If you’re in your 30s and haven’t saved much for retirement, you’re not alone.
As of the fourth quarter of 2023, the median 401(k) balance for account holders in their 30s was about $20,400, according to data from Fidelity Investments, the nation’s largest 401(k) provider.
That’s a far cry from the $1.46 million the average American thinks they’ll need to save to retire comfortably, according to Northwestern Mutual’s 2024 Planning and Progress study.
But do not panic. Even if you have little or no retirement savings, you can still get back on track and even retire as a millionaire. You may simply need to set aside a little more money each month than if you had started earlier.
CNBC calculated how much you could retire with if you contributed $1,000 per month to a retirement investment starting at ages 25, 30 and 35. These calculations assume a starting balance of $0 and an annual rate of return of 6% or 8% until age 65. Additionally, the calculations do not take into account unpredictable events such as market volatility.
If you start at 25
- Earn a 6% annual rate of return: $2,001,448
- Earn an 8% annual rate of return: $3,514,281
If you start at 30
- Earn a 6% annual rate of return: $1,431,834
- Earn an 8% annual rate of return: $2,306,175
If you start at 35
- Earn a 6% annual rate of return: $1,009,538
- Earn an 8% annual rate of return: $1,500,295
As you can see from the calculations, the sooner you can start saving for retirement, the better. In effect, you give your contributions more time to grow thanks to the power of compound interest.
But try not to focus only on your account balance at any given time, as it can be affected by factors beyond your control, like market volatility.
Instead, financial experts generally recommend focusing on your savings rate, which is the percentage of your annual income that you contribute to your retirement accounts, like a 401(k). Fidelity recommends aiming for a savings rate of 15%, including any matching contributions from your employer.
And remember, it’s okay to start small and work your way up.
“You have plenty of time, you’re just going to end up with a slightly more aggressive savings rate than if you had started earlier. And that’s great,” Anne Lester, retirement expert and author of “Your Best financial life: save smart now for the future you want,” told CNBC in March.
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