I’ve been contributing to my 401(k) since my 20s — but why don’t I feel financially secure yet?

At 35, No_Independence5418 is wrestling with a dilemma many mid-career professionals face: Am I saving enough for retirement, or should I be doing more? Despite the poser contributing to their 401(k) regularly since their early 20s, maxing out a Roth IRA, and leveraging other savings options, they feel like they haven’t saved nearly as much as they’d like. 

How can you tell when you’re saving enough? What is enough? 

Let’s take a look at this user’s situation and dive into the savings conundrum more. 

Key Points from This Article

• Retirement planning isn’t just about hitting a percentage. It’s about saving enough for the future you want. 
• Sometimes, 15% isn’t enough, and you may need to raise your savings percentage. 
• Also: Are You On Track to Retire? Take This Quiz and Find Out ^(Sponsored)

Are You Saving Enough?

Generally, saving 15% of your income into retirement accounts is recommended as a solid starting point for retirement. However, that doesn’t mean that’s all you have to save. Some people may need more, depending on factors like lifestyle inflation and rising retirement costs. These factors can often widen the gap between what 15% will give you and what you actually need. 

Many individuals do not have enough saved for retirement, so it’s essential to stay on top of your retirement savings plan. 

Here’s what our Reddit poster currently has saved:

• $65k in 401(k)
• $7k in Roth IRA
• $1k in HSA
• $20k in a pension
• $5k in a high-yield savings account
• $1k in company stock

This is about $100k across all accounts, though the poster makes an annual income of just under $60k total. This poster is continually making steady progress on their savings. However, they are also working long hours for another 30+ years and would rather be done working sooner rather than later. 

Saving at 15% probably won’t be enough for this user to retire early. It’s considered the minimum. If you’re looking for a more luxurious retirement or want some extra wiggle room, you need to save more. 

Is 15% Enough for You?

For some, contributing 15% might not align with their early retirement goals or desired lifestyle. Here’s why it might be inadequate:

1. Income Growth and Lifestyle Adjustment: As earnings increase, retirement contributions may not scale proportionally. Potentially, this could lead to a retirement shortfall if you don’t slowly increase your savings, too. Those with a higher income typically need to save more than 15%.
2. Investment Returns: Often, contributions alone aren’t enough. It’s important to maximize returns, too. Sometimes, when the market is doing poorly, your retirement savings may not grow as much as you’d like!
3. Time and Compounding: Retirement savings work largely through compound interest. It’s not your contributions themselves that are enough. It’s the compound interest those contributions make over the decades. 

Strategies to Supercharge Retirement Savings

If 15% doesn’t feel like enough, there are a few ways you can strengthen your savings:

• Max out tax-advantaged accounts: Aim to max out both your 401(k) and Roth IRA to take full advantage of tax benefits. For 2024, the limits are $23,000 for 401(k)s (if 50 or younger) and $7,000 for IRAs.
• Leverage Your HSA: Because healthcare costs tend to be higher as you get older, an HSA can do a lot of heavy lifting for retirement. These savings are tax-free and won’t disappear at any point, allowing you to use them in retirement even if you start saving much earlier in life. 
• Build Taxable Investments: We also recommend considering a taxable brokerage account to help grow your savings even more. This can provide some tax flexibility in later life, too. 
• Increase Savings with Raises: Consider raising your savings percentage with raises, not just the amount of money you’re saving. This will help ensure that your extra cash doesn’t end up fueling lifestyle inflation. 
• Focus on Work-Life Balance: Don’t forget about work-life balance, too. Sometimes, working too much overtime isn’t particularly helpful if it leads to excessive stress.