How Saving An Extra $25 A Week In Your 401(K) Can Add More Than $200,000 To Your Retirement Fund — Depending On When You Start
- A 25-year-old worker could add $218,000 to his retirement pot by saving just an extra $100 a month
- Experts calculated how much each age group could earn if they invested the amount in their 401(K) compared to a traditional savings account
- READ MORE: Have YOU saved enough for retirement?
A 25-year-old worker can earn $218,000 by saving an extra $100 a month for his 401(K), new analysis shows.
The figure is nearly four times what the same person would earn if they deposited the money in a regular savings account, according to personal finance experts at GoBanking Rates.
Currently, the national average savings rate is 0.42 percent, which means that a 25-year-old who put $100 in his account would earn $52.36 by the time he retires, at age 65.
But conservative estimates show they can expect a 6.5 percent annual return on investment in a 401(K) — snowballing their savings.
Moreover, GoBanking Rates points out that the earner could add as much as $436,000 if his employer matched his 401(K) contributions at 3 percent.
GoBankingRates personal finance experts calculated how much each age group could earn if they invested $100 each month in their 401(K) from now until they turn 65
But the numbers make it clear how important it is to start investing early. A 30-year-old who started investing the same $100 a month in his 401(K) would end up with 154,032 by the time he’s 65.
A 35-year-old, meanwhile, would end up with $107,264, while a 40-year-old would save $73,129.
A 60-year-old who started putting away $100 a month would earn $7,071 — or $14,141 if his employer matched the contributions.
The analysis stems from concerns that America is facing a retirement crisis as workers save too little for their twilight years.
A landmark report this month found that wealthy households have nearly ten times more money saved for retirement than middle-income households. Analysis by the Government Accountability Office found that this gap had widened exponentially over the past two decades.
A high-income household has about $605,000 saved for their twilight years — compared to $64,300 in a middle-income home.
America is facing a retirement crisis as workers save too little for their twilight years, experts warn
Wealthy households have saved almost ten times more money for retirement than middle-income households, according to figures from the Government Accountability Office
In 2007, these figures were $330,000 and $86,800, respectively.
In addition, only one in ten low-income households have money saved for a retirement pot – compared to one in five in 2007.
And recent Bank of America numbers show that more and more employees are taking “hardship” from their 401(K)s amid rampant inflation and rising interest rates.
About 15,950 of the company’s plan participants withdrew money from their accounts in the second quarter of the year. It represented a 36 percent increase over the same period in 2022.
And another 75,000 earners took out a loan from their plan — meaning they’ll pay back the amount in five years.