401(k) comparison to the average American

On occasion a student may say, “it’s acceptable for me to do poorly in my class because everyone else is doing bad too”.  I do not buy into this type of thinking because you might just be in a class filled with under-performers.  There are times you will out-perform your entire class and that is be fantastic.  There are also times when you may do poorly even if everyone else is doing great.  Just make sure you are doing your best possible by putting in the effort required to succeed and be effective in doing so.  I personally like to compete against myself in some situations such as school.  There are other times I think it is good to compare your performance against others.  Retirement funds is one example of when I like to compare myself to others because it gives me an idea of where I stand compared to everyone else.

Using smart asset, I am able to see where others are in terms of their 401(k) accounts.  Here is America’s average 401(k) balances by age:

  • Ages 20 to 29 – $9,900
  • Ages 30 to 39 – $38,400
  • Ages 40 to 49 – $91,000
  • Ages 50 to 59 – $152,700
  • Ages 60 to 69 – $167,700
  • Ages 70 to 79 $160,200

In my opinion, these numbers seem extremely low and I do think these averages need to come up.  According to smart asset, ages 20 to 39 are averaging a 7% contribution per year to 401(k).  Since I first started at my first employer who offered a 401(k) with 4% match, I’ve contributed 10% of my salary per year.  I did this for a few years and then bumped up my contribution to 15%.  The reason I contributed at least 10% to my 401(k) was because I knew I needed to save at least 10% of my money.  By putting away 10% of my pay immediately before it went into my bank, I knew I would just get used to living without it.  There is such a thing as living above your means and many Americans do this frequently.  Living within your means basically means, spending less money than you earn monthly.

Since I’ve had some experience with 401(k) contributions and had a positive result, I would like to give some advice.  Make sure you are contributing as much as you can and continue contributing this throughout your entire career.  I have seen 5 to 11% returns depending on the year.  Your 401(k) quickly increases as you build it up through time.  Initially, you may not see a huge jump, but in time you will.  I check mine as often as I can (at least once per day) as further motivation to work hard.  It gives me purpose and satisfaction to know that I am working towards something.  As mentioned in my blog titled, Key Performance Indicators… in finance we need to have key performance indicators to help us more easily track our finances.  For example, I track 401(k) and mortgage to understand my trends.  These things are exciting to me and help me keep going.

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