Investing in a 401(k) is a powerful way to save for retirement. These plans boast higher contribution limits than IRAs, and some offer other perks like matching contributions -- making it easier to save more over time.
How much you should have saved, though, will depend entirely on your situation and goals. The average worker expects to need around $1.8 million to retire comfortably, according to a 2024 survey from Charles Schwab, but some retirees will need far less or even more than that.
While your target should be unique to you, it can sometimes be helpful to see where others your age stand on savings. This is what the average and median 401(k) balances look like across all ages, plus a few ways to save even more.
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The average 401(k) balance varies widely by age
How much you have saved for retirement will depend on many factors, such as your income level, overall cost of living, family situation, and more. But your age will also play a part in your savings, as older adults tend to have far more in savings than those just starting out in their careers.
As part of its 2024 How America Saves report, Vanguard examined both the average and median balances of U.S. adults participating in Vanguard 401(k) plans.
While the average balances may be more compelling, these figures are often skewed by extremely high-earning individuals. The median may be a more accurate representation of the typical American, as it's the middle value where half of the participants have higher balances and half have lower balances.
| Age Group | Average 401(k) Balance | Median 401(k) Balance |
|---|---|---|
| Under 25 | $7,351 | $2,816 |
| 25 to 34 | $37,557 | $14,933 |
| 35 to 44 | $91,281 | $35,537 |
| 45 to 54 | $168,646 | $60,763 |
| 55 to 64 | $244,750 | $87,571 |
| 65 and older | $272,588 | $88,488 |
Source: Vanguard. Table by author.
Regardless of how your savings compare to the average American's 401(k) balance, it's still important to consider your own goals. Fortunately, if you're falling behind on retirement saving, there are a few simple tricks for building a healthier nest egg.
1. Take advantage of the employer match
The 401(k) company match can instantly double your savings with next to no effort, potentially growing your nest egg by hundreds of thousands of dollars over time.
For example, say that you're earning $60,000 per year and your employer will match 100% of your contributions up to 3% of your salary -- which works out to $1,800 per year.
Let's also say that you're earning a modest 8% average annual return on your investments. At that rate, $1,800 per year would add up to around $204,000 after 30 years. Keep in mind, too, that those calculations only account for the employer match itself. Once you factor in your own savings, you'd have at least double that amount.
2. Set up automatic contributions
Many 401(k) plans allow you to transfer a set amount straight from your paycheck to your retirement account each pay period. By setting up these automatic transfers, it can be easier to build saving into your budget rather than simply contributing whatever cash you have left at the end of the month.
Consistency is key to building a robust retirement fund, and automatic contributions can help keep you on track. When saving becomes a habit that you no longer have to think about, you're more likely to stick to your plans and reach your goals.
3. Focus on your emergency fund
While it may sound counterintuitive, sometimes saving in places outside of your retirement fund can actually help you save more for retirement over the long haul.
Emergencies will happen, and pulling money from your 401(k) before retirement can have hefty consequences. In many cases, making a withdrawal before age 59 1/2 will result in a 10% penalty and income taxes on the amount you withdraw.
When you have at least three to six months' worth of savings in an emergency fund, it's less likely that you'll need to tap your 401(k) to cover an unexpected expense. And by keeping your retirement account untouched, you'll give your savings more time to build.
Contributing to a 401(k) is a fantastic way to save for retirement. No matter where you are in your journey or how your savings compare to others, taking all the steps you can to build a stronger nest egg will pay dividends come retirement age.
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