# How Much Should You Have In Your 401k By 30?

With pension plans a thing of a past and Social Security benefits uncertain, your 401k plan is by far the most important vehicle to a safe retirement.  So in order to secure a good retirement, how much should you have in your 401k by 30?  We will answer this use four different scenarios.  In all the scenarios, we assume that the starting salary is \$45,000 and it rises at 3% per year—because \$45,000 is the average for a college graduate and a 3% rise per annum is the average throughout the many industries.

Remember, 401k contributions takes your pre-tax money to invest, meaning 401k contributions are taken before taxes.  In all the following examples, we assume that you start your 401k at 23, because that is when most people start their first career.

## Scenario 1: 3% Match Example

• Employer Match: 3%
• Employee contribution: 3%
• Average Salary of College Graduate: \$45,000
• Average increase in salary: 3% per year
• Average return of 401k portfolio: 10%

401k balance by 30=\$27,726

## Scenario 2: 5% Match Example

• Employer Match: 5%
• Employee Contribution: 5%
• Average salary of college Graduate: \$45,000
• Average increase in salary: 3% per year
• Average return of 401k portfolio: 10%

401k balance by 30=\$46,211

As you can see, the difference is big between your agency matching 3% and 5%.  It is a difference of almost \$20,000 over just 7 years.

Now let’s keep all the salary information (\$45,000) and company match the same (5%) .  But let’s change how much the employee contributes.  Instead of contributing just 5% of the salary, let’s assume the employee is going to max out the 401k contribution.  In 2014, the max contribution for your 401k is \$17,500, which is 39% of a \$45,000 salary.  We are also going to assume that the average salary of the employee rises at a rate of 3% a year.

Now let’s assume that we are going to contribute 10% of our salary, instead of 5%.

## Scenario 3: 10% 401k Example

• Employer Match: 5%
• Employee Contribution: 10%
• Average salary of college Graduate: \$45,000
• Average increase in salary: 3% per year
• Average return of 401k portfolio: 10%

\$401 balance by 30=\$69,317

Now let’s assume you are someone who is really into saving money and can afford to max out your 401k with a starting salary of \$45,000.  The maximum you can contribute to your 401k in 2014 is \$17,500, which is 39% of \$45,000.  So let’s see where you will end up by 30 if you decide to max out your 401k.

## Scenario 4: Maxed Out 401k Example

• Employer Match: 5%
• Employee Contribution: 39%
• Average salary of college Graduate: \$45,000
• Average increase in salary: 3% per year
• Average return of 401k portfolio: 10%

\$401k balance by 30: \$203,330

Yes, if you contribute a maximum amount from the start, you will accrue over \$200,000 in your 401k by 30. This is assuming your salary starts at \$45,000. But the caveat is that it is extremely hard to max out your 401k when it starts out at \$45,000 if you are not extremely careful with your money.  But 10% is highly possible.