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Editor’s Note: I’ve added a few sections in this article to point you to some new information. This article was last published on January 10, 2014, so make sure to follow the links if you want more recent information. Still, I feel the findings in this article are relevant and will help you to think about starting to invest more of your hard-earned money!

People tend to think that college students and young adults don’t invest. I can’t believe how many times I hear that — and it’s pure rubbish.

I started investing when I was in my teens (with the help of my parents, of course), and pretty much every college and university campus has a college finance and investment club. So, to think that young adults don’t invest is just wrong.

But really, how much do they invest? Do they have much money? What about when they start working? How much are they investing then?

Let’s look at some fun breakdowns provided by Fidelity that shows just how much young adults have in their IRAs and 401(k)s. The numbers may surprise you.

Young Adult Average IRA Balances

Let’s first take a look at IRA balances for young adults. To put this in perspective, Fidelity looked at all of their 7 million IRA accounts, and saw that the average balance for all accounts reached a new high of $81,100 last year. That’s a 58 percent improvement from 2008, when the financial crisis hit.

For young adults, the balance breaks down as follows:

Age Range Average IRA Balance at End of 2012 Tax Year Average IRA Balance at End of 2008 Tax Year Percentage Increase 20–29 $9,300 $5,800 60 Percent 30–39 $20,700 $10,100 105 Percent

That’s much lower than the average balance for all accounts, but it does make sense that it would be given that young adults are just starting out.

Let’s also look at their average contributions to get a full picture:

Age Range Average Roth IRA Contribution (2012 Tax Year) Average Traditional IRA Contribution (2012 Tax Year) Overall Average IRA Contribution (2012 Tax Year) 20–29 $3,260 $3,170 $3,170 30–39 $3,280 $3,900 $3,320

From these results, we can conclude that the average young adult doesn’t really start investing in an IRA until they graduate college and start earning a decent salary. Based on a $3,170 contribution, it would take three years to get to the average account balance with no growth. So, maybe they are starting about 25–26 (based on the tax year and contribution timing), which is about a year or two after graduation.

Editor’s Section: Updated IRA Information

Fidelity has released some updated IRA balance information, although it may include other ages (it does, however, mention millennials, for example).

A quick search online indicates that there isn’t much updated information for retirement account balances, and existing data may still be some of the most useful information. For example, this article has information from 2013 and was published in 2017. Still, it has great information of balances over time.

Find the relevant information that will motivate you!

Young Adult Average 401(k) Balances

Now, let’s take a look at young adult 401(k) balances. This one is tougher because there are a lot more variables involved. For this, we’re strictly going to look at accounts for young adults under 29.

Age Range Average 401(k) Balance Average 401(k) Contribution Amount Average 401(k) Employer Contribution Amount 20–29 $17,800 6.1% 3.7%

There are also some other interesting facts that came out of this study:

The average gross compensation for this age group is $58,000.

They have been active in their 401(k) on average four years.

These results help us paint an even clearer picture when you combine them with the IRA results. So, if the average young adult has been active in their 401(k) for four years, they most likely started investing around 24–25, right after graduation. This is also the same time they started contributing to their IRA.

The interesting thing is that the combined savings rate (the employee contribution plus the employer contribution) is 9.8 percent. When you combine that with an IRA contribution, these young adults are saving at least 10 percent of their salary for retirement.

Editor’s Section: Updated 401(k) Information

Investopedia has an article about average 401(k) balances by age, although it does seem to talk about account balances generally. You’ll also discover some savings targets. The conclusion of the article has some tips to help you avoid the situation where you don’t have enough money to last you through your retirement.

Surprising Results

Did any of these results surprise you? I was surprised by two facts:

Young adults aren’t contributing the max to the IRAs. Young adults are contributing more than I would have expected to their 401(k)s.

I would have guessed that the average IRA balance would be either higher or lower. Higher would have indicated more people contributing the max, while lower would have indicated more people were either doing the max or not doing anything at all. I’m surprised by the number because it shows people are doing something, which is good, I just wish they were maximizing their IRA potential.

Second, I’m surprised that young adults are contributing 6.1 percent of their pay, on average, to their 401(k)s. I know that when I first started working, I only did 5 percent to take advantage of my company match. What’s even more surprising is that the average matching contribution is only 3.7 percent, so young adult employees are doing almost double what their companies are doing for them.

Action Plan to Be Above Average

The best way to be above average is to just contribute the most you can — and it’s not that hard. If the average salary for this age group is $58,000, it’s not hard to boost your 401(k) contribution to 10 percent and also max out your IRA with a $5,000 deposit. The two of these combined will ensure that you’re saving at least 10 percent of your pay, and will put you above average. Then, add in your employer’s contribution, and you’ll be pushing 15 percent of your pay.

Let’s break down what that looks like over time. We’re going to keep it simple:

10% per year 401(k) contribution + 5% employer match

$5,000 per year IRA contribution

5% growth rate

5% annual raise

$40,000 starting salary at age 25

Age Average 401(k) Balance Average IRA Balance Net Worth 25 $6,000 $5,000 $11,000 30 $45,946 $31,381 $77,327 35 $107,507 $65,051 $172,558 40 $199,577 $108,024 $307,601 45 $334,315 $162,869 $497,184 50 $528,271 $232,866 $761,138 55 $803,881 $322,203 $1,126,084 60 $1,191,459 $436,222 $1,627,681 65 $1,731,837 $581,742 $2,313,580

There’s your action plan. I think having over $2 million at age 65 is above average, and I think our estimates were pretty conservative. A 5 percent average return is less than what has been average, so I think there is potential upside in this.

Another key part of your action plan should be to get a handle on your finances by signing up with Personal Capital. They are a free online platform which aggregates all your financial accounts in one place so you can see where you can optimize.

Before Personal Capital, I had to log into a bunch of different systems to track my different accounts (brokerage, multiple banks, 401(k), etc.) to track my finances. Now, I can just log into Personal Capital to see how my accounts are doing, how my net worth is progressing, and where my spending is going.

One of their best tools is the 401(k) fee analyzer which has helped me save in 401(k) plan fees I had no idea I was paying. There is no online product that has helped me stay on top of my finances more than Personal Capital. It only takes a minute to sign up.

Remember, the only thing that you can count on for sure in retirement is the money you’ve saved for yourself. Nobody else is going to help you.

What are your thoughts on the average account balances for young adults? Did you think they would be more or less? How are you progressing on the action plan to be above average?