With many employers no longer offering large retirement packages, most Americans are forced to become more financially savvy when it comes to retirement. Money, once shrouded in mystery and considered a taboo subject, is now being discussed at the dinner table. These talks help people improve their financial knowledge and ensure they understand the importance of saving money and doing so as soon as possible.
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As barriers to investment continue to be removed, experts find that Americans are saving more and better preparing for the future. Vanguard, one of the world’s leading investment management companies, found that the average savings rate of 401(k) plan participants in 2023 was 11.7% when combined with employer contributions. This matched the record set last year.
When it comes to retirement savings, however, it can be challenging to know if you’re on track. Now you can see if your nest egg is on par with other Americans. See how much people have in their 401(k) plans at different income levels and what you can do to measure.
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Average 401(k) Plan Account Balance by Income
According to Vanguard’s extensive “How America Saves 2024” research, average account balances increased by 29%. These increases were possible due to a number of factors, but auto-enrolment plans, more accessible financial advice and easier long-term investment vehicles were strong catalysts.
The data revealed that the average 401(k) account balance was $134,128, while the average account balance among all participants was $35,286. Account balances, however, varied significantly by income.
Average 401(k) plan account balance by income:
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3691 dollars
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$15,000-$29,999: 6142 dollars
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$30,000-$49,999: $10,072
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$50,000-$74,999: $24,939
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$75,000 – $99,999: $51,073
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$100,000 – $149,999: $91,323
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$150,000+: 188678 dollars
Age, gender, and employment status also significantly affected a participant’s defined contribution plan balance. For example, men had an average account balance of $157,489, while women had an average account balance of $112,401.
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What you’ll need for a comfortable retirement
Many studies show that average retirement savings may not be enough. Northwestern Mutual’s 2024 Planning and Progress Study found that people believe they will need $1.46 million to retire comfortably in the United States. This number represents a more than 50% increase from the $951,000 people believed they would need in 2020.
That amount varied slightly by generation, with Gen Z and millennials expecting to need over $1.6 million to live at or near their pre-retirement lifestyle. Boomers thought they could retire comfortably on $990,000, while high-net-worth individuals (people with more than $1 million in investable assets) said they would need almost $4 million.
The survey found large disparities between the amount respondents thought they needed to save for a comfortable retirement and their actual retirement savings. In 2024, the average amount saved for retirement (from all sources including 401(k), IRAs, pensions, bank accounts, etc.) was $88,400, about $1.37 million off target.
Steps to take to strengthen savings
For those who worry about whether they have enough money set aside for a comfortable retirement, there is good news. First, you are not alone. A staggering 43% of Northwestern Mutual respondents believed they could risk outliving their savings. Second, there are steps you can take to meet your retirement goals.
A quarter of respondents said they increased their savings in an effort to close the gap between what they have now and what they hope to have down the road. Others have sought professional advice or started a financial plan to help them get on track for the future.
More people are also becoming more knowledgeable about ways to reduce their tax burden in retirement. Of the 30% of respondents who said they had a plan to minimize the taxes they pay on their retirement savings, nearly a third said they would make strategic withdrawals from traditional and Roth accounts, and 23% said they would use a health savings account (HSA) or other tax-advantaged HC account.
It is important that these deficiencies are addressed as soon as possible. The younger you are, the more time you have to make up for gaps in your retirement savings and take advantage of increased interest.
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