The Average 401(k) Balance by Age
Oct 23, 2023
It's fun to compare 401(k) balance averages, but
they won't tell you much about your own retirement readiness.
Nerdy takeaways
- The
average 401(k) balance at Vanguard was $112,572 in 2022.
- Your
age, income and job tenure may affect the size of your 401(k) balance is.
- Balances
fell overall in 2022 because of market volatility.
- Taking advantage of an employer match may help you beef up your balance.
Every year, 401(k) holders at Vanguard hit
millionaire status. Not one of them? You’re not alone: A seven-figure 401(k)
balance is the exception, not the rule.
In 2022, $112,572 was the average 401(k) balance
of nearly 5 million Vanguard plan participants, according to the How America
Saves 2023 report. That balance is down 20% from a year ago, but that can be
partially attributed to inflation, rising interest rates and market
volatility, particularly in the bond and equity markets.
[1]
If that balance still
seems high, consider that averages tend to be skewed by outliers, and in this
case, that number is being propped up by those rare millionaires. The median,
which represents the middle balance between the highs and lows, was $27,376 in
2022.
No matter which number is closer to your reality — and for some, both might feel
out of reach — it’s important to remember that numbers like this might tempt
you to gawk, but they probably won’t offer you much actionable information.
Average 401(k) balance by age
According
to Vanguard's 2022 data, here is the average 401(k) balance by age.
Age |
Average 401(k)
account balance |
Under 25 |
$5,236. |
25 to 34 |
$30,017. |
35 to 44 |
$76,354. |
45 to 54 |
$142,069. |
55 to 64 |
$207,874. |
65 and older |
$232,710. |
Median 401(k) balance by age
While
averages may be more common, the median is often a better metric for getting an
accurate view of a data set. Averages are influenced by outliers — either very
high or very low numbers. You'll notice that Vanguard's average 401(k) balances
are quite a bit higher than the medians.
Age |
Median 401(k) account
balance |
Under 25 |
$1,948. |
25 to 34 |
$11,357. |
35 to 44 |
$28,318. |
45 to 54 |
$48,301. |
55 to 64 |
$71,168. |
65 and older |
$70,620. |
Average 401(k) contribution rates
How much are you putting into your 401(k)? The IRS sets contribution limits
for 401(k) accounts, or the maximum amount you can add to your account in a given year.
Those contribution limits are $22,500 in 2023 and $30,000 for those 50 or older.
Most people don't contribute the max – only 15% of Vanguard plan participants
did in 2022 – and most of those investors were older, made more money, and had
been with their employer for longer compared with those who contribute less.
Even if you made the maximum contribution every single year and posted
double-digit investment returns — both of which are highly unlikely — it would
take nearly 20 years to hit a million. That makes it unfair and fruitless for,
say, a 25-year-old to compare their 401(k) balance with the average for savers
of all ages.
If you want to beef up your balance without maxing out your 401(k), one way to
do it is to contribute at least enough to get the employer match if there's one
offered. About half, 49%, of Vanguard's plans had an employer match.
To get their employer 401(k) match, employees had to first put in an average of 6.8%
of pay; the median required contribution to get a match was 6%, which means
half of plans required more than that, and half required less.
Average employee contribution: 7.4% of pay. Median employee contribution: 6.4% of pay.
Average 401(k) match
Average employer contribution: 4.5% Median employer contribution: 4% Now, let's get back to the balances. The below numbers show how 401(k) balances increase with age, at least until participants start
drawing on their money in retirement.
Ages 20-24
Average 401(k) balance: $5,236. Median 401(k) balance: $1,948.
Many of the participants in this age group are new to working and new to saving for
retirement. Yet even at this age, it’s a good rule of thumb to prioritize
contributing to your workplace retirement plan, especially if your employer
matches a portion of your contributions.
These numbers don’t reflect what younger investors may have saved elsewhere, in taxable brokerage
accounts, or individual retirement accounts, such as Roth or traditional IRAs.
Ages 25-34
Average 401(k) balance: $30,017. Median 401(k) balance: $11,357.
At this point, whether measured by the average or the median, participants have
increased their balances quite a bit.
As people age and spend more time in the workforce, they’re more likely to hold
more than one 401(k), especially if they’ve changed jobs without rolling over
or combining accounts.
Ages 35-44
Average 401(k) balance: $76,354. Median 401(k) balance: $28,318.
Another solid jump by this age range, with both figures more than doubling — the last time we’ll see a percentage jump that large between age ranges. That’s likely at least partially a product of peak earning years. According to compensation research company Payscale, women hit their peak earnings on average at age 44. For men, that age is 55.
Ages 45-54
Average 401(k) balance: $142,069. Median 401(k) balance: $48,301.
This group has hit the age at which catch-up contributions are allowed by the IRS: Participants age 50 and older can contribute an extra $7,500 in 2023.
that extra cash is available to put toward retirement.
Ages 55-64
Average 401(k) balance: $207,874. Median 401(k) balance: $71,168.
Growth has slowed here, which makes sense, as people may start to withdraw the money
they've been saving for retirement.
After this age group, 401(k) balances can begin to fall, or at least grow at a slower
pace, as even more people start tapping their accounts. The average balance for
those 65 and older is $232,710; the median falls to $70,620.
What you can learn from the average 401(k) balance
Again:
not much. This is a fairly arbitrary benchmark. In the aggregate, it can speak
to how workers in general are doing when it comes to saving for retirement, but
it does little to help you analyze your own situation. It’s also limited to
people who have a defined contribution plan at work; many workers don’t.
A better approach to benchmarking your efforts: A retirement calculator, which will give you a more personalized recommendation for how much you should have saved now, and how much you’ll need at the end of the line. (If you don't like what you see, you might find our guide to retirement
planning helpful.)
Finally, it’s worth noting that you may or may not want to put all your retirement
eggs into a 401(k) basket. Should you max out your 401(k)? Maybe. But it isn't the best choice for everyone.
Once you’ve earned your employer match, there can be benefits to spreading your
money around among other retirement accounts, such as an IRA.
Source: Nerd Wallet