While younger people who have just joined the workforce may think they don’t have to worry about retirement savings until later in life, the sooner you start saving for retirement, the better. .
If your business offers a 401 (k) plan, it can be an easy way to start saving for the future, even if you are just starting out. Not only are your 401 (k) contributions excluded from your taxable income, but if your business offers a match, you’ll also get free money.
For many Americans, 2020 was a tough economic year. Between March 2020 and January 2021, about 1.6 million people earned savings from their 401 (k) plans under the CARES Act, which allowed those affected by the pandemic to withdraw up to $ 100,000 without incurring the usual early retirement penalty, depending on retirement. Fidelity plan provider. This represents 6.3% of eligible people using Fidelity’s labor savings platform.
But despite the volume of 401 (k) withdrawals under the CARES Act, a third of 401 (k) savers increased their savings rate by 2020. Fidelity also recorded record contributions from women during the fourth quarter of 2020.
According to Fidelity, the overall average balance of 401 (k) reached $ 121,500 as of the fourth quarter of 2020.
How much money have Americans saved in all age groups
Fidelity also gave CNBC Make It a look at how much money Americans have in their 401 (k) sa each age.
Below is a look at the average amount of money Americans have saved in their Fidelity accounts as of the fourth quarter of 2020, as well as the amount of their contributions relative to their salaries.
How Much You Should Save for Retirement
You should think of retirement planning as something you do throughout your career, not just when you have a significant salary.
“The most important thing is to start saving as soon as possible and consistently over time, because that’s really what ends up accumulating your balance in retirement,” says Eliza Badeau, Fidelity’s vice president of thinking.
While retirement may seem far-fetched, it’s best to start saving early, as it allows you to get out of the highs and lows of the market, Badeau says.
Fidelity recommends that the retirement time be reduced by ten times the salary. To achieve this, the company recommends trying to consistently save 15% of your income, including both employee contributions and agreement with the employer.
“Start saving as much as you can from your salary, and at the very least, if you get a matching contribution, contribute enough to get that match so you don’t leave money on the table,” Badeau says.
Even if you’re just starting out, try to increase your contribution in small increments so you can get up to 15% of your salary, Badeau says.
How much emergency cash to have on hand
In addition to saving for retirement, it’s also important that your finances are stable from a short-term perspective, so you don’t have to add back to the money you’ve left long-term, he says. Badeau.
Try to save three to six months on maintenance in a cash account. You should think of it as an emergency fund to stay afloat if you lose your job, Badeau says.
It may seem overwhelming to try to save so much at once, but it’s okay to start small. Set achievable goals by saving one month at a time and finally work up to your desired balance.
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