It might not seem like much today, but you'd be surprised what a few decades in the stock market can do.
When saving for retirement, it can often feel like you're making little progress toward your goal. You expect you'll need six or seven figures to retire comfortably but you may only be able to set aside a couple hundred dollars -- or even less -- each month.
But what this picture doesn't account for is the earnings on your investments. These can go a lot further than you think. To show you what I mean, let's consider the example of $10,000 invested in your 401(k) for 20 years.
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Here's what your $10,000 could be worth in 20 years
A $10,000 401(k) balance today doesn't seem like it would go very far in retirement, but a lot depends on how long you have until you need to withdraw your cash and what kind of return you earn. The greater your rate of return and the longer you leave your cash invested, the more you'll have by retirement.
For our example, let's say you invest $10,000 in a 401(k) today and you aim to withdraw it in 20 years. While it's invested, you earn a 10% average annual return. After two decades, your $10,000 would be worth $67,275. That's enough to cover a couple years' worth of retirement expenses for most people, especially when paired with Social Security benefits.
You could wind up with even more if the $10,000 you contributed to your 401(k) on your own earned you a company match from your employer. This could potentially add hundreds or thousands of dollars to your 401(k) balance today, which could grow to be worth tens of thousands of dollars or more in a few decades.
How to maximize your 401(k)'s growth
There's no way to guarantee that you earn a 10% average annual return, so your actual balance over 20 years could be different than in the example above. Some factors influencing returns, like how the economy is doing, are beyond anyone's control. But there are things you can do to grow your 401(k) balance more quickly.
First, avoid leaving any of your 401(k) match on the table if you can. Try to contribute at least enough to get the full match each year unless you cannot afford to lose any money from your paychecks. Talk to your employer if you're unsure how its matching formula works or how much you have to set aside to claim your full match.
Next, review your investments. Most 401(k)s give you a choice between various mutual funds. These are bundles of investments you purchase as a package. They charge annual fees known as expense ratios, and some can be quite high. Generally, you want to avoid paying more than 1% of your assets per year for an expense ratio. That's $1 for every $100 you have invested in the fund.
Index funds are a great choice if they're available to you. These are low-cost investments that spread your money around between many companies so your portfolio isn't too dependent on any one in particular.
Next, focus on your contribution rate. Think about how long you have until retirement and how much you believe you'll need to save to determine what you need to set aside each month. If you're not able to save as much as you'd like right now, do what you can. Whenever possible, increase your contributions by 1% of your salary per year until you reach your target savings rate.
Finally, be careful of the annual contribution limits. In 2024, adults under 50 can only contribute up to $23,000 to a 401(k). Adults 50 and older may contribute up to $30,500. Exceeding these limits can bring costly tax penalties, so keep a close eye on your contributions throughout the year to make sure you don't set aside too much.
FAQs
For our example, let's say you invest $10,000 in a 401(k) today and you aim to withdraw it in 20 years. While it's invested, you earn a 10% average annual return. After two decades, your $10,000 would be worth $67,275.
How much will $10,000 be worth in 20 years? ›
The table below shows the present value (PV) of $10,000 in 20 years for interest rates from 2% to 30%. As you will see, the future value of $10,000 over 20 years can range from $14,859.47 to $1,900,496.38.
How much will a 401k grow in 20 years? ›
401(k) Compound Interest Savings Tables
| Annual Savings ($) | 20 Years at 5% Interest ($) | 20 Years at 8% Interest ($) |
|---|
| 5,000 | 165,329.77 | 228,809.82 |
| 10,000 | 330,659.54 | 457,619.64 |
| 15,000 | 495,989.31 | 686,429.46 |
| 20,000 | 661,319.08 | 915,239.29 |
Average and median 401(k) balances by age
| Age range | Average balance | Median balance |
|---|
| 35-44 | $91,281 | $35,537 |
| 45-54 | $168,646 | $60,763 |
| 55-64 | $244,750 | $87,571 |
| 65+ | $272,588 | $88,488 |
2 more rowsJun 24, 2024
Fidelity says by age 60 you should have eight times your current salary saved up. So, if you're earning $100,000 by then, your 401(k) balance should be $800,000.
How much to save to have $1 million in 20 years? ›
Bottom Line. Given an average 10% rate of return on the S&P 500, you need to save about $1,400 per month in order to save up $1 million over 20 years. That's a lot of money, but the good news is that changing the variables even a little bit can make a big difference.
What will $25,000 be worth in 20 years? ›
However, you can get a lot of mileage out of $25,000 over 20 years if you invest it. An investor who achieves an 8% annualized return will turn $25,000 into $116,523.93 in 20 years.
Can I retire at 62 with $400,000 in 401k? ›
You can retire a little early on $400,000, but it won't be easy. If you have the option of working and saving for a few more years, it will give you a significantly more comfortable retirement.
How many years of maxing out 401k to become a millionaire? ›
How Long Will Becoming a 401(k) Millionaire Take? If you invested $23,000 into your 401(k) each year and earned a consistent 8% return each year, you'd achieve a plan balance of $1 million in slightly under 20 years. Note that this does not factor in a potential employer match.
What will 20000 be worth in 20 years? ›
As you will see, the future value of $20,000 over 20 years can range from $29,718.95 to $3,800,992.75.
As of June, there were roughly 497,000 so-called retirement-created millionaires in the U.S., according to the wealth management firm, which analyzed balances across 26,000 of its customers' accounts. Nearly 399,000 Americans also have a least $1 million in an individual retirement account.
How much does the average person retire with? ›
What are the average and median retirement savings? The average retirement savings for all families is $333,940, according to the 2022 Survey of Consumer Finances. The median retirement savings for all families is $87,000.
What is a good 401k balance at age 55? ›
By age 50, you should have six times your salary in an account. By age 60, you should have eight times your salary working for you. By age 67, your total savings total goal is 10 times the amount of your current annual salary. So, for example, if you're earning $75,000 per year, you should have $750,000 saved.
How many Americans have $300,000 in savings? ›
The poll also found that among those who have been saving for retirement, 6.7% have saved between $10,000 and $49,999, 12.6% have saved between $50,000 and $99,999, 12% have saved between $100,000 and $199,999, 9.9% have saved between $200,000 and $299,999 and 16.5% have saved $300,000 or more.
What is the average 401k return over 20 years? ›
Variable Rate of Return: Financial advisors often project an average rate of return for 401(k) plans between 5 to 8% over 20 to 30 years. However, this does not guarantee such returns due to market volatility and other factors.
What will 10,000 dollars be worth in 30 years? ›
Focus on the long-term
If you can manage to earn a 10% return on your investment every year for 30 years, your $10,000 could grow to as much as $174,000—all without contributing another penny on top of your original investment. That's the magic of compound interest.
How much will $1000 be in 20 years? ›
As you will see, the future value of $1,000 over 20 years can range from $1,485.95 to $190,049.64.
| Discount Rate | Present Value | Future Value |
|---|
| 17% | $1,000 | $23,105.60 |
| 18% | $1,000 | $27,393.03 |
| 19% | $1,000 | $32,429.42 |
| 20% | $1,000 | $38,337.60 |
25 more rowsIf you invest $10,000 today at 10% interest, how much will you have in 10 years? Hence the required value is $ 25940.
How much will $50 000 be worth in 20 years? ›
Assuming an annual return rate of 7%, investing $50,000 for 20 years can lead to a substantial increase in wealth. If you invest the money in a diversified portfolio of stocks, bonds, and other securities, you could potentially earn a return of $159,411.11 after 20 years.
