Are your retirement benefits ahead of the curve?

It’s difficult to determine exactly how much you need to save for retirement. Some people choose a round number, such as Save …

It’s difficult to determine exactly how much you need to save for retirement. Some people choose a round number, such as saving 10% or 15% of their salary, while others use an external cue, such as the amount of money being offset by an employer.

You may be wondering if you are saving enough to finance the retirement you want. “How much income do you think you need to add year to year to fund your retirement lifestyle?” Said Charlie Bolognino, a certified financial planner with Side-by-Side Financial Planning in Plymouth, Minnesota. “Don’t forget to plan for everyday expenses, annual health care costs and recurring purchases such as car replacements.”

Here are some benchmarks to help you understand whether you are well on your way to amassing a sizable nest egg for retirement.

Look at the average 401 (k) balance by age

According to Vanguard 401 (k) data, the average 401 (k) savings rate in 2020 was 7% of salary. The average 401 (k) account balance is $ 129,157. However, with age, the amount that the average person can save and accumulate increases.

“The amounts you have to save will be very different … for someone who wants a generous retirement with a beachfront villa versus someone who is interested in a more humble idea of their golden years,” says Patrick King. a certified financial planner and founder of Prana Wealth in Atlanta. “If it is difficult for you to decide which old-age provision (savings rate) is realistic for you, save 10% of your income first.”

See if you beat the 401 (k) averages for your age group:

Under 25

Average 401 (k) balance: $ 6,718

Average 401 (k) savings rate: 5%

Age 25 to 34

Average 401 (k) Balance: $ 33,272

Average 401 (k) savings rate: 6.3%

Age 35 to 44

Average 401 (k) Balance: $ 86,582

Average 401 (k) savings rate: 6.7%

Average 401 (k) balance: $ 161,079

Average 401 (k) savings rate: 7.4%

Average 401 (k) balance: $ 232,379

Average 401 (k) savings rate: 8.7%

Average 401 (k) Account Balance: $ 255,151

Average 401 (k) savings rate: 9.2%

[ Read:New 401(k) Contribution Limits for 2021. ]

Try to maximize your 401 (k)

A retirement goal worth striving for in reaching your 401 (k) plan. The contribution limit of 401 (k) is $ 20,500 in 2022. Employees 50 and older can make catch-up contributions of up to $ 6,500 for a maximum contribution of $ 27,000 in 2022. Financing your 401 (k) in full allows you to get the best possible tax deductibility from the money you save for retirement. Your traditional 401 (k) contributions will not be taxed until they are withdrawn from your account.

However, according to a Vanguard analysis of 1,700 401 (k) plans with 4.7 million attendees, only 12% of 401 (k) attendees maxed their 401 (k) in 2020. Most people who max out their 401 (k) make more than $ 150,000 a year and tend to have more years in the job and be closer to retirement age.

Unsurprisingly, it is easier to save for retirement when you have a high salary. Those who made $ 150,000 or more had an average 401 (k) balance of $ 354,569, more than double the average of $ 121,570 saved by those who were 75,000 to 99,999 Earned US dollars, found Vanguard.

“Start small and increase your contribution 1 to 2% each year until you get the maximum,” said Kayse Kress, certified financial planner with Physician Wealth Services in San Diego. “Always make sure you are contributing enough to reap the benefits when your employer is contributing accordingly.”

[Read:A Guide to 401(k) Vesting. ]

Strive to reach $ 1 million in 401 (k) savings

With 401 (k) contributions capped each year, it takes decades of careful savings and solid investment returns to build a large retirement account. Those who save consistently over many years can often accumulate impressive retirement assets. For example, those with 15 years or more on the job have an average 401 (k) balance of $ 505,353, more than four times the average balance of $ 126,083 among all 401 (k) participants in 2021, according to an analysis by 23,700 Fidelity company pension accounts with 20.2 million participants.

In contrast, workers who change jobs can leave a small balance on their old 401 (k) plan or pour their retirement savings into an IRA, so job hoppers often don’t have all of their assets in a single 401 (k). Employment gaps, time off from savings for retirement, and waiting time to join a new employer’s 401 (k) plan also result in lower account balances.

[Read:How Much Should You Contribute to a 401(k)? ]

Remember to make catch-up contributions

Workers 50 and older are entitled to make-up contributions to 401 (k) plans up to $ 6,500 more than younger workers. A catch-up contribution means you’ll save between $ 20,500 and $ 27,000 on your 401 (k) plan in 2022. However, according to a T. Rowe Price Retirement Plan, only 14.3% of eligible 401 (k) subscribers made catch-up in 2020 service analysis of 674 401 (k) plans with over 2 million subscribers.

Older 401 (k) attendees often increase their savings rate as they near retirement, found T. Rowe Price. “Set your own parameters for increasing your savings rate,” said Jared Paul, certified financial planner and founder of Capable Wealth in Albany, New York. “The easiest time to do this is when you get a promotion or raise. You will get more money than you are used to, so obviously you have extra money to save. “