WebEligibility: Your employer needs to offer a 401(k) plan. Just like in the bond market, you can buy all sorts of different stocks with different risk profiles. Ive personally mostly invested in growth stocks in my 20s, 30s, and 40s. There is more than one way to estimate a future rate of return for your retirement investmentssome simple, some not. Nothing to sneeze at. If youve not done so, it literally pays to check on the average rate of return of your 401(k) plan. Sign up forPersonal Capital, the webs #1 free wealth management tool to get a better handle on your finances. Stocks tend to perform very well over time, but they can also perform poorly sometimes. You dont want to lose out on years of potential compounding growth. They can include expenses for record keeping, legal representation and services offered to employees such as educational seminars. In 14 years, your retirement portfolio will have doubled. Between 1986 and 2019, the S&P 500 saw: Highs of 31.49% in 2019, 31.5% in 1989, 32.39% in 2013, 33% in 1997, and If youve thought for even a few minutes about saving for retirement, chances are you have some familiarity with the 401(k) savings plan. Confused yet? A 401(k) account is an employee-sponsored retirement vehicle that allows you to contribute pre-tax income towards your retirement. One of the most effective is to find ways to reduce your discretionary expenses or increase your income. According to a study from Motley Fool, the average 401 (k) return in 2015 was -.4%. You dont want to lose out on years of potential compounding growth. SmartAssets services are limited to referring users to third party advisers registered or chartered as fiduciaries ("Adviser(s)") with a regulatory body in the United States that have elected to participate in our matching platform based on information gathered from users through our online questionnaire. 401(k) plan contributions are factored as an annual percentage of your annual income. Just four years ago, the average rate of return on 401 (k) plans was an abysmal -.4%. A retirement goal worth aspiring to is maxing out your 401 (k) plan. Vanguard's data shows the average 401 (k) balance for workers 65 and older to be $279,997, while the median balance is $87,725. Access your favorite topics in a personalized feed while you're on the go. You might be looking at these numbers and thinking How will I ever make it to retirement with returns like the -.4% in 2015? SmartAssets services are limited to referring users to third party advisers registered or chartered as fiduciaries ("Adviser(s)") with a regulatory body in the United States that have elected to participate in our matching platform based on information gathered from users through our online questionnaire. If youve already got all the money youll ever need, there simply is no point taking outsized risk at all. Heres what you should know to help you make an informed decision. The value of your 401(k) at retirement is a function of how much you contribute, the matching provided by your employer and the appreciation of your 401(k) assets. You are doubling your money, and your employer is building a happy workforce. What should you do if you need to rollover your 401(k)? The average 401(k) balance is $129,157, according to Vanguard's 2021 analysis of over 5 million plans. As an employee in a 401(k) plan, you dont have to worry about the complicated rules and regulations that need to be followed, or about making arrangements with the funds in which you invest your moneyyour employer takes care of all of that for you. If you're struggling with debt, it might be tempting to dip into the 401k cookie jar to relieve the pressure. c){for(var d=[],e=2;e