How Much Should I Contribute to My 401(k) in My 30s?

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There are so many resources out there talking about how much you should contribute to your 401(k) in your 20s, 30s, 40s, and so on.

So, how much should you really be contributing into your 401(k) in your 30s?

AS MUCH AS YOU CAN/WANT.

I want this platform to be educational with no hint of shame or guilt.

You may be able to contribute to your retirement account and you may not be able to.

Contribute what fits your budget and goals.

If you have a certain goal in mind in terms of how much you want to have in your accounts by the time you retire, mathematically there is an answer to how much you would hypothetically need to contribute to reach that goal.

I want to review in this post a little bit about employer-sponsored accounts and things to consider when you’re planning monthly contributions to your retirement accounts over a long period of time.

What are employer-sponsored retirement accounts?

These are retirement accounts offered as a fringe benefit from your employer.

The most common accounts are 401(k)s (workers typically in the private sector) and 403(b)s (workers typically in the government or non-profit sector).

I am not going to flesh out the nuts and bolts of these accounts because Investopedia can do it much better than I can:

See articles: 401(k) Plan: The Complete Guide & 403(b) Plan

One thing I do want to mention is sometimes employers offer a “match” where they will contribute the same amount to your account that you contribute.

Most of the time it’s up to a certain percentage.

This is YOUR MONEY. Employers include the match as a part of your benefits package.

If you are unsure about how much your employer matches, check the benefits pamphlet you received when you first started.

I made the mistake for a few years of only contributing very little and not getting the full employer match, so I lost out on a big chunk of free money.

Live and learn.

Why to start saving for retirement as early as you can

If you read my simple retire early calculation post, you already know that the amount I was contributing to my 403(b) (non-profit version of a 401(k)) was not consistent with my goal of retiring early. 

To recap, I was contributing about $70-$100 a month,

If I kept contributing at that rate, I would have about $140,000 by the time I wanted to retire (55 years old). That is not enough money to live on for my entire retirement!

So, I realized I needed to be contributing waaaay more.

Saving for retirement definitely felt like something I could worry about at a later date.

Then, I learned how much more your money can grow in the stock market the more time it’s in it.

We all know most of us are going to have social security available to us, but that will likely not be enough for us to maintain our current lifestyle.

According to Bank Rate, the average social security check if you start claiming at 65 years old is $2,993 a month ($35,916/year).

That amount does not cover my current living expenses, let alone give me room to travel, help family/friends, and whatnot.

I want to show an example of how compound interest can work in your favor when you start investing as early as possible.

Here you can see the younger you start investing, the less money a month you need to contribute to reach $1 million by the time you are 65 years old.

This is because your money has more time to grow in the stock market due to compound interest.

These calculations are based on an 8% return because that is the average rate the market grows if you include a 2% inflation rate (I know 2022 is very different).

I used this compound interest calculator to do the above calculations.

When I first saw these calculations, I was blown away at the idea that we could even invest our way to a million.

But duh, right?

I did not know much about investing at the time and it was definitely a scary word to me.

How much should you contribute to your 401(k) in your 30s?

I want to start off by saying, just contribute as much as you can.

There are so many articles out there saying we should have 1x our salary by 30 years old and 3x by 40 years old.

But, we all have different expenses and some of you may be only able to contribute $50, something is better than nothing!

I’ll just say that I am nowhere near close to 1x my salary in investments and I’ll be 30 years old next year.

I may be closer to that goal if I would have started contributing sooner, but oh well.

As you have seen above, if you’re 30 and you want to have a million by the time you are 65, then contributing about $500/month would likely get you there based on an 8% return.

If you want to retire earlier, you’ll have to contribute more a month!

Those who like the long-term investing strategy (me included), recommend contributing to your employer plan enough to get a match and then max out other investment accounts before maxing out your 401(k).

See related article: Prioritizing Investments, Bogleheads.org

But how much will you spend a year in retirement?

Investopedia says, “Most experts say your retirement income should be about 80% of your final pre-retirement annual income. That means if you make $100,000 annually at retirement, you need at least $80,000 per year to have a comfortable lifestyle after leaving the workforce.”

Although, our expenses are expected to change in retirement, using the calculation from Investopedia can give you a good idea about how much you may need a year in retirement.

Check out another one of my posts, Simple Early Retire Calculation, to read more about how to calculate how much you would need to retire.

My personal 403(b) account and account projection

I am currently only contributing enough to get my employer match at this time.

Some day I hope to have enough income to max it out, but I am happy with where I am at right now!

Personally, I contribute 6% of each paycheck and my employer matches my contributions and a half.

So approx. a total of $820.40 per month!

I say approximately because I get paid every 2 weeks and so I get paid 3 times a month 2 months out of the year.

I won’t be able to access this money until I am 59 1/2 unless I have a hardship or do the roth conversion ladder.

But let’s just assume I wait until I am 59 1/2, using this compound interest calculator, I am going to project how much money I would have in my retirement accounts at 59 1/2 if I keep contributing (aka investing) at this rate.

This calculator projects I would have $1,273,557.98 at age 59 1/2 if I keep contributing at this rate. Super excited to see that number!

Bret and I not only want to be able to enjoy our retirement, but we also want to be in a financial position to help our parents and other family/friends if they need it.

I sometimes feel like I wish I had more money to invest in the stock market or real estate right now, but the calculation above helps me remember I am still making good choices right now to set myself up for the future.

Retirement accounts for those who do not have access to employer-sponsored plans

• If you are self-employed, you can still contribute to retirement accounts! Click here for a list of them.
• If your employer does not offer retirement accounts, there are other options, click here to learn more.

Info for those who are planning for retirement later in life

For some, saving for retirement while they were young was just not an option.

There are rules in place to help you “catch up”.

• You can use this calculator from Nerd Wallet to see generally how much to save for retirement at your specific age.
• Read here about catch-up rules for retirement accounts.
• Also, check out these catch-up tactics from Investopedia.

Final thoughts

This is just a general overview of employer-sponsored plans and one way you can try to project how much you’d have invested at retirement.

Employers offer different investment options, so your account will likely be different than mine.

Here are two clickable articles to get you started thinking about choosing your investments for your 401(k):

• Strategies to Maximize Your 401(k), Investopedia
• How to Invest Your 401(k), NerdWallet

If you still have questions, talk with someone in your HR department, or someone who works for the company your accounts are held.

If you want to learn to manage them yourself, do some research and find someone in the personal finance space you can trust. I found someone and bought their investing course. It helped me a ton!

Or, just sift through the info online on your own. There are a ton of free resources out there.

Long term, you might consider hiring a professional financial advisor to review your investments and to make sure you are on the right track to meet your goals.

I hope I have inspired you a little bit to take a look at how you have been preparing for retirement.

I share my personal numbers in hopes of encouraging others and showing the power of investing/compound interest!

There are other people in my life who have shared their personal financial information with me and it has helped me tremendously.

I know it can sometimes be discouraging to think about how far you may be behind in planning and that’s okay and normal. Many people in the finance space say that the best time to start investing was yesterday and the second best time is now!