Smart401k Blog

The Cost of Being Average With Your 401(k) (Infographic)

by David Roberson | Jan 29, 2016

No one wants to be average, especially when it comes to the kind of retirement they’ll be able to afford. The infographic below compares the size of an average 401(k) investor’s nest egg with that of one who is taking retirement planning to the next level. Being a better-than-average planner could be the difference between having enough money to fund the kind of retirement you want or falling short of your retirement goals. 
Infographic_for_Smart401k

[1] “Fidelity Average 401(k) Balance Nearly Doubles Since Downturn” http://www.fidelity.com/inside-fidelity/employer-services/fidelity-average-401k-balance-nearly-doubles 2 Feb 2014.Web
[2] For Americans 35-44 years of age, according to the Bureau of Labor Statistics Consume Expenditures in 2012 Survey, http://www.bls.gov/cex/2012/combined/age.pdf
[3] “The Pros and Cons of Ignoring Your 401(k)” http://www.nbcnews.com/business/consumer/pros-cons-ignoring-your-401-k-n61826  26 March 2014. Web
[4] According to a study by Financial Engines® (http://corp.financialengines.com/employer/FinancialEngines-2014-Help-Report.pdf), Help participants, on average, experienced median annual returns over 3% (332 basis points) higher than Non-Help participants, net of fees, over the period of 2006-2012.
[5] "Workers Bank on 401(k) for Retirement but Need Help Making the Most of It,” http://pressroom.aboutschwab.com/press-release/schwab-corporate-retirement-services-news/workers-bank-401k-retirement-need-help-makin  .15 Aug 2013. Web.
[6] “Advisor Value”  http://ing.us/rri/sites/ing.us.rri/files/advisor_value_white_paper.pdf  2012
[7] “2014 DALBAR QAIB Highlights Futility of Investor Education,” http://www.dalbar.com/Portals/dalbar/cache/News/PressReleases/2014QAIBHighlightsPR.pdf  9 April 2014
[8] “How America Saves” https://institutional.vanguard.com/iam/pdf/HAS13.pdf
[9] Calculation based on a 40-year-old investor with a starting account balance of $89,300, a before tax salary of $78,169 increased by 3% annually, a 50 cent match for every dollar contributed up to 6% of pay, a 5.02% rate of return, and a contribution rate of 6.4% for the first 5 years. For subsequent years the following contribution rates were utilized: ages 45 to 54, 7.4%; ages 55 to 64, 8.7%; and 65-plus, 10%. Average contribution rate based on Vanguard’s How America Saves 2013 study. https://institutional.vanguard.com/iam/pdf/HAS13.pdf
[10] Calculation based on a 40-year-old investor with a starting account balance of $89,300, a before tax salary of $78,169 increased by 3% annually, a 50 cent match for every dollar contributed up to 6% of pay, a 8.02% rate of return, and a contribution rate of 8% for the first 5 years. For subsequent years the following contribution rates were utilized: ages 45 to 54, 9.25%; ages 55 to 64, 10.88%; and 65-plus, 12.5%.

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