When saving for retirement in your 20s, you might find yourself asking, “How much should I have in my 401(k) at 28?” It’s a great question and one that shows you’re prioritizing your financial future early—an excellent habit for long-term success!
While the exact answer depends on your income level, lifestyle goals, and saving habits, there are key benchmarks and strategies you can use to evaluate whether you’re on track.
What’s the Average 401(k) Balance for Your Age?
According to Fidelity Investments, the average 401(k) balance for individuals in their 20s (ages 20–29) is $10,500. However, keep in mind that this average can vary significantly based on factors like length of employment, contribution consistency, and employer matching programs.
Here’s a helpful breakdown from Vanguard for younger savers:
- Average balance for people under 25: $5,236
- Average balance for people aged 25–34: $30,017
These figures provide a baseline to see where you stand, but being “average” doesn’t always align with your unique retirement goals.
Savings Benchmarks by Age
Financial experts, including Fidelity, recommend aiming to have one year’s annual salary saved by the time you’re 30. If you’re earning $50,000 per year, that means you should aim to have roughly $50,000 saved by the age of 30 in all your retirement accounts, including your 401(k).
If you’re 28 years old, you can use this benchmark to adjust your savings if necessary. For instance, if you’re earning $50,000 and have $25,000 saved, you’ll need to contribute more aggressively in the next two years to close the gap.
Factors That Influence How Much You Should Save
Several factors impact how much you should have saved in your 401(k) by 28, including the following:
1. Income Level
Higher earners may need to save more to maintain their lifestyle in retirement. If you earn $75,000 annually, your savings goal at 28 should be closer to $75,000 by age 30 to meet Fidelity’s benchmark.
2. Employer Matching
If your employer matches contributions, take full advantage of this free money. For example, if your employer matches 50% of your contribution up to 6%, you essentially receive an extra 3% of your salary toward retirement annually.
3. Personal Lifestyle and Goals
Are you planning for early retirement? Do you want to travel in your later years or leave a legacy for your children? Your lifestyle goals should guide how aggressively you save.
4. Current Savings Rate
Are you contributing the recommended 15% of your income (including employer match) toward retirement? If not, now’s the time to increase your savings rate.
Why Your 20s Are Crucial for Retirement Savings
One of the biggest advantages of saving in your 20s is the power of compound growth. Money contributed early has more time to grow, thanks to the reinvestment of earnings. Even small amounts can significantly impact your future balance over decades.
For example:
- Saving just $200 a month starting at age 28 at an annual return of 7% may grow to $240,000 by age 60.
- Compare this to starting at age 38—your total savings would be only $114,000!
The earlier you start, the less you’ll need to contribute later to achieve the same results.
Tips to Maximize Your 401(k) Savings by Age 28
If you’re looking to boost your 401(k) balance, these tips can help you stay on track or catch up:
1. Take Advantage of Employer Contributions
Always contribute enough to get the full employer match. This is free money you don’t want to leave on the table.
2. Increase Your Savings Rate Annually
Start small if necessary, then increase your contribution by 1% annually until you hit at least 15% of your income.
3. Review Investment Allocations
At 28, you have decades before retirement—this makes you a candidate for a more aggressive investment portfolio (i.e., higher stock allocation). Review your retirement plan’s target date funds or speak to a financial advisor for guidance.
4. Avoid Early Withdrawals
Withdrawing funds early can result in penalties and lost growth potential. Keep your money invested unless it’s an emergency.
5. Automate Contributions
Set up automatic contributions from your paycheck so you never miss a deposit. This “set it and forget it” approach ensures consistent growth.
6. Lower Expenses and Redirect Savings
Cutting unnecessary expenses, such as reducing dining out or canceling unused subscriptions, can free up cash to contribute more toward your 401(k).
Common Challenges and How to Overcome Them
If you feel behind on your savings goals, you’re not alone. Here’s how to address common barriers to building a solid 401(k):
- Debt: Prioritize high-interest debt first, then channel extra funds into retirement savings.
- Competing Priorities: Balance short-term goals (like saving for a house) with long-term ones by setting specific percentages for each.
- Job Hopping: If you’ve changed jobs frequently, consolidate old 401(k) accounts into a single one. This simplifies management and ensures no accounts are forgotten.
How to Stay On Track to Retirement Savings
If you’re unsure whether you’re saving enough—or saving efficiently—consider these additional steps to stay on track:
- Use retirement calculators to estimate your future needs.
- Speak to a financial advisor for personalized advice.
- Consider opening an IRA or Roth IRA to supplement your 401(k) savings.
Bottom Line
By 28, your 401(k) goal should ideally align with saving one year’s salary by the age of 30. For instance, if you earn $55,000 annually, aim to have $55,000 saved in your retirement accounts by the end of your 20s.
However, don’t stress if you’re behind. Small, incremental changes in your contributions can make a big impact over time. Start today by increasing your savings rate by 1%—your future self will thank you!
Saving for retirement is a marathon, not a sprint. Use the tips above, and watch your 401(k) balance grow steadily.
