Image source: The Motley Fool/Upsplash
You’ve probably been told at least half a dozen times in your lifetime that it’s important to save for retirement consistently throughout your career. If you attempt to retire on Social Security alone, you might end up having to seriously cut your spending, since the average retirement benefit today is only $1,918 per month.
One challenge you might run into in the course of saving for retirement is not having access to a 401(k) plan through work. Not all companies offer these. And if you’re self-employed, you won’t be eligible for workplace benefits, period.
The good news, though, is that anyone with earned income can save for retirement in an individual retirement account (IRA). It doesn’t matter whether you work part-time at a local bookstore or as a full-time pet-sitter. Income from any job can be contributed to an IRA up to a specific limit set by the IRS each year. Currently, that limit is $7,000 if you’re under age 50 or $8,000 if you’re 50 and older.
If you’re already putting money into an IRA, you may be curious as to how your balance compares to the average saver’s. Fidelity has some information on that, and it may surprise you.
The average IRA balance as of the first quarter of 2024 is $127,745. That’s a 10% increase from the final quarter of 2023, which is a pretty huge jump. It’s also a 13% increase from a year prior.
The reason the average IRA balance is up so much isn’t necessarily that workers have rapidly increased their contribution rates over the past few months. Rather, the stock market has been up since the start of the year, which explains why IRA balances grew so quickly from just a few months before.
Now that you know what the average IRA balance looks like, you can compare it to yours to see how well you’re doing. But keep in mind, Fidelity gives us the average IRA balance overall but not the average IRA balance by age. If you’re 32 with an IRA worth $40,000, that’s very different from being 52 with that same balance.
To put it another way, you may not have $127,745 saved for retirement right now. But if you’re not very far along in your career, that doesn’t mean you’re doomed. You may just need time to catch up — which you can do by continuing to make contributions to your IRA and investing your money wisely.
You should also know that a stock market decline in the coming months could drag the average IRA balance down. If that happens, it’s not something to panic over. Market fluctuations are common, which is why it’s also common to see average savings balances change from one quarter or year to the next.
If you’re eager to see your IRA balance grow, there are two ways to set yourself up for success. First, automate contributions to that account.
One benefit 401(k)s have over IRAs is that contributions are deducted automatically from workers’ paychecks, allowing them to stay on track. But many IRAs have an automatic savings feature that allows you to do the same — meaning you can arrange for a certain amount of money to hit your IRA each month off the bat.
Secondly, aim to invest your IRA heavily in stocks for maximum growth. Over the past 50 years, the market’s average annual return has been 10%. So let’s say you’re 30 and only have $5,000 in your IRA as of now. If you contribute $200 a month to that account over the next 35 years, and your investments deliver a 10% return during that time, by age 65, you’ll end up with about $791,000 to your name.
Here’s another example: Let’s say you’re 45 and have exactly $127,745 saved to date. If you load up on stocks for a 10% return and invest $200 a month through age 65, you could end up with $997,000. That makes you a retirement millionaire, more or less.
It’s interesting to see what the average IRA holder has saved so far. But remember, there are a lot of factors that go into that number, and age is definitely one of them. So don’t stress if your IRA balance is below the average if you’re also younger than the average worker.
And even if you’ve been working for quite some time and have a lower balance than the average, you have plenty of opportunities to catch up. So rather than fixate on how your IRA balance compares to the average, work on setting yourself up with as large a nest egg as possible to fund the awesome retirement you deserve.
This credit card is not just good – it’s so exceptional that our experts use it personally. It features a 0% intro APR for 15 months, a cash back rate of up to 5%, and all somehow for no annual fee!
Click here to read our full review for free and apply in just 2 minutes.
We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
—
Blog powered by G6
Disclaimer! A guest author has made this post. G6 has not checked the post. its content and attachments and under no circumstances will G6 be held responsible or liable in any way for any claims, damages, losses, expenses, costs or liabilities whatsoever (including, without limitation, any direct or indirect damages for loss of profits, business interruption or loss of information) resulting or arising directly or indirectly from your use of or inability to use this website or any websites linked to it, or from your reliance on the information and material on this website, even if the G6 has been advised of the possibility of such damages in advance.
For any inquiries, please contact [email protected]