Retirement Savings Have Doubled (But There’s a Catch)
If you’re still looking for a sign of economic recovery, check your 401(k) balance. Chances are it’s much higher than just a few years ago.
According to a Fidelity Investments report, the average 401(k) balance was $88,600 at the end of March 2014—up from $80,900 one year earlier and up a whopping 92% since the market low point in the first quarter of 2009, when the average was just $46,200.
While stock market gains in recent months have boosted earnings for those who have continued socking away money in their 401(k) accounts, many workers still aren’t saving enough for retirement.
“It’s encouraging to see such positive savings results for millions of Americans in the five years since the market downturn,” Julia McCarthy, executive vice president of Workplace Investing at Fidelity, says in a release. “But even with this quarter’s positive news, there is still more that can be done to improve outcomes in retirement.”
For starters, all workers need to prioritize retirement savings. Fidelity data shows that almost one-third of employees who have access to a 401(k) plan are not contributing, CNBC reports.
Also, many of those who do contribute to employer-sponsored retirement plans aren’t saving enough to ensure a comfortable retirement. They’re saving an average of 8% of their pay, according to the report, which included data for 13 million active and retired employees in more than 21,000 plans. But most financial experts recommend contributing at least 10 to 15% of pay to a 401(k) plan.
To prepare for a financially stress-free retirement, start contributing to a 401(k) as soon as it’s available, and if your employer offers a matching contribution, make sure to contribute enough to take advantage of the match.
If contributing 10% is out of reach, start where you can and reevaluate your contribution level each year, increasing annually until you reach the target.