plan before you even have a chance to hit your paycheck. Employer-sponsored 401 (k) have the upper hand in this regard, as contributions are automatically deducted on the payroll side. But some IRAs also offer an automatic savings feature, and if you sign up for one, you’ll get the same benefit – your money will land in your retirement plan before you have a chance to. touch it.
Of course, at this point, many people are still recovering from the financial impact of the pandemic. If you’re one of them and can’t focus on long-term savings right away, that’s okay. But once you’re in a better financial position, you can work on increasing your contributions to grow your retirement plan balance and make sure you have enough money later in life.
Remember, comparing yourself to others isn’t always productive, and if your retirement savings don’t mimic the average, there’s no need to cut back. What you should do, however, agree to increase your savings if you’re unhappy with your current balance so that you don’t have to worry about covering bills once you’re ready to quit your career.
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