Newly released data from investment management company Vanguard provides a revealing look at how much Americans have saved in their 401(k) workplace retirement accounts. This annual report, which analyzes data from millions of U.S. retirement accounts, shows a stark reality: the average balance across all age groups is $134,128 in 2024, while the median balance is much lower at $35,286.
This gap between the average and median balances indicates that while some Americans are doing quite well with their retirement savings, many others are lagging behind. These numbers have sparked renewed concerns that a significant portion of the U.S. population may not be adequately prepared for retirement, leaving many financially vulnerable in their later years.
Age-Based Breakdown of 401(k) Balances
Vanguard’s data offers a breakdown of average 401(k) balances by age group, which can serve as a useful benchmark for those looking to compare their retirement savings. Here’s what the numbers show:
- Under 25: The average balance is just $7,351. This is perhaps understandable given that many young people are still early in their careers.
- Ages 25-34: The average balance rises to $37,557, as these individuals start to settle into more stable jobs and begin saving more regularly.
- Ages 35-44: By mid-career, the average balance jumps to $91,281, reflecting years of consistent saving.
- Ages 45-54: The balance increases significantly to $168,646, as workers typically begin focusing more on their retirement.
- Ages 55-64: For those approaching retirement, the average balance is $244,750, still far short of what most experts recommend for a comfortable retirement.
- 65 and over: For retirees or those on the verge of retiring, the average 401(k) balance peaks at $272,588.
Concerns Over Retirement Readiness
Despite these savings figures, there’s mounting concern that millions of Americans are not financially prepared for retirement. Many are finding themselves forced to dip into their retirement accounts prematurely to cover emergencies, further diminishing their long-term savings. In fact, Vanguard’s report highlights that a growing number of people are making early withdrawals from their 401(k)s, underscoring the financial strain many households are under.
Adding to the challenge is the fact that income levels, geographic location, and lifestyle choices heavily influence how much individuals can save. Many households, particularly those in high-cost areas like California and New York, struggle to contribute as much to their retirement accounts as they’d like.
Contributing to Your 401(k): How to Maximize Savings
For those concerned that their 401(k) balance may be lagging behind, there are steps that can be taken to catch up. In 2024, the IRS allows individuals to contribute up to $23,000 annually to a 401(k), and those over 50 can add an additional $7,500 as a catch-up contribution.
Cassandra Kirby, a certified financial planner and wealth advisor, emphasizes the importance of maximizing employer matches. “Always contribute up to the match,” Kirby advises. “Otherwise, you’re leaving money on the table.”
Automatic contribution increases are another strategy to ensure steady growth in retirement savings. “Some plans allow you to set it so that your contribution automatically increases by 1% each year,” Kirby explains. “This is a ‘set it and forget it’ strategy that can be really effective over time.”
Additionally, financial experts recommend putting any work bonuses directly into retirement savings and increasing your 401(k) contributions whenever you receive a raise. These small adjustments can have a major impact on your retirement nest egg over time.
The Right Time to Retire
Choosing when to retire is another critical decision. According to research from financial services company Morningstar, timing your retirement can significantly impact your financial security. The study found that 45% of households that retire at age 65 risk running out of money. However, delaying retirement until age 70 reduces that risk to 28%.
Social Security benefits also play a key role in retirement planning. For those born after 1960, full benefits kick in at age 67. But if you delay claiming Social Security until age 70, your benefits increase by 8% each year you wait, providing a significant financial boost during retirement.
Spencer Look, associate director of retirement studies at Morningstar, stresses the importance of participating in employer-sponsored retirement plans. “The data shows that contributing to a 401(k) significantly lowers the risk of falling short in retirement,” Look says. “Even if you can only save a little, it’s better than saving nothing.”
In conclusion, while many Americans are saving diligently for retirement, the stark disparity in savings levels across age groups highlights a growing concern about the nation’s overall retirement readiness. For those looking to boost their savings, taking advantage of employer matches, automatic contribution increases, and delaying retirement can help secure a more financially stable future.
