How Much Money Should You Have in Your 401k When You Retire?

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

To determine the amount needed in your 401k at retirement, you should aim for a fund that can provide 75% of your pre-retirement income. This target assumes a lower cost of living in retirement and is a standard benchmark in retirement planning.

Step-by-Step Calculation

  1. Determine 75% of Your Current Income:
    • Calculate 75% of your annual pre-retirement income. This is the annual amount you aim to get from your 401k.
  2. Use an Annuity Calculator:
  3. Assess Your Current Savings:
    • Compare your current 401k balance with the calculated target. If there’s a shortfall, adjust your savings plan accordingly.

Example

  • If your pre-retirement income is $60,000, then 75% is $45,000.
  • An annuity calculator might indicate that you need a 401k balance of $1 million to provide an annual income of $45,000.

Adjustments for Future Needs

  • Adjust for Inflation: Consider future cost-of-living increases.
  • Healthcare Costs: Estimate healthcare expenses, as they can be higher in retirement.
  • Lifestyle Changes: Adjust for any significant changes in your retirement lifestyle.

401k Savings Guide

AgeTarget 401k SavingsNotes
30$100,000Early career, building savings
40$300,000Mid-career, accelerating saving
50$600,000Pre-retirement, maximizing contributions
60$1,000,000Near retirement, assessing income needs

Conclusion

To ensure a comfortable retirement, aim to have a 401k balance that can provide 75% of your pre-retirement income. Use an annuity calculator to determine this amount, and adjust your savings plan to meet this goal. Remember to consider inflation, healthcare costs, and lifestyle changes in your calculations. Contact us today for a free quote.

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Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Shawn Plummer is a Chartered Retirement Planning Counselor, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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