401k - I am 28, what is the "average" i should have in my 401k now?

[Sean R]

I have about $8,000 in my 401k and feel thats low for my age. What do you see a 28 year old should have by now to live well when i retire? I know everyones perception is different but trying to get an idea - please include low/medium/high estimates - thanks in advance

[Star]

If you can afford to put the maximum in your account (I think it's $15,000), then the financial consultants will tell you to do so. Of course, there is risk in 401(k) - you could lose your capital. I think, by age 30, you should have approximately $30,000 in the 401(k) - assuming you started working at 21, then that means that you would have taken 9 years to put $30K, so that's a $3333/year (which, if you get 1 paycheck per month is $278/month).

As you get raises, you can put your raise into your 401(k) since you should be used to earning the salary you are currently earning (and can live comfortably on that salary).

[SeanML]

There is no 'correct' answer for your question. I deal with 401k plans everyday at work, and you're doing well just saving anything at all. I've seen 60 year olds who have hardly a few hundred dollars in their accounts when they retire (even without any outside accounts)! Don't lose hope, you're still young.

The general theory is that you should have 70% of your gross income today (I would estimate your salary that you think you'll have before you retire) for each year that you are in retirement. So if you're making $50,000 right now, you plan on retiring at age 60 and have a life expectancy of 80 years, you would need to have saved about $700,000 by the time you retire. That's $35,000 a year over 20 years (80 minus 60). That's not even taking into account that the $700,000 should actually be obtaining interest even during retirement (i.e. if you have it in a money market fund).

Don't be discouraged by that dollar figure though. You should be getting raises as you advance your career, and that will allow you more discretionary income to put into your 401k. Also, don't discredit the advantages of tax deferred growth and investments in the stock market. Yes, the market has been quite volatile lately, but a lot of people have figures of long term stock market averages around 8-10% per year. Over the amount of time you have left to save, you should have plenty of time to obtain the amount you need for retirement.

One hint of advice though: save as much as you can now. because the earlier you save the better (it gives you more years of compound growth).

A few notes:

-The aformentioned 70% of your annual income is an estimated figure (from theory). Some people could definitely live off of less in retirement; some people need to live off of more. That is ultimately up to your own spending habits and what you plan on doing in retirement. You'll need to estimate that percentage yourself.

-If your company is matching any of your 401k contributions, definitely put in AT LEAST the maximum percentage that they match.

-Keep in mind that you may also have a pension plan and possibly Social Security (if that is still around) that would be paying you yearly sums of money each year in retirement.

-Here is a link to a calculator that might quickly help you determine the track you are on:

http://www.401k.org/401kcalculator/401kcalculator.html

Good luck!

-Sean