How Does Your 401(k) Balance Compare With the Average?

When it comes to your retirement accounts, comparing how much you have saved with the national average can help you benchmark your savings.

For most employees, an employer-sponsored 401(k) account is a significant piece of their retirement planning. Knowing how the balance in your 401(k) stacks up against the averages for your age range may inspire you to adjust your savings rate or perhaps choose different investments.

Key Takeaways

A 401(k) is a tax-advantaged retirement savings plan, often with a matching contribution from an employer.
Compare your 401(k) with the average account size range for your age group to help you set (or re-set) your savings goals.
Average 401(k) contributions have increased in recent years, as have average balances.

What Is a 401(k)?

A 401(k) is an employer-sponsored retirement plan that offers tax savings to the employee. There are two types of 401(k)s—traditional and Roth—and they offer tax advantages in different…

2023-01-27 19:35:14 How Does Your 401(k) Balance Compare With the Average?
Article from www.investopedia.com Retirement can be a tricky topic, and planning for it is a fundamental part of financial security. As Americans are living longer, the need to adequately plan for retirement is more essential than ever before. One of the most common retirement planning vehicles is the 401(k) plan. For those of us contributed to a 401(k) plan, it is important to regularly assess our retirement savings to make sure that it is on track. So how does your 401(k) balance compare with the average?

Recent reports from the Employee Benefit Research Institute (EBRI) have revealed that the average 401(k) balance varies widely depending on age group. Generally speaking, older workers have more money in their 401(k) plan. For example, in 2020 the average 401(k) balance for workers aged 55 to 64 was $234,870. In comparison, the average 401(k) balance for workers aged 35 to 44 was only $98,790.

When it comes to different income groups, the picture is also mixed. Increasingly, low-income households have seen their 401(k) balance increase. This can be partially attributed to government programs such as the Saver’s Credit, which provides tax breaks to those with an adjusted gross income of less than $66,000. On the other hand, higher-income households saw their 401(k) balance decrease in 2020. This may be because of a lack of contribution room and other tax breaks.

In order to ensure that your 401(k) balance is on the right track, it is important to consider several factors. First and foremost, it is important to make sure that you are contributing enough to your 401(k) plan each month. Furthermore, you should also ensure that you are following an investment strategy that is tailored to your individual retirement needs. Additionally, taking advantage of employer matching contributions can be beneficial as well.

Finally, it is also crucial to understand the impact of fees on your 401(k) balance. Many 401(k) plans come with fees that can have a significant impact on your savings. It is important to understand these fees, as they can erode away your retirement savings if they are not managed properly.

In conclusion, it is essential to maintain an adequate 401(k) balance in order to be prepared for retirement. Checking your balance and making proper adjustments is a fundamental part of this process. While the average 401(k) balance does vary depending on age and income group, it is even more important for each individual to evaluate their own retirement savings. By understanding how your 401(k) balance compares to the average, you will be better prepared to achieve your retirement goals.