Personal Finance

I'm 29 and just hit six figures in my 401(k) — it feels great! What should I do next?

Maurie Backman

Published: December 17, 2024 2:24 pm

Key Points from 24/7 Wall St.

• If you have a six-figure 401(k) at 29, you’re ahead of the game.
• Keep contributing to your plan steadily and make sure you’re investing appropriately.
• Consider investing outside of a 401(k) as well.
• Also: Is your 401(k) optimized for your retirement plans? (Sponsored)

Funding a 401(k) plan is not an easy thing to do in your 20s. At that stage of life, a lot of people are focused on paying off student loans, tackling credit card debt, and trying to build up some sort of emergency fund. So it’s easy to see why your 401(k) might have to fall by the wayside.

But not everyone is in that boat. In a Reddit post, one user shared their personal victory of having reaching $100,000 in their 401(k) at just 29 years old. And they got there with a combination of a strong savings rate (10% of their salary), an employer match, and savvy investing in an S&P 500 index fund.

But the question is, what comes next?

A great position to be in

As of the third quarter of 2024, the average millennial aged 28 to 43 had a 401(k) balance of $66,500, according to Fidelity. So if you’re 29 with $100,000 in a 401(k), you’re way ahead of the game, especially since you’re also at the low end of that age range.

First, let’s talk about what might happen if you were to stop saving for retirement at this point with $100,000 in your 401(k). Assuming you’d want to retire at 67, which would be your full retirement age for Social Security purposes, and assuming a 7% annual return on your investments (which is reasonable with a heavy position in S&P 500 index funds), you’d be looking at about $1.3 million if you stopped contributing to your 401(k), period. That’s pretty close to the $1.46 million Americans today think it’ll take to retire comfortably, according to Northwestern Mutual.  

That said, why settle for $1.3 million in savings when you could continue contributing and investing toward the future and potentially wind up with a giant-sized nest egg that buys you the retirement of your dreams? If you’re already in the habit of funding a 401(k), continuing to save and invest should be pretty easy. And if you do so savvily, you could end up in a fantastic spot for retirement.

Choose your assets wisely and consider branching out

In the above post, the user wondered whether they should eventually consider moving their money into safer assets that are less volatile than an S&P 500 index fund. The reality is that when retirement is decades away, there’s no reason to ditch the stock market, volatile as it may be. It’s only when retirement is a handful of years away that it pays to consider a major shift in strategy.

So if you’re in a similar position to the user in the above post, keep doing what you’re doing. Continue contributing to your 401(k) and keep loading up on S&P 500 index funds, which also offer the benefit of low fees (called expense ratios) that shouldn’t eat away too heavily at your returns.

At the same time, though, if you’re able to keep saving at your current rate, you may end up in a position where you’re able to retire early. So it pays to invest in a taxable brokerage account on top of a 401(k) for added flexibility.

There can be steep penalties for tapping a 401(k) before the age of 59 and ½. So in the coming years, aim to put at least enough money into your 401(k) to claim your employer match in full. But also make sure you’re investing outside of a 401(k) to some degree.

Another benefit of investing in a taxable brokerage account is that you’ll have the option to hold stocks individually, which 401(k)s typically don’t allow for. An S&P 500 index fund is a great choice for generating strong returns, but if you want to try to beat the market (and hey, there’s nothing wrong with doing that), you’ll need to branch out into individual companies.

Finally, even though you’re in a great spot, you may want to consider working with a qualified financial advisor who can address whatever financial questions you have. An advisor can customize an investing strategy that’s unique to you so you’re able to work toward your goals.