How Much Money Do I Need to Start a Retirement Account?

by Wanda Thibodeaux

It is possible to set up a retirement account with only minimal funding. However, the minimum amount you need depends on two factors: the type of retirement account you start and how close you are to retirement. Those who are younger can afford to contribute less because they have more time to save. Those who are near retirement might get into trouble if they put only the minimum into their retirement account because they have less time before they need the funds.

401(k) Plans

A 401(k) plan, an alternative to a traditional pension, is a retirement savings account that takes a percentage of your paycheck and holds it for you until you retire. The funds in the account normally are invested in mutual funds or stock and are not taxed until you withdraw the money. Some employers provide extra incentives to use 401(k) plans such as contribution matching. According to the Profit Sharing/401k Council of America, at the time of publication, there is no federal law requiring a minimum contribution to a 401(k) plan. If you can only afford to put away $10 a month, then it's OK to do so. However, some companies do have minimum contributions you must make before they will match your funds.


An individual retirement account, or IRA, is an investment account that, unlike a 401(k) plan, you set up on your own without the help of your employer. IRAs can take many different forms, the simplest of which are bank-based savings and certificate of deposit accounts. The bank may not require a minimum contribution to open and maintain these types of IRAs. This allows a great deal of flexibility if you find you can't contribute as much one month compared to a previous one. However, many IRAs, such as those containing stocks or mutual funds, have a minimum initial contribution of $1,000 at the time of publication, as explained by Cameron Huddleston of Kiplinger. Once you open the account, a minimum monthly contribution of $50 to $200 is normal, according to Don Taylor of


Depending on the type of retirement account you open and where you do it, there may be fees associated with the account. Usually, these are maintenance fees. However, brokers often charge fees for selling or purchasing bonds, stocks, mutual funds and similar investments. It's important to read the fine print on your account agreement before you sign up for anything, as these fees quickly can eat away at your funds. This is especially true if you know you cannot contribute much to the account.

Bottom Line

Depending on the type of retirement account you set up, you may be able to contribute as little as you want per month, although it's not unusual to have an initial opening contribution of $1,000 and minimum monthly contribution of up to $200. Keeping this in mind, the U.S. Department of Labor points out that you may need up to 90 percent of your pre-retirement income in order to maintain the quality of living you had prior to stopping work. The Internal Revenue Service claims you need at least 80 percent. This means that even though a "barely-there" contribution may work for you in the short term, it likely will not meet your retirement needs.

About the Author

Wanda Thibodeaux is a freelance writer and editor based in Eagan, Minn. She has been published in both print and Web publications and has written on everything from fly fishing to parenting. She currently works through her business website,, which functions globally and welcomes new clients.

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