Average 401k Balance by Age

401k
••• Getty Images

Financial experts are constantly telling you to save for retirement, but despite all of the advice and what may seem like scare tactics from time-to-time, you may be better off than you think. How do you know for sure, though? What is the average 401(k) balance by age, and is being average good enough? Maybe knowing how you compare with others will help to keep you on track as you move through your career.

Average 401(k) Balance

According to Fidelity's 2020 fourth quarter retirement analysis, the average 401(k) balance was over six figures at $121,500—31.35% higher than at the end of 2016 ($92,500). And if you’re somebody who has saved for over 10 years, the market has rewarded you handsomely, with average balances exceeding $250,000. If you had any doubt that long-term saving pays off, Fidelity has proof that it does.

If those numbers weren’t exciting enough, the analysis found that individuals continued to increase their contributions to retirement accounts in 2020, despite the COVID-19 pandemic. Employees contributed an average of 9.1%, up from 8% one year prior. Despite economic difficulties arising from the COVID-19 global pandemic, individuals have continued investing to better prepare for retirement.

Average 401(k) Balance by Age

The Fidelity analysis reveals some strong data, but how does that break down by age? As you would expect, workers earlier in their careers contribute less than contributions later in life largely because of lower wages, higher housing costs and the unfortunate burden of student loan payments.

As you look at these numbers, keep in mind that the latest data available comes from a June 2020 Vanguard report using data from 2019. Presumably, current numbers are slightly better than the below figures suggest. Don’t beat yourself up if you’re young and just starting on the journey of financial literacy. Time is a powerful wealth builder when you start early.

  • <25: $5,419
  • 25-34: $26,839
  • 34-44: $72,578
  • 45-54: $135,777
  • 55-64: $197,322
  • 65+: $216,720

Fact or Fiction?—Higher earning employees have an easier time saving for retirement because they earn more. According to Vanguard, this is a fact, but people who earn more are probably further along in their careers and, because of that, they’re older.

Average Account Balance by Annual Income

  • <$15,000: $8,260
  • $15,000-$29,999: $13,069
  • $30,000-$49,999: $29,740
  • $50,000-$74,999: $66,033
  • $75,000-$99,999: $113,143
  • $100,000-$149,999: $177,597
  • $150,000+: $298,851

The report also found that longevity at a single job translates into a higher 401(k) account balance. The longer you stay, the higher your balance.

Years of Service

  • 0–1: $13,448
  • 2–3: $29,824
  • 4–6: $54,320
  • 7–9: $89,663
  • 10+: $226,731

Gender and 401(k) Account Balances

On the surface, it appears that males do a better job of saving for retirement than women. The average male account balance is $131,045 while the average female balance is $88,393, but these numbers are misleading. Women tend to have lower incomes and shorter job tenures, according to the study.

However, when comparing women and men at the same income level, women save a higher percentage of their income than men do.

The Most Alarming Trend

When the year-end numbers for 2021 are released, they’ll likely show even more impressive results, but it’s not all great news. Yes, balances are higher, but still too low heading into retirement.

A 2019 survey from Charles Schwab found that, on average, people needed $1.7 million to retire. Let’s say that you’re currently 30 years old and have $25,000 saved for retirement at age 67. Starting now, you would need to save $1,567 per month to reach that goal.

Since the average balance at 65 is only about $216,000, Americans are reaching retirement with less than 20% of what they may need. This is a rough estimate based on replacing 70-80% of your income with retirement dollars once you reach age 67. Out of necessity, most people are finding ways to live on far less than 70%.

The Bright Side

Don’t lose heart. The younger you are, the more opportunity you have to use the power of compounding. Even a small increase in retirement savings will yield significant gains. Using that same 30-year-old person above, if they were to increase their monthly savings amount to $1,600, at age 67 they would have $1.8 million in retirement savings (assuming a conservative 5.5% rate of return).

If you wait until you’re older to get serious about retirement saving, it will be too difficult to save enough, but if you start young, small increases become substantial a few decades into the future.