What is the average 401k balance? How do you measure up?

 

Building your wealth with a retirement plan!

Retirement plan, like the 401k, is one of the most important tools you can use to accrue wealth.  About 58% of Americans were active participants to 401k plans according to a report in 2018.  The built in tax advantage of a 401k plan allows individuals to grow their money tax deferred.  

Other advantages like company matching and automatic enrollments are beneficial in ensuring individuals have the best chance at growing their nest eggs for retirement.  

However, for all the advantages of a 401k, it’s widely believed that many Americans are falling behind on their savings.  A general rule of thumb says you should have saved the following amounts equal to your current salary:

  • Age 30:  One time your annual salary.  If you make $30k, then you should have $30k saved.
  • Age 40:  Three times your annual salary.  If you make $30k, then you should have $90k saved.
  • Age 50:  Five times your annual salary.  If you make $30k, then you should have $150k saved.
  • Age 60:  Seven times your annual salary.  If you make $30k, then you should have $210k saved.
***These numbers will give you a general guideline where your savings number should be.  You should strive to save more if you can!


Without further ado, let’s take a look at the average 401k balance, according to Vanguard’s 401k report entitled ‘How America Saves 2020’.

Average 401k balance for year 2019:  $106,478.

Median 401k balance for the year 2019:  $25,775.

Note:  The large discrepancy between the two numbers is due to few account holders with large balances that tend to skew the numbers.  It’s a good practice to look at the median number, as that represents a number where half the accounts have more, while the other half have less.

These numbers below will further break down by income and sex:

Income:  Under $15,000 / Sex:  Female / Balance:  $7481 (Median Balance:  $1357)
Income:  Under $15,000 / Sex:  Male / Balance:  $11834 (Median Balance:  $2022)

Income:  Between $15,000-$29,999 / Sex:  Female / Balance:  $13071 (Median Balance:  $4091)
Income:  Between $15,000-$29,999 / Sex:  Male / Balance:  $15419 (Median Balance:  $4590)

Income:  Between $30,000-$49,999 / Sex:  Female / Balance: $32402 (Median Balance:  $11666)
Income:  Between $30,000-$49,999 / Sex: Male / Balance:  $31166 (Median Balance:  $11234)

Income:  Between $50,000-$74,999 / Sex:  Female / Balance: $65704 (Median Balance:  $27810)
Income:  Between $50,000-$74,999 / Sex:  Male / Balance:  $71677 (Median Balance:  $31067)

Income:  Between $75,000-$99,999 / Sex:  Female / Balance:  $110901 (Median Balance:  $52923)
Income:  Between $75,000-$99,999 / Sex:  Male / Balance:  $122441 (Median Balance:  $60840)

Income:  Between $100,000-$149,999 / Sex:  Female / Balance:  $171614 (Median Balance:  $91296)
Income:  Between $100,000-$149,999 / Sex:  Male / Balance:  $199272 (Median Balance:  $107325)


As these median numbers show, we all could do better at saving for retirement.  The median balances will most likely be insufficient to fund 30 plus years of retirement.  Relying on social security, hitting the lottery, or waiting for an inheritance is not a valid plan for retirement.  

Let’s make a plan then commit to saving more for retirement!  

Thank you all for reading!


Jake

Wandering Money Pig 


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