A 401(k) can be a valuable part of a retirement savings plan. But how much should you have saved in your 401k at different ages, or even stages of your career?
Charting the average 401k balance by age can help put your own savings in perspective. Seeing what others are saving in their 20s, 30s, 40s, and beyond can be a useful way to gauge whether you’re on track with your own retirement plans, and what else you can do to maximize this important, tax-deferred form of savings.
Keep reading to learn about these potential benchmarks, and smart ways to handle common savings challenges people may face at different phases of life. After all the point isn’t to see whether you measure up, but to ensure you keep making progress toward your retirement goals!
Table of Contents
- Average 401(k) Balance: Overview
- Average 401(k) Balance: Ages 35 and Younger
- Average 401(k) Balance: Ages 35 to 44
- Average 401(k) Balance: Ages 45 – 54
- Average 401(k) Balance: Ages 55 to 64
- Average 401(k) Balance: Ages 65 and Older
- Tips on Improving Your 401k Return
- Creating or Reassessing Your Retirement Goals
Average 401(k) Balance by Age Group
Pinning down the average 401k account balance can be challenging, as there are only a handful of sources that collect information on retirement accounts, and they each have their own methods for doing so. Vanguard, for example, is one of the largest 401k providers in the U.S., with more than $1.7 trillion in assets under management, across 1,400 plan sponsors and 4.7 million participants. Sponsors are typically the companies or organizations that offer the 401k; participants are generally employees.
For the purposes of this review of the average 401k balance by age, we’ll be using data from Vanguard’s “How America Saves 2021” report . Specifically, we’ll be looking at the average and median 401k balances by age, for savers in 2020.
Why look at the average balance amounts, as well as the median? Owing to the fact that there are people who save very little as well as those who have built up very substantial balances, the average account balance only tells part of the story. By comparing the average with the median amount — the number in the middle of the savings curve — it provides a bit of a reality check as to how other retirement savers in your cohort may be doing.
|Age Group||Average 401k Balance||Median 401k Balance|
Ages 35 and Younger
The average 401k balance for savers 35 and younger can be split into two groups:
• Under age 25: $6,718
• Ages 25 to 34: $33,272
Median 401k balances for both age groups are lower. The median balance is a dividing point, with half of savers having more than that amount saved for retirement in their 401k and the other half having less.
It makes sense that the under 25 group would have the lowest balances in their 401k overall, as they’ve had the least amount of time to save for retirement. They’re also more likely to earn lower starting salaries versus workers who may have been on the job for 5 to 10 years. The youngest workers may not have as much income to put towards a 401k.
Key Challenge for Savers
Debt often presents a big challenge for younger savers, many of whom may still be paying down student loan debt, or who may have credit card debt (in some cases both). How do you save for retirement when you want to get out of debt ASAP?
It’s a familiar dilemma, but not an insurmountable one. While being debt free is a priority, it’s also crucial at this age to establish the habit of saving — even if you’re not saving a lot. The point is to save steadily (e.g. on a biweekly or monthly cadence), and whenever possible to automate your savings.
Then, when your debt is paid off, you can shift some or all of those payments to…you, by upping your retirement contribution.
Ages 35 to 44
• Average 401(k) balance: $86,852
• Median 401(k) balance: $32,664
The average 401k balance for workers in the 35 to 44-year-old group is $86,852. The median 401k balance for these workers is $32,664. That’s quite a gap! So what is a good average balance to have in your 401k by this point?
One rule of thumb suggests having three times your annual salary saved for retirement by the time you reach your 40s. So if you’re making $100,000 a year then ideally you should have $300,000 stashed away in your 401k. This assumes that you’re earning a higher income at this point in life, and you’re able to contribute more to your plan because you’ve paid off student loans or other debts.
Key Challenge for Savers
While it’s true that being in your late 30s and early 40s can be a time when salaries range higher — it’s also typically a phase of life when there are many demands on your money. You might be buying a home, raising a family, investing in a business — and it can feel more important to focus on the ‘now’ rather than the future.
The good news is that most 401k plans offer not only automatic contributions, but the opportunity to increase those contributions each year automatically. Take advantage of this feature if your plan offers it. Even a 1% increase in savings each year can add up over time.
Ages 45 to 54
• Average 401(k) balance: $161,079
• Median 401(k) balance: $56,722
Among 45 to 54-year-olds the average 401k balance is $161,079, while the median balance is $56,722.
The rule of thumb for this age suggests that you stash away six times your salary by age 50. So again, if you make $100,000 a year then you should have $600,000 in your 401k by your 50th birthday. Whether this is doable or not can depend on your income, 401k deferral rate and overall financial situation.
Key Challenge for Savers
For some savers these are peak earning years, yet college costs and the need to help aging or ailing parents are among the challenges savers can face at this stage. The great news is that starting at age 50 the IRS allows you to start making catch-up contributions. While you may feel strapped, this could be the perfect moment to renew your commitment to retirement savings because you can save so much more. For 2022, the regular 401k contribution limit is $20,500 – but add in $6,500 in catch-up contributions, and you can save a whopping $27,000.
Ages 55 to 64
• Average 401(k) balance: $232,379
• Median 401(k) balance: $84,714
The average 401k balance among 55 to 64-year-olds is $232,379. The median balance is much lower, at $84,714.
By this stage, experts typically suggest having 10 to 12 times your annual salary saved. So going back to the $100,000 annual salary example from earlier, you’d need to have $1 million to $1.2 million tucked away for retirement by age 60.
Key Challenge for Savers
As retirement itself draws closer, it can be tempting to think about dipping into Social Security. At age 62, you can begin claiming Social Security retirement benefits to supplement money in your 401k. But starting at 62 gives you a lower monthly payout — for the rest of your life. Waiting until full retirement age, which is 66 or 67 for most people, will allow you to collect a higher benefit. And if you can wait until age 70 to take Social Security, that can increase your benefit amount by 32% versus taking it at 66.
Ages 65 and Older
• Average 401(k) balance: $255,151
• Median 401(k) balance: $82,297
The average 401k balance for those 65 and older is $255,151. The median balance is $82,297. So, is $255,000 enough to retire on assuming that you’re fully vested in your 401k?
Most experts would say no, unless you have other resources set aside for retirement. A pension plan, for example, or an Individual Retirement Account (IRA) could both supplement your 401k savings. Investing in an annuity is also an option worth considering if you’re interested in creating a guaranteed stream of income for retirement.
Key Challenge for Savers
Just because you turn 65, a common shorthand for “retiree”, doesn’t mean you’re at the end of the line or out of options. After all, 70 is the new 60 for many people these days, and you may be embarking on a new chapter in life, love, or business that could change your financial circumstances. The challenge here is to revisit your plan, possibly speak with a financial professional if you haven’t done so already, so you can maximize all potential income streams and ways to save.
And don’t forget: A 2019 law eliminated the long-standing age limit of 701/2 for making retirement contributions to your IRA (and Roth IRAs don’t have age limits)! If life permits, you can (and should) keep saving.
Tips on Improving Your 401k Return
Getting the best rate of return on your 401k can help you to fund your retirement goals. But there are different things that can affect your returns, including:
• Investment choices
• Market performance
Time is also a consideration as the longer you have to invest, the more room your money has to grow through the power of compounding interest. If you’re interested in maximizing 401k returns, here are some things to keep in mind.
1. Review Your Contribution Rate
The more you contribute to your 401k, the more growth you could see. If you haven’t checked your contribution rate recently, it may be a good idea to calculate how much you’re saving and whether you could increase that amount. At the very least, it’s a good idea to contribute enough to qualify for the full employer matching contribution if your company offers one.
As noted above, if your plan offers automatic yearly increases, take advantage of that feature. Behavioral finance studies have shown repeatedly that the more you automate your savings, the more you save.
2. Make Catch-Up Contributions If You’re Eligible
As mentioned, once you turn age 50 you have an opportunity to contribute even more money to your 401k. If you’re able to max out the regular contributions each year, making additional catch-up contributions to your 401(k) can help you grow your account balance faster.
3. Take Appropriate Risk
The younger you are, the more time you have to recover from market downturns and thus the more risk you can generally take with your investments. This is important to note as some risk is necessary to grow your portfolio. Being too conservative with your 401k investments, on the other hand, could cause your account to underperform and fall short of your goals.
4. Pay Attention to Fees
Fees can erode your investment returns over time and ultimately reduce the size of your nest egg. As you choose investments for your 401k, consider not only the risk/reward profile but the cost of different funds. Specifically, look at the expense ratio for any mutual funds or exchange-traded funds (ETFs) offered by the plan. This reflects the cost of owning the fund annually, expressed as a percentage. The higher this percentage, the more you’ll pay to own the fund.
Creating or Reassessing Your Retirement Goals
If you’re still working on putting your retirement savings plan together, a 401k can be a good place to start. As you decide how much to save, ask yourself these questions:
• What kind of lifestyle do I want to live in retirement?
• When do I plan to retire?
• How much of my income can I afford to save in a 401k?
• Is there an employer match available and if so, how much?
• How much risk am I willing to take with 401k investments?
Using a retirement calculator can help you estimate how much you might need to save for retirement. There are also calculators that can factor in how much you’ve already saved to tell you if you’re on track with your goals.
Recommended: When Can I Retire? This Formula Can Help
It can be helpful to check in with your goals periodically to see how you’re doing. For example, you might plan an annual 401k checkup at year’s end to review how your investments have performed, what you contributed to the plan and how much you’ve paid in fees. This can help you make smarter investment decisions for the upcoming year.
What is the average 401k balance by age? It’s a tricky question to answer as there’s no single source of information for these numbers. And it’s important to remember that the average 401k balance by age is just an average; it doesn’t necessarily reflect your ability to save for retirement.
That said, the average and median numbers provided above reflect some important realities for different age groups. It’s clear that some people are able to save more, others less — and it’s crucial to understand that there are many factors that play into those account balances. It’s not simply a matter of how much money you have, but the choices you’re making. Every stage of life brings its own unique set of challenges that can derail your retirement, but with a little forethought and planning, it’s possible to keep your retirement on track.
Also, keep in mind that a 401k isn’t the only way to save and invest money for the future. You could also open an IRA online or a brokerage account. Brokerage accounts can offer flexibility, since you may be able to trade stocks, exchange-traded funds, IPOs or cryptocurrency, which are typically not offered in a 401k. If you’re ready to diversify your retirement portfolio, open an online brokerage account with SoFi Invest® today. And as a SoFi member, you have access to complimentary financial advice. Don’t wait! Start saving today.
Photo credit: iStock/kate_sept2004
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