Over the past few years, investors have experienced a rollercoaster ride in the financial markets. Despite the challenges of the bear market in 2023 and interest rate hikes by the Federal Reserve, those who stayed committed to their retirement plans, such as a 401(k), have seen positive results.
According to Vanguard’s “How America Saves 2024” report, the average 401(k) plan balance in 2023 was $134,128, showing growth from $112,572 in 2023 but a slight decrease from $141,542 in 2023.
It’s important for investors to remain focused on their long-term investment strategies and not react impulsively to market fluctuations. Building a solid retirement nest egg requires consistency and discipline.
Average and median 401(k) balance by age
Vanguard’s data from approximately 5 million defined contribution plan participants provides insights into the average and median balances for different age groups at the end of 2023.
| Age | Average Account Balance | Median Account Balance |
|---|---|---|
| Source: Vanguard, “How America Saves 2024” | ||
| Under 25 | $7,351 | $2,816 |
| 25-34 | $37,557 | $14,933 |
| 35-44 | $91,281 | $35,537 |
| 45-54 | $168,646 | $60,763 |
| 55-64 | $244,750 | $87,571 |
| 65+ | $272,588 | $88,488 |
Age 25 and younger
- Average 401(k) balance: $7,351
- Median 401(k) balance: $2,816
For individuals starting their careers, the median balance of $2,816 highlights the importance of early savings habits. Fidelity recommends aiming to save at least 10 times your annual salary by age 67.
Additionally, Fidelity suggests saving 15% of your pretax income from the start of your career, including any employer matching contributions, to work towards a secure retirement.
Ages 25-34
- Average 401(k) balance: $37,557
- Median 401(k) balance: $14,933
By age 30, Fidelity recommends having the equivalent of one year’s salary saved in your 401(k) plan. Incrementally increasing your contribution percentage during your 30s can help bridge any savings gaps.
Ages 35-44
- Average 401(k) balance: $91,281
- Median 401(k) balance: $35,537
In your 40s, balancing financial responsibilities with retirement savings becomes critical. Fidelity suggests aiming for a retirement account balance of three times your salary by age 40.
Ages 45-54
- Average 401(k) balance: $168,646
- Median 401(k) balance: $60,763
As you approach retirement age, maximizing contributions becomes key. Fidelity recommends accumulating six times your salary in your 401(k) by age 50.
Ages 55-64
- Average 401(k) balance: $244,750
- Median 401(k) balance: $87,571
For those nearing retirement, diversification and strategic asset allocation are crucial for long-term financial stability. Fidelity suggests aiming for eight times your salary saved by age 60.
How much do you need to retire?
Estimating your retirement savings needs involves considering factors such as life expectancy, location, and expected investment returns. Calculating your annual expenses and factoring in healthcare costs are essential for planning your retirement fund.
The “4 percent rule” is a common guideline for retirement withdrawals, but individual circumstances may vary. It’s recommended to have savings equivalent to 25 times your annual expenses for a comfortable retirement.
Bottom line
While Social Security provides financial support, it may not cover all retirement expenses. Continuing to work and strategically saving for retirement are crucial for a secure financial future.