How Much Would You Have for Retirement If You Saved $100 a Month? (2024)

Andrew DePietro

March 17, 2019 at 10:15 AM

How Much Would You Have for Retirement If You Saved $100 a Month? (1)

The figures thrown around Americans in regards to how much they should have saved for retirement can be very daunting. How is one supposed to save $1 million by age 65 with the rising costs of living and unprecedented levels of household debt?

How Much You’d Have for Retirement If You Saved $100 a Month

Saving $100 a month via a traditional route, such as a basic savings account, results in much lower retirement savings than in a 401k. If you’re age 25, and have 40 years to save until retirement, depositing $100 a month into a savings account earning the current national interest rate of 0.10% APY would leave you with $48,974.93 in before-tax savings.

Click to See: How Long $1 Million in Retirement Will Last in Every State

A rather depressing figure is that 49 percent of employers with 401k plans match 0 percent of employee salary. But even with no match from your employer, the retirement savings you earn from a 401k, with a slightly conservative rate of return of 6.5 percent — The Motley Fool found the rate of return to be 7 percent over the last five years — is considerably higher. If you started putting your money into a 401k today at age 25 and saved for 40 years, based on the current median income of $57,652, you’d have $272,214 saved by age 65 — and that’s with no employer contribution.

Take a look below at how much you’d have saved by 65 based on which age you started. These calculations are assuming the employer match is zero, and the salary is based on the U.S. median.

Age at Start of Investing	Birth Year	401k Retirement Savings
25	1994	$272,214
30	1989	$188,329
35	1984	$128,080
40	1979	$84,989
45	1974	$54,338
50	1969	$32,692
55	1964	$17,550
60	1959	$7,093

Less frequent than no match is employers who match 50 cents on the dollar up to 6 percent of employee salary. The median match is 3 percent. Based on the same parameters above, you’d save approximately $408,321 by age 65 if you put away $100 month with a 3 percent employer match of your salary.

Read: This State Is Home to the Worst Cities for Retirement, Study Finds

Tips to Save More for Your Retirement Savings

A straightforward, if basic, way to increase your retirement savings is to increase your monthly contribution. For the purposes of this study, $100 contributed a month was used, for an annual contribution of $1,200. You could certainly crank that up if you wish by contributing more depending on what your budget permits, contributing every paycheck and opting for your employer’s maximum contribution match.

Another strategy is to open and maintain several vehicles for retirement savings. For instance, you can have a 401k through your employer while at the same time contributing to an IRA outside of work. Plus, IRAs tend to offer a wider variety of investment options than the usual 401k plan.

The good news is, retirement costs can be modified and reduced based on geography. The basic fact is that some states and cities have cheaper costs of living than others, better taxes on retirees, more affordable homes, or many other factors. Some states even tax Social Security, so where you choose to retire certainly affects how quickly you use up your savings.

Find out the best places to retire if you haven’t saved as much as you should’ve.

More on Retirement Planning

We make money easy. Get weekly email updates, including expert advice to help you Live Richer™.

Methodology: GOBankingRates determined how much a person would have for retirement if they saved $100 a month first through a basic savings account, and second by using a 401k. SmartAsset’s 401(k) calculator was used to determine how much savings one would have if they invested $100 every month until retirement, using the following constants (1) type of Account [401K], (2) annual contribution amount [$1,200, based on a $100 a month contribution], (3) current 401k balance [$0], (4) employer matches [0%], (5) annual income [$57,652, the median household income according to the Census Bureau 2017 American Community Survey], (6) annual rate of return savings [6.5%, based on slightly more conservative value than The Motley Fool’s 7 percent average], (7) marital status [single], (8) retirement age [65], and (9) life expectancy [78.6 years, the U.S. average according to the Center for Disease Control. These factors were then used for each birth year in the study to give a final total Retirement Savings. This figure was then spread out over the average thirteen years between retirement and death and taxed at the appropriate income level.

This article originally appeared on GOBankingRates.com: How Much Would You Have for Retirement If You Saved $100 a Month?

As an expert in personal finance and retirement planning, I understand the challenges that individuals face in saving for their retirement, especially considering the rising costs of living and the complexities of investment options. In this article by Andrew DePietro dated March 17, 2019, he discusses the daunting task of saving $1 million by age 65, and how Americans can approach this challenge by saving $100 a month.

The article primarily explores two savings strategies: depositing $100 a month into a basic savings account with a 0.10% annual percentage yield (APY), and contributing $100 a month to a 401k with an annual rate of return of 6.5 percent. The study aims to provide perspective on the retirement savings individuals could accumulate based on these two approaches.

Key Concepts Discussed:

Savings Scenarios:
- Basic Savings Account: Saving $100 a month in a savings account with a 0.10% APY results in lower retirement savings. For example, a 25-year-old saving for 40 years would have approximately $48,974.93 before taxes.
- 401k: Contributions to a 401k with a 6.5% annual rate of return could yield considerably higher retirement savings. For a 25-year-old with 40 years of saving and no employer contribution, the projected savings would be $272,214.
Impact of Employer Matching:
- The article mentions that 49 percent of employers with 401k plans do not match any percentage of the employee's salary. Even without employer matching, a 401k with a 6.5% rate of return can significantly boost retirement savings.
Effect of Employer Match:
- Employers who match 50 cents on the dollar up to 6 percent of the employee's salary could lead to higher savings. With a 3 percent median match, an individual saving $100 a month could accumulate approximately $408,321 by age 65.
Age at Start of Investing:
- The article provides a breakdown of retirement savings based on the age at which individuals start investing. The calculations assume no employer match and use the U.S. median income of $57,652.
Tips for Increasing Retirement Savings:
- The article suggests increasing monthly contributions to boost retirement savings. Additionally, maintaining multiple retirement savings vehicles, such as a 401k and an IRA, is recommended for a diversified approach.
Geographical Impact on Retirement Costs:
- Retirement costs can be influenced by geographic factors, such as the cost of living, taxes, and housing affordability. The choice of the retirement location can affect the pace at which savings are depleted.
Methodology:
- The article outlines the methodology used in the study, including the use of SmartAsset's 401(k) calculator. Factors such as annual contribution amount, employer matches, income, rate of return, retirement age, and life expectancy were considered in the calculations.

In summary, the article provides a comprehensive analysis of retirement savings, emphasizing the importance of early and strategic planning. It considers different scenarios, including the impact of employer matching and the choice of savings vehicles, to guide individuals in making informed decisions about their retirement finances.