What is the 401k plan?
Most of you all must be wondering what does 401k mean. A 401k plan can be defined as a retirement savings plan for employees. So if you got a new job and had plans to save money for the future, you might take up some savings option offered by your company or in banks. When you sign up for the 401k plan offered by your company, which offers you a salary of $1,000 per month, you will get the opportunity to contribute to the 401k plan before the money is taxed.

The money that goes into your 401k plan grows year after year until you take it out at retirement. The maximum contribution you can make to your 401k plan as of 2017 is $18,000 per year. If you are over fifty years old, you can also contribute a catch-up contribution of $5,500. Also, if you are ready to make a matching contribution of another 6% to your 401k account, you can make a total contribution of $29,500 each year. But still, this varies from person to person depending on how much average 401k balance you put in your plan. You need not pay any penalty for withdrawal if you are over 59 years. Otherwise, you may have to pay 10% of the amount as a penalty for in-between withdrawals.

Investment options:
In 401k you can invest in a wide variety of things from mutual funds, stocks, bonds, real estate or investment trusts. It completely depends on the level of risk you want to take on and how long you have until your retirement that is something you need to look into before doing it. One downside of the company plans is that their investment options are limited and the 401k plan has got annual management fees, and the fees associated with mutual funds are higher than you might expect. Hence, the safest option is to choose the best funds you can with the lowest fees.

What’s the average 401k balance by age?
Expecting the same retirement savings as that of your colleague is not a wise thought to calculate your income. But getting an idea of what others are doing to hike their retirement savings can be good information to have. You must be uncertain of how much you will need for your post-career days and find how others are planning can help you by providing a benchmark for setting the milestone and goals.

So, what is your retirement planning and how does your average 401k balance need to be to retire is considered depending on a lot of factors? But there are varies problems may retirees face today and one of that problem is low-interest rates in the economy. This makes things harder for savings, and people are planning for retirement to generate significant interest income off of their portfolios. A lot of people look for higher returns in the market, but one disadvantage of the market is that it does not provide a guarantee of the level of interest of income you may receive out of bonds, dividend income so it is difficult to calculate how much income can be generated from a portfolio. This puts us back to the question how big is your average 401k balance by age.

Everybody’s financing is different. Assume that you have been working in a company for eight years and throughout your 20s it’s a rule of thumb to have saved about a year’s salary in your average 401k balance by the time you reach the age 30. If you are not that old, this should be a reminder to step up your retirement saving. You can increase your contributions if you get a raise. When you change jobs, you will get an offer to cash out your average 401k balance that is not a good idea to be doing because you will automatically lose all your compound growth that it will make for you in the stock market over the next 40 years.

The average 401k balance by age should be for example: if you are $50,000 in your 30s, you should have saved $25,000 for retirement. By the age 40, you should have twice your annual salary. By age 50, four times your salary and by 60s, six-time your salary and by 67, eight times. If you are 67 years old making $75,000 per year, you should be an approx of $600,000 till date.