Saving for retirement isn't easy, but 401(k) accounts are a universally popular way to save thanks to hands-off investing features and contributions drawn directly from your paycheck.
But how do you know if you've saved enough? How is your retirement savings plan shaping up against people your same age?
Here's the data:
Average 401(k) balance up to age 25: $4,048 Median: $1,385
Average 401(k) balance ages 25-34: $22,187 Median: $8,363
Average 401(k) balance ages 35-44: $60,528 Median: $23,944
Average 401(k) balance ages 45-54: $116,192 Median: $46,200
Average 401(k) balance by ages 55-64: $177,805 Median: $71,579
Average 401(k) balance by age 65+: $200,358 Median: $68,558
All workers: Average savings of $96,288 Median: $26,405
(Median is the middle point, so half the savers would be above and half below)
Source: “How America Saves” a 2016 report by Vanguard. Balances are from Vanguard defined contribution programs. A 401(k) is a defined contribution (DC) plan.
On average, most experts advise that you will need to save enough to replace 80% of your current income for the length of your retirement.
Related content: What your 401(k) is costing you
Some economists believe the 401(k) itself is failing U.S. workers. In this 2016 report by the Economic Policy Institute called “The State of American Retirement” participation declined “even as baby boomers have approached retirement.”
Share of families age 32â€“61 participating in retirement plans by type, 1989â€“2013
|Defined-benefit plan||Defined-contribution plan||Both types of plans||Any plan|
|Accompanying note from EPI: “Since DC and DB shares include families with both kinds of plans, the share with both types is subtracted from the total to produce the share with any plan. Shares indicate whether either the respondent or his or her spouse participated in such a plan or plans on a current job (individual participation rates are lower).”|
|Source: EPI analysis of Survey of Consumer Finance data, 2013.|
Am I saving enough in my 401(k)?
The contribution limit to a 401(k) or its alphanumeric cousins — e.g. the 403(b) — increased $500 to $18,000 for 2015 and 2016. The catch-up contribution for those age 50 and up also increased $500, to $6,000. Estimates for 2017 suggest these figures will stay the same, though it won't be announced by the IRS until October 2016.
But don't these limits stop you from socking away more money. Data from Fidelity shows that investors who have both a 401(k) and an IRA retirement account have an average total of around $250,000 saved, more than those with a 401(k) alone.
Related content: How to open a Roth IRA
Are there downsides to 401(k)s?
Here's one of the shortcomings of the 401(k) system when it comes to investing in stocks: During tough economic times, many people lose their jobs, the still-working see their salaries get frozen or cut, and many companies eliminate the match. On the whole, money going into retirement accounts declines.
But this is also when the stock market declines, which means it could be a better time to be buying stocks. Historically, the broad market — as measured by the Dow or the S&P 500 — has recovered from declines. In the teeth of the Great Recession, the S&P 500 fell as low as 666 (spooky!). Unfortunately, many Americans didn't have the resources to buy companies (which is what you're doing when you buy stocks) at much lower prices, and workers got less help from employers. Money flowing into 401(k)s increases as the economy improves but also when the stock market has already begun to rebound, making stocks more expensive to purchase.
There may also be situations where a company no longer provide matching funds, long a major draw for 401(k) savers — free money! — but among those that do continue to match, it might be getting better for the saver:
The 2015 Trends & Experience in DC Plans Report from Aon Consulting surveyed 360 employers with over 10 million employees. Here's what they found:
â€¢ 42 percent of companies now match dollar-for-dollar, up from 31 percent in 2013.
â€¢ 56 percent require workers to save 6 percent to earn the match.
Most adults will confront the thought — am I saving enough? — at some point, no matter their age, so it's important to focus on the fundamentals and not to panic. Even if you are behind, all experts will tell you even starting small is the right thing to do.
Robert Brokamp, a certified financial planner, contributed to this article.