How Much Should You Put Away in Your 401k in Your 30s?


When you begin to think seriously about your retirement, it can seem overwhelming at first. Commonly accepted wisdom says to put away 10-15% of your income, but this can seem like quite a lot, especially if you are just getting established in your career. The reality is that the amount of money you invest in your 401k has a lot to do with your personal goals, assets, and other sources of income. For example, the money you can expect to get back from a pension, rental income, royalties, or Social Security are all sources of retirement income, which means that you might not be relying on a high 401k when it comes time for retirement. So the quick answer is that there is no “right” or “wrong” amount to put aside for your retirement, but you should have some idea of how much money you want to be living on when you finally leave the workforce.

Regardless of how much you’re expecting to get back when you retire, if you want to grow your 401k, it’s important to start early. The earlier you start, the smaller your monthly or yearly contributions can be. This makes your contributions feel far more manageable, which, in turn, makes you more likely to continue making them. It’s also important to set a rough goal for when you want to retire. This can be adjusted as life circumstances make your actual retirement age more and more clear, but it will give you a better idea of what you need to be putting away to realistically achieve your goals.

The first step is to look at your income now and decide how much of that income you want to continue earning after you retire. So if you are currently making $40,000 per year, would you like to continue making $40,000 a year after you retire? Could you live on less? How much less? Would you like to make more? How much more? This kind of thinking will help you to set a realistic goal as far as how much you can actually expect to make, and give you an amount to work towards.

401k in Your 30s

For example, imagine that you are 30 years old, and currently making $50,000 a year. You want to retire at age 65, but you have nothing in your 401k right now. You would like to live on 85% of your current income after retirement, which means you would like to continue to make $42,500 per year after you’ve retired. To achieve that goal, you’ll need to have $2.06 million in your 401k by the time you are 65 years old. That, in turn, means that you’ll need to start putting away $600 per month in order to reach that number by the time you retire. It’s recommended that you invest in 70% stocks, 25% bonds, and 5% cash.

If $600 is something you can realistically set aside for your retirement, great! Sure, it’s less spending money now, but you’ll be fully financially secure when you retire, and you’ll know that you have money to last you until you’ve passed away. However, if that amount of money is too steep a contribution for you to realistically make, you may have to make some adjustments. Remember, this model is also based on the idea that you are exactly 30 years old. The further into your 30s you are, the higher those monthly payments will have to be to reach your retirement goal.

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