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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.

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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.

Contributing 10% of your salary if you have a starting salary of $45,000 is $4,500. Contributing 10% instead of 5% over 7 years will yield you 401k balance that is $23,000 more. I think 10% of your salary is what you should be aiming for—and more if you can afford it. So again, how much money should you have by 30 years of age? If we assume that your starting salary is $45,000, your salary grows at a rate of 3% per year, you contribute 5% of your gross salary, and your employer matches 5% of your 401k, then you should have at least $46,000 in your account by 30. However, on the high end, you should have over $69,000 in your 401k portfolio if you are contributing 10% of your salary instead of 5%, and keeping all other things the same.

***

Of course all these numbers are variable because you can hit a really bad bear market during the course of those seven years that decreases your 401k portfolio. But that is the nature of stock investing. You can also hit a really good bull market which takes your portfolio to new heights beyond what you expected. What I have given above are what your 401k portfolio should be around. Aside from a really good/bad market, you can always increase/decrease that amount by having a job that pays more/less or matches more/less.

If you are interested in estimating your 401k’s worth by 30 with your own numbers, go to this calculator.

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