Are you interested in seeing how your long-term savings are compared to the average? We have the answer.
You probably already know that it's very important to save for retirement, but if you didn't, here's a gentle but vital reminder. If you're an average earner, Social Security will only make up for around 40% of your pre-retirement income, and most retirees require approximately twice that amount to live comfortably. So if you want to prevent financial troubles in retirement, saving on your own is the way to go.
If you've started contributing to a 401(k) or IRA, you may be interested in how your balance stacks up to the average saver's one. Fidelity has some answers to this question.
Retirement account balances have risen dramatically.
When the pandemic outbreak initially hit last year, retirement savings took a big blow. Then, in March of 2020, the stock market plummeted, leaving many older employees fearful that their retirement plans might be jeopardized.
Thankfully, this did not occur, owing to the stock market's rapid rebound. So now, retirement plan balances had recouped from the previous year's decline and surpassed the highs set before the pandemic struck.
So, where do those checks and balances stand now? The average 401(k) balance was $123,900 in the 1st quarter of 2021, reported Fidelity. In the meantime, the average IRA balance has risen to $130,000.
A record number of people saving for retirement now have $1 million or more in a 401(k) or IRA, in addition to growing plan balances. And this is after a year that was not just tumultuous in terms of the stock market but also plagued by general economic uncertainty.
How to make your retirement plan more profitable
If you're in your thirties or forties and have a 401(k) or IRA amount equivalent to the average American, you're probably in a good position since you still have plenty of time to add to it and grow it into a greater sum. However, if you're in your fifties and have between $123,900 and $130,000 in retirement funds, you should consider increasing your contributions.
Also, if you're younger but are far away from the average 401(k) or IRA balance, you may want to reconsider your spending habits. In either case, creating a budget can help you gain a better understanding of your finances and make it simpler to set aside more money for savings.
Using autopilot for the process is also a good idea since you'll be putting money into your retirement account before you even get to see your paycheck. Employer-sponsored 401(k)s have an advantage in this aspect because contributions are withdrawn immediately from your paycheck. However, some IRAs have an automatic savings function too. If you sign up for one, you'll enjoy the same benefit: your money will be deposited into your retirement account before you have even had a chance to touch it.
Of course, many individuals are still reeling from the financial effects of the pandemic at this time. So it's completely fine if you're one of them and can't think of long-term savings at the moment. However, once you're in a better financial position, you may focus on increasing your contributions to build the balance of your retirement plan and guarantee that you'll have enough money to live comfortably later.
Remember that comparing yourself to other people isn't exactly productive, and there's no need to beat yourself up if your retirement funds don't match the national average. If you're unhappy with your current balance, though, commit to increasing your savings so that you won't have to worry about your bills when you're ready to retire.
