Do you have enough saved to retire?
Why is it called a 401(k)? The term refers to Section 401(k) of the tax code, initially created in 1978 to give those who earned a high wage a tax advantage. That evolved into what we have today: one of the most popular retirement savings account for workers in the United States.
This year, the 401(k) turns 40.
To commemorate its 40th birthday, let’s go over a few stats, information brought to you by The Motley Fool, published in the Society for Human Resource Management’s HR Magazine.
- Average 401(k) balance: $96,288
- Approximate account value for those age 65 and over: $200,000
- Percentage of U.S. employees who work for an organization or company that provides a 401(k)-type plan: 79%
- Percentage of these workers who choose to participate in a 401(k): 41%
- Percentage of the overall U.S. workforce that is saving in a 401(k): 32%
Are you saving in a 401(k)?
What do those numbers tell us? That many U.S. workers could be saving in a 401(k), but aren’t.
If you aren’t saving for retirement yet, consider starting now. Retirement savings aren’t just for going on vacations or replacing your income source after you retire. A modest retirement account can pay for medical expenses, moving from one home to another, or simply paying for help with tasks you are unable or unwilling to do when you’re older.
You’re never too young or old to contribute into a 401(k). If you’re young and new to the workforce, dedicating even a small percentage of your income into that account each paycheck really adds up. And if you’re older, having some sort of retirement savings is still better than nothing. Essentially, if you’re working and receiving a steady paycheck, it’s worth it to invest in a 401(k).
And if your company offers matching funds and you aren’t contributing into a 401(k) , you’re losing out on free money! And everyone likes free money.
Still have questions about what to do with a 401(k) and how to start saving for retirement today? Check out our Beginner’s Guide to Retirement.
How old is your 401(k)? How is it performing? Let us know in the comments below!