Millennials, as a generation, have had a tough go, financially speaking. Older millennials graduated college right in time for not just one, but two recessions. Throw in high levels of student debt, stagnant wages, and raging inflation, and it's a small miracle millennials have retirement savings at all.
But as of last year, millennials had an average 401(k) balance of $67,300, according to Fidelity. That's not a huge amount of savings per se. But it's also not dire at all.
Image source: Getty Images.
Millennials still have time on their side
A $67,300 balance in a 401(k) plan may be cause for alarm for people in their 50s and 60s. But many millennials are still solidly in their 30s or early 40s, which means they have plenty of time to grow their retirement savings.
In fact, let's say you have $67,300 in your 401(k) at age 35, and you contribute nothing more for the next 30 years. If your investments deliver an 8% yearly return, which is a bit below the stock market's average, you should end up with about $677,000 by age 65.
Here's an even better scenario. Let's say you have $67,300 at age 35, and you contribute another $300 a month to your 401(k) over the next 30 years. Assuming that same 8% return, you could be looking at a balance of close to $1.1 million.
So if you're a millennial whose 401(k) balance is comparable to the average above, don't panic. If you keep working and saving, you may be surprised by how much money you end up with down the line.
Be sure to make the most of your 401(k)
While continuing to save and invest could help you grow your 401(k), there are some additional strategies you can employ.
First, aim to snag your complete workplace match each year if your company offers one. Secondly, review your investments each year and pay attention to their fees, known as expense ratios. Dumping some higher-cost mutual funds in favor of lower-cost index funds could help you grow your savings more efficiently.
Finally, make sure you're investing aggressively enough in your 401(k). If you're a millennial who's decades away from retiring, putting the bulk of your savings into less risky but lower-yielding bond funds probably isn't a smart bet. A more age-appropriate option could be an S&P 500 index fund.
It's encouraging to see that the average millennial 401(k) balance is pretty decent. And with the right strategy, you can build on your current balance to set yourself up for the retirement of your dreams.
