Average Balance in 401k: Retirement Savings Plan

What is the average balance in 401k? This is a question I have seen on numerous occasions. To other extents, I even encounter the question of what is 401K?

A 401(k) plan is a retirement savings plan accorded to employees by their employers. This savings plan makes it possible for employees to divert a portion of their wages into long term investments before any tax deductions are made.

How do you keep track of your retirement benefits savings?

It is not easy to know exactly how much you ought to have accumulated by a certain age over time if you are not relying on any data to make comparisons.

Reviewing the average 401k balance by age can help assess how your retirement savings are fairing.

In case your employer prefers the 401(k) plan, things will be easier and more effective for you. This is because the 401k plan allows the employer to deduct the required retirement savings from your pay each month.

When you are at liberty to pay the savings yourself after receiving your salary, there is a possibility of being tempted to postpone, ignore, or forget to pay.

The 401(k) savings plan helps you to be consistent. When you remain consistent in your contribution, you can even accumulate millions upon your retirement.

Many have achieved that with a recent survey on this plan showing that 180,000 people with 401(k) accounts were able to save millions.

You can achieve this through the little you earn and later save. The average balance in 401k stands at more than $103,700 from millions of Fidelity accounts.

This accumulated figure changes depending on different generations of account owners. By reviewing average balance in 401(k) from Fidelity accounts, you will be able to get an idea of how much your savings can be compared to your age mates.

401(k) plan

Median and Average Balance in 401k by Age

The median and average balances by every age are useful in determining how much you might be able to stack up as retirement savings.

This is so because 401 (k) accounts have contribution limits of $19,500 annually, with $26,000 being for people who are 50 years old and above.

If you ensured paying maximum contribution yearly and had double-digit returns on investments, both of which are difficult to attain, it would make you a wealthy retiree.

In nearly 20 years, you would be able to become a millionaire.

This observation makes it useless for someone aged 25 to compare his or her retirement savings to the average savings to people of all ages.

So, how do 401 (k) balances rise with age until members begin to draw on their own money upon retirement?

Breakdown of the Median and Average Balance of 401k by Age

Age 20-29

Median 401k balance: $4,300

Average 401k balance: $11,800

Most of the members aged 20 to 29 years are new employees and most likely new to the idea of saving for their retirement.

However, they are encouraged to fully contribute through their workplace retirement scheme.

It is advised that you target a retirement balance that matches either half or all your yearly salary by the age of 30.

This age group may not easily achieve that, but the figures do not show their other savings on other platforms

Age 30-39

Median 401k balance: $16,500

Average 401k balance: $42,400

In this stage, members have grown their balances as they have spent more years working, even being able to have more than one 401(k) plan.

Age 40-49

Median 401k balance: $36,000

Average 401k balance: $102,700

The figures within this age group grow by more than double the previous group, especially since the age is considered a peak age of any career.

Age 50-59

Median 401k balance: $60,900

Average 401k balance: $174,100

At this age, members can save up a higher contribution of up to $6000 annually. This additional contribution can help members who feel they are lagging behind in terms of what they have accumulated.

Age 60-69

Median 401k balance: $62,000

Average 401k balance: $195,500

At this age, the contribution has slowed down mainly because the majority of workers in this age group are already leaving employment and having to rely on savings as they wait to access their retirement benefits.

average balance in 401k

Read: Using 401k to Buy a House

How Much do I Need to Save for Retirement?

The answer to this question depends on every individual, as we all face different situations and have different economic status.

Main financial services firms like Fidelity Investments have set good basic guidelines on how much you should generally save for your retirement.

According to most firms, salary matters in deciding how much to save annually.

Retirement savings also depend on one’s age before retirement.

Different workplaces have a different retirement savings plan, with the most common being the 401(k) plan and the 403(b) plan.

With these two plans, balances accumulated mainly have a good percentage of the amount contributed as retirement savings for many members.

Leading financial firms recommend the following concerning retirement saving:

  • Depending mainly on your salary, putting aside 15% of the salary every year in a retirement plan is a good idea.
  • It is advisable to contribute enough that allows you to enjoy all the savings plan advantages in the offered employer match.
  • Staying on track as much as you can in your contributions. Young people especially can use the retirement savings plan to be consistent in their annual savings. Your goal in saving should be your motivating factor. Let what you want your retirement to look like be your guiding factor.
  • When to retire is also an important factor to consider. This helps you to stay keen so as not to be broke in retirement.

Review the target levels of saving by age as well as the average balance in 401k by age before you begin saving for retirement. The amount you will accumulate through your 401(k) plan, as well as in your general retirement accounts, will be determined by your circumstances.

Is It Late to Start Saving for Retirement?

The most appropriate time to start saving is in your early 20s. If you are still there, then you are perfectly good to go.

Nevertheless, you might be the kind that is not regular in your saving since to you, it is not much of a priority.

It is never too late to start off or continue saving for retirement.

Many people desire early retirement, but then you may still be strong at 65, and no matter your age, when you start saving, it is much better than not saving at all.

Reviewing the average balance in 401k would be a good way to keep you motivated.

Great Retirement Saving Tips

No matter when you start saving, there are good tips that you can follow to increase the amount you contribute to your 401(k) plan.

  1.    Live on a budget: Visualize how you wish your retirement life to be and then review what you will have to sacrifice so as to achieve it. Cutting on spending, especially on stuff you do not really need, helps you to save up that money for your retirement.
  2.    Raise your income: It is not easy to increase income, especially as you get older. You can try to acquire additional skills that help you earn extra income, from which you save more into your 401(k) plan.
  3.    Change your retirement lifestyle: Your retirement lifestyle should match your retirement savings. Your finances may require you to cut on some lifestyle
  4.    Clear high-interest debts: Having large financial debts is normal, some of which remain unpaid at retirement. Try as much as you can to clear all high-interest loans that you may have so that you are not forced to use up your savings on debt paying as that will be a great loss.

Read: 52 Week Money Challenge: Savings Plan

Another option is to review all 401(k) plans and then settle for the one with good interest-bearing advantages.

I hope at this point you are still not asking what is 401k?

We all want to avoid struggle when we retire. However, building a good retirement takes a lot of sacrifice and intelligence. No matter your current age, it is possible to go for that retirement savings plan. The average balance in 401k plan shows the strong will by many to ensure their retirement is taken care of financially.

Leave a Comment