With the decline in workplace pension plans, the responsibility to save for retirement falls squarely on the shoulders of employees. While everyone’s situation is different, a look at some average savings levels by age can help you benchmark your progress.
Average 401(k) Balances by Age
- The average 401(k) balance was $11,800
- The median 401(k) balance was $4,300
- The average contribution rate was 7% of compensation
- The average 401(k) balance was $42,400
- The median 401(k) balance was $16,500
- The average contribution rate was 7.8% of compensation
- The average 401(k) balance was $102,700
- The median 401(k) balance was $36,000
- The average contribution rate was 8.5% of compensation
- The average 401(k) balance was $174,100
- The median 401(k) balance was $60,900
- The average contribution rate was 10.1% of compensation
- The average 401(k) balance was $195,500
- The median 401(k) balance was $62,000
- The average contribution rate was 11.2% of compensation
Fidelity is one of the largest administrators of 401(k) plans and these figures reflect participants in employer plans administered by Fidelity. As is no surprise, average account balances as well as contribution rates increase as workers get older.
Fidelity also released aggregate totals for 401(k) balances at the end of the first quarter of 2019.
They published aggregate data for 401(k), 403(b) plan and IRA account balances as of the end of the first quarter:
Average Retirement Account Balances
|Q1 2019||Q4 2018||Q1 2018||Q1 2009|
As you can see balances rebounded nicely after the poor year in the stock market in 2018, especially with the challenging fourth quarter. The strong stock market performance of the decade from Q1 2009 – Q1 2019 certainly also helped balances in these three types of retirement accounts. Possibly the strong performance of 2019 will help show increases in these overall balances the next time Fidelity measures them.
Fidelity also broke down average 401(k) balances on a generational basis in this same press release.
Balance Changes by Generation
|Average 401(k) balance – Q1 2009||Average 401(k) balance – Q1 2019||Cumulative percentage change|
Fidelity defined the generations as follows:
- Millennials are those born from 1981-1997
- Gen X are those born from 1965-1980
- Baby Boomers are those born from 1946-1964
There is a lot of data in the Fidelity study to digest. While this data is helpful in providing a comparison of where your 401(k) balance might stack up compared to broad averages, it doesn’t address recommended retirement savings levels throughout your career to help determine if you are on track.
How Much Should I Have Saved for Retirement?
This is a question that financial advisers are often asked by their clients. The answer, of course, depends upon your situation.
Two major financial services firms, T. Rowe Price (TROW) - Get Report and Fidelity Investments, have set rules of thumb regarding how much you should have saved for retirement in general, including 401(k) accounts, IRAs and other accounts, by various ages. Both firms have done this as a multiple of your salary. Their suggested savings levels by age are fairly similar. Fidellity recommends a 35-year old have twice their annual salary saved, while T. Rowe Price recommends 1 to 1.5 times the annual salary. At 45, the recommendation is 2.5 to 4 times the annual salary, for a 55-year-old, between 5 to 8.5 times the salary, and by retirement age, savers should have set aside about 10 to 14 times their salary.
In dollars, for someone earning $75,000 a year, this would translate to having these amounts saved for their retirement.
|Age||Fidelity||T. Rowe Price|
$75,000 - $112,500
$187,500 - $300,000
$375,000 – $637,500
67(Fidelity) 65 (T. Rowe Price)
$600,000 – $1.05 million
While these figures include money beyond what is in your 401(k), they still serve as a retirement savings benchmark beyond the average 401(k) balances discussed above.
For many of us, a 401(k), a 403(b) or similar workplace retirement plan will be our primary retirement savings vehicle. Balances accumulated in these types of plans will likely comprise a very significant percentage of the amount saved for retirement for many.
The analysis done by both firms comes to some similar conclusions and makes some similar recommendations for those saving for retirement. While not specific to 401(k) plans, these items are very relevant to those using a 401(k) or similar retirement plan as their primary retirement savings vehicle.
- Saving 15% of your salary annually in a plan such as a 401(k) is a good target for many people.
- Many 401(k) plans offer an employer match, it’s a good idea, if possible, to be sure to contribute enough to take full advantage of that match.
- It’s important to stay on track to the extent possible with your retirement savings. Especially for those who are younger, you have a long time until retirement and time can be a huge ally in building your retirement nest egg.
Beyond the nuts and bolts of saving for retirement, it's helpful to step back and look at what you are saving for. This includes things like:
- What does retirement look like for you? What do you intend to do in retirement, where do you plan to live? These and other factors will influence how much you will need to fund your desired retirement lifestyle.
- When do you plan to retire? The longer you are retired the more you will need to help ensure that you don’t run out of money in retirement.
Retirement averages and even target levels of retirement savings by age are helpful, but they are only a starting point for those using a 401(k) to save for retirement. The amount you should have in your 401(k) and in your overall retirement nest egg at various ages will depend upon your individual situation. Use averages and savings benchmarks as a starting point and work from there.