3 Key Signs You’re Saving Enough in Your 401(k) To Retire Comfortably — and 3 You Aren’t
Written by
Gabrielle Olya
Edited by
Joe Evans
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The majority of employees who are utilizing their 401(k) plans believe they are saving enough to have the type of retirement they desire, a recent Bank of America report found. According to the 2024 Workplace Benefits Report, 66% of employees say their 401(k) will build enough savings for a comfortable retirement.
While you might not know exactly how much money you will need to save for retirement, there are some signs that you are well on your way to having sufficient 401(k) savings — as well as signs that you are falling behind.
Here are the signs to look out for:
Key Signs You’re Saving Enough in Your 401(k)
There’s no one-size-fits-all approach to 401(k) savings, so understanding your specific situation is essential.
“Savings goals are personal and different for every person depending on several factors,” said Lisa Margeson, managing director of retirement research and insights at Bank of America. “These factors include your current age, the age at which you plan to retire, how long you expect to live, how much you plan to spend in retirement and what your sources of retirement income will be.”
With that said, there are still some indicators you can look for to determine if you are saving enough.
You’ve Saved 2.4 Times Your Salary by Age 40
If you plan to obtain 38% of income replacement from retirement savings, there are certain savings thresholds you should reach by certain ages, according to Bank of America’s Financial Wellness Tracker:
- Ages 18-25: 0.1x your salary
- Ages 26-30: 0.5x your salary
- Ages 31-35: 1.1x your salary
- Ages 36-40: 2.4x your salary
- Ages 41-45: 2.8x your salary
- Ages 46-50: 3.9x your salary
- Ages 51-55: 5.3x your salary
- Ages 56-60: 6.9x your salary
- Ages 61-64: 8.5x your salary
If your 401(k) balance aligns with these benchmarks based on age, you’re likely in good shape.
You’ve Checked Your Savings Needs With an Online Calculator
To determine if your savings are on track, nail down your ultimate goal.
“To understand your individual retirement needs, it’s important to first identify your potential post-retirement expenses and income, so you have an estimate of how much you may need to draw from your savings each year in retirement,” Margeson said. “It’s also important to factor in potential career gaps, such as time away from work due to caregiving. You can use online calculators, like the Merrill Personal Retirement Calculator, to understand where you are now and how to close any gaps.”
In addition to utilizing tools, like an online retirement calculator, you can also utilize tools offered by your employer to see if you’re 401(k) savings are where they should be.
“Many employers offer tools, like digital platforms, that can help employees track their individual progress toward their personalized retirement goals,” Margeson said. “These platforms can provide specific recommendations and benchmarks to ensure you’re making progress toward retirement.”
You’ve Gotten the OK from a Financial Advisor
One of the best ways to ensure your 401(k) savings are adequate is to meet with a financial professional.
“Consider meeting with a financial advisor, who can give you personalized guidance on how to meet your goals,” Margeson said.
If a financial advisor believes your 401(k) savings are in a good place, you can rest assured knowing they probably are.
Key Signs You Are Not Saving Enough in Your 401(k)
Although your retirement savings needs are unique, there are some signs you are not where you should be when saving in a 401(k).
You’re Not Maxing Out Your Match
If your employer offers a matching contribution, you should take advantage of it.
“Ensure you’re maxing out on your employee contribution to your 401(k) to maximize the match from your employer, if offered, to avoid leaving any money on the table,” Margeson said.
You’re Not Contributing More as You Grow in Your Career
“Increase your contributions as you grow in your career — as your income increases, so should your contribution rate,” Margeson said. “A good strategy is to consider saving any additional income when you get a raise, so as to save for your future self with money you may not miss.”
You’re Using Your 401(k) as a Checking Account
Taking out a loan from your 401(k) should be a last resort, not a regular occurrence.
“Remember, your 401(k) will grow best if it is allowed to grow over time,” Margeson said. “Try to use other savings accounts for daily or short-term expenses.”
What To Do If Your 401(k) Savings Have Fallen Behind
If your 401(k) savings are not where they should be, there are steps you can take to get them back on track.
“It’s never too late to make changes that will help your financial future,” Margeson said. “Try to increase the amount of money you’re contributing to your 401(k) — even if just by 1%. Remember, compound interest is your friend!”
Margeon also recommends setting up an appointment with a financial advisor.
“Financial advisors can provide you with personalized advice and guidance to help you achieve your unique retirement goals, and help you break things up into tangible steps,” she said. “They can also give you access to educational tools and resources to help you more confidently manage your money.”
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