The 401k is one of the most woefully light retirement instruments ever invented. The maximum amount you can contribute is $19,500 for 2020. Let’s go through how much 401k savings by age you should to live a comfortable retirement.
Although the 401k pales in comparison to a nicely funded pension, even more disappointing than thee 401k is the IRA. With the IRA retirement plan, you can only contribute $6,000 in pre-tax dollars. Further, you can only contribute if you make under $72,000 a year as an individual and $119,000 as a married couple. What about the rest of us?
Meanwhile, you have to make less than $139,000 a year as a single person or $206,000 as a married couple for the privilege of contributing the maximum $6,000 in after- tax dollars to a Roth IRA. I do not recommend doing this before maxing out your 401k.
Give me a pension that pays 70% of my last year’s salary for the rest of my life over a 401k or IRA any time! At least with the 401k, anybody can contribute.
Average Retirement Balances
Based on Fidelity’s 2Q2020 study, here are the average retirement balances for the IRA, 401(k), and 403(b).
- The average IRA balance was $111,500, a 13% increase from last quarter and slightly higher than the average balance of $110,400 a year ago.
- The average 401(k) balance increased to $104,400 in Q2, a 14% increase from Q1 but down 2% from a year ago.
- Average 403(b) account balance increased to $91,100, an increase of 17% from last quarter and up 3% from a year ago.