According to Vanguard’s 2024 How America Saves report, individuals between the ages of 55 and 64 have an average 401(k) balance of $244,750. Nonetheless, the median balance gives a clearer depiction of the typical savings for individuals in this demographic, standing at only $87,571.
This indicates that half of the participants possess savings surpassing this figure while the other half have less. The average can be influenced by exceptionally high earners who have accumulated millions for their retirement. While $87,000 is still a considerable sum, for most people, it may only support a few years in retirement.
If you find yourself lagging in your savings, one straightforward method to increase your contributions is to fully utilize your employer’s 401(k) matching program. The prevalent type of match typically provides 50% of an employee’s contributions, capped at 6% of their salary. This can significantly enhance your savings by thousands of dollars annually.
Should you fail to contribute sufficiently to qualify for the entire match, you are essentially forfeiting free money.
High earners distort average balances
For retirees who are 65 years or older, the average 401(k) balance is reported at $272,588.
The median balance for this demographic is $88,488. Figuring out the optimal amount needed in a 401(k) can be quite difficult as it greatly relies on individual retirement objectives and geographical location. A commonly cited guideline is to target an annual retirement income that equals 80% of your final working year’s salary.
For example, if your last year’s salary was $80,000, your target retirement income should be $64,000 per year. This 80% benchmark is merely a rough estimate and should be modified depending on personal factors. Besides 401(k) savings, a large number of retirees also depend on Social Security benefits.
Numerous strategies exist for optimizing Social Security income, which can greatly influence overall retirement finances. Saving for retirement is challenging, but uncomplicated steps can ease the process. With the right approach, you could save more than you initially expect.
By staying informed and proactive, you can successfully navigate the intricacies of retirement planning and improve your financial security for what lies ahead.
