• Tue. Sep 20th, 2022

The average 401(K) balance of Americans in their 50s and 60s

ByChad J. Johnson

Apr 25, 2022

Select’s editorial team works independently to review financial products and write articles that we think our readers will find useful. We earn commission from affiliate partners on many offers, but not all offers on Select are from affiliate partners.

A 401(k) is a type of retirement account provided by your employer that uses pre-tax money to help you save for your years out of work. Since most employers automatically enroll employees in some 401(k) plan and contributions can be automatically deducted from their paychecks, those who participate can avoid much of the hassle of saving for retirement.

The process raises two important questions: first, how much money should someone have in their 401(k) for retirement and second, how much money do people preparing to retire actually have in their their 401(k) account?

While the answer to the first question has a lot to do with when you plan to retire and what type of lifestyle you want to adopt at that time, there are a few guidelines you can follow, few no matter where you are in your retirement savings journey. help you get there – Select recently covered how much money you should have saved at each age if you want to fully explore this topic.

Regarding the second question, select the information used from Vanguard’s How America Saves 2021 Survey to dig deeper into what the average American retiree’s 401(k) balance looks like. According to the survey, participants reported the following amounts:

  • Average 401(k) balance for ages 45-54: $161,079 (average); $56,722 (median)
  • Average 401(k) balance for ages 55-64: $232,379 (average); $84,714 (median)
  • Average 401(k) balance for people age 65 and older: $255,151 (average); $82,297 (median)

While it can be nice to get an idea of ​​what other people have put aside, keep in mind that personal retirement savings goals can differ depending on the type of lifestyle you want. adopt in retirement. If you plan to travel regularly and make expensive purchases that you might not have made when you were younger, for example, you’re going to need to save a considerable amount of money. If you’re hoping to live a less expensive lifestyle, stay close to family, and indulge in a few new hobbies, you can probably get away with a smaller balance.

How to start saving for retirement

One of the best ways to starting to save for retirement means making sure you’re enrolled in your employer’s 401(k) plan. You can decide what percentage of each paycheck you want to defer to this account and some companies will even match all or part of what you contribute so that you grow your balance even faster. Pay particular attention to the matching requirements, as some employers have a minimum percentage required. For example, if your employer matches contributions of at least 3%, you will need to contribute at least 3% of each paycheck to your 401(k) in order to receive the match.

401(k) accounts also come with maximum contribution limits which change slightly each year – for 2022 you are allowed to contribute up to $20,500. Keep in mind, however, that maxing out your account can be very difficult. If you are unable to reach the $20,500 mark, be sure to contribute at least enough to receive the match from your employer.

Another way to make sure you’re growing your retirement savings is to contribute to a Roth IRA, a powerful tool you can use when it comes to saving for retirement because you can contribute money after tax that is invested and grows over time. When you withdraw the money in retirement, anytime after age 59½, you won’t have to worry about paying taxes on it either.

The sooner you can open a Roth IRA, the better because your money will have more time to accumulate. If you were to open a Roth IRA today by investing $100 and contributing only $3,000 each year — assuming an 8% annual return — over 30 years, you would have accumulated $340,856. However, if you were to follow the same steps and only give your money 20 years to grow, you would end up with just $137,752. That 10 year difference can end up costing you over $200,000, so it’s better to do it sooner rather than later.

Similar to a 401(k) account, a Roth IRA also has an annual contribution limit, except it’s much lower at $6,000 – this limit is also use it or lose it, so if you’re contributing less than 6 $000 per year, the remaining limit will not be carried over to the following year. This is yet another reason why it’s important to start contributing to a Roth IRA as early as possible.

There are many Roth IRA providers. If you want a hands-off approach, consider one such as Improvement or wealth frontsince their robo-advisors can choose the right portfolio for you and automatically adjust your allocation based on your needs and risk tolerance.

Improvement

On Betterment’s secure site

  • Minimum deposit and balance

    Deposit and minimum balance requirements may vary depending on the investment vehicle selected. For Betterment Digital Investing, minimum balance of 0 USD; Premium investment requires a minimum balance of $100,000

  • Costs

    Fees may vary depending on the investment vehicle selected. For Betterment Digital Investing, 0.25% of your fund balance as an annual account fee; Premium Investing has an annual fee of 0.40%

  • Prime

    Up to one year of free management service with qualifying deposit within 45 days of signup. Valid only for new individual investment accounts with Betterment LLC

  • Investment vehicles

  • Investment opportunities

    Stocks, bonds, ETFs and cash

  • Educational resources

    Betterment RetireGuide™ helps users plan for retirement

wealth front

On the Wealthfront secure site

  • Minimum deposit and balance

    Deposit and minimum balance requirements may vary depending on the investment vehicle selected. $500 minimum deposit for investment accounts

  • Costs

    Fees may vary depending on the investment vehicle selected. Zero account, transfer, trading or commission fees (fund ratios may apply). Wealthfront’s annual management advisory fee is 0.25% of your account balance

  • Prime

  • Investment vehicles

  • Investment opportunities

    Stocks, bonds, ETFs and cash. Additional asset classes to your portfolio include real estate, natural resources and dividend stocks

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    Offers free financial planning for planning college, retirement and buying a home

If you prefer to get more involved in the investments you choose, go with a brokerage such as loyalty or Charles Schwaballowing you to choose your own investments or start a conversation with an advisor about your goals and the types of assets that interest you.

Charles Schwab

  • Minimum deposit and balance

    Deposit and minimum balance requirements may vary depending on the investment vehicle selected. No account minimum for active investing via Schwab One® Brokerage account. Automated investing with Schwab smart portfolios® requires a minimum deposit of $5,000

  • Costs

    Fees may vary depending on the investment vehicle selected. Schwab a® The brokerage account has no account fees, $0 commission fees for stock and ETF trades, $0 transaction fees for 4,000+ mutual funds, and $0.65 fees by option contract

  • Prime

  • Investment vehicles

    Robo-advisor: Schwab Smart Wallets® and Schwab Intelligent Portfolios Premium™ IRA: Charles Schwab Traditional, Roth, Rollover, Legacy and Custodial IRAs; plus, a Personal Choice Retirement Account® (ECRP) Brokerage and negotiation: Schwab a® Brokerage account, brokerage account + specialized platforms and support for trading, Schwab Global Account™ and Schwab Organization Account

  • Investment opportunities

    Stocks, bonds, mutual funds, CDs and ETFs

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    Complete retirement planning tools

Loyalty investments

  • Minimum deposit and balance

    Deposit and minimum balance requirements may vary depending on the investment vehicle selected. No minimum to open a Fidelity Go account, but a minimum balance of $10 for the robo-advisor to start investing. Minimum balance of $25,000 for personalized planning and advice from Fidelity

  • Costs

    Fees may vary depending on the investment vehicle selected. No commission fees for trades in stocks, ETFs, options and some mutual funds; zero transaction fees for over 3,400 mutual funds; $0.65 per options contract. Fidelity Go is free for balances under $10,000 (afterwards, $3 per month for balances between $10,000 and $49,999; 0.35% for balances over $50,000). Fidelity’s personalized planning and advice has a 0.50% advisory fee.

  • Prime

  • Investment vehicles

    Robo-advisor: Fidelity Go® and Fidelity® Personalized planning and advice IRA: Fidelity Investments Traditional IRAs, Roths and Rollovers Brokerage and negotiation: Fidelity investment trading Other: Fidelity Investments 529 Education savings; Loyalty HSA®

  • Investment opportunities

    Stocks, bonds, ETFs, mutual funds, CDs, options and fractional shares

  • Educational resources

    Comprehensive tools and industry-leading in-depth research from over 20 independent vendors

Correction: The story previously said that after you started with $100 and then invested $3,000 for 30 years, you would have $715,024, and the difference would be over $500,000. The story has been updated to reflect the exact amount of money you would have.

Editorial note: Any opinions, analyses, criticisms or recommendations expressed in this article are those of Select’s editorial staff only and have not been reviewed, endorsed or otherwise endorsed by any third party.