When it comes to retirement savings, having an idea of what others do can be good information. It can be hard to determine exactly how much you’ll need for your own post-career days, but finding out how others are planning—or not—can offer a benchmark for setting goals and milestones.
• Americans’ 401(k) balances are up, thanks to a combination of asset performance and increased contributions.
• 401(k) account balances and contribution rates vary greatly by age, with those in their 60s racking up the biggest numbers.
• Most Americans still aren’t saving sufficient amounts for their retirement years, several studies show.
401(k) Plan Balances by Generation
The good news is that Americans have been making an effort to save more. According to Fidelity Investments, the financial services firm that administers more than $7.4 trillion in assets, the average 401(k) plan balance reached $106,000 in the second quarter of 2019. That’s a 2% increase from $104,000 in Q2 2018.1
How does that break down by age? Here’s how Fidelity crunches the numbers:
Twentysomethings (Age 20–29)
Average 401(k) balance: $11,800
Median 401(k) balance: $4,300
Contribution rate (% of income): 7%
Thirtysomethings (Age 30–39)
Average 401(k) balance: $42,400
Median 401(k) balance: $16,500
Contribution rate (% of income): 7.8%
Among millennials (which Fidelity defines as those born between 1981–1997), 38% of workers increased their savings in Q2 2019.2 This generation is the most likely to contribute to a Roth 401(k), too.
Fortysomethings (Age 40–49)
Average 401(k) balance: $102,700
Median 401(k) balance: $36,000
Contribution rate (% of income): 8.5%
The jump in the account balance size for Gen Xers could reflect the fact that these folks have logged a good couple of decades in the workforce, and have been contributing to plans that long. The slightly larger contribution rate may reflect the fact that many are in their peak earning years.
Retirement Savings Goals
What should you aim for, savings-wise? Fidelity has some pretty concrete ideas. By the time you’re 30, the company calculates you should have saved half of your annual salary. If you are earning $50,000 by age 30, you should have $25,000 banked for retirement. By age 40, you should have twice your annual salary. By age 50, four times your salary; by age 60, six times, and by age 67, eight times. If you reach 67 years old and are earning $75,000 per year, you should have $600,000 saved.
How Do You Get Started?
Sad but true: Most Americans don’t have nearly enough savings to sustain them through retirement.
How do you avoid that fate? First, become a student of the retirement savings process. Learn how Social Security and Medicare work, and what you might expect from them in terms of savings and benefits.
Then, figure out how much you think you’ll need to live comfortably after your nine-five days are past. Based on that, arrive at a savings goal and develop a plan to get to the sum you need by the time you need it.
Start as early as possible. Retirement may seem a long way away, but when it comes to saving for it, the days dwindle down to a precious few, and any delay costs more in the long run.
Not your age group? Stay tuned to Part 2!
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Fidelity Investments. “Fidelity 2019 Retirement Analysis: A Record Number of People Boost Their Savings Rate in Q2 as Average Account Balances Continue to Increase,” Page 1. Accessed Sept. 27, 2019.
Fidelity Investments. “Fidelity 2019 Retirement Analysis: A Record Number of People Boost Their Savings Rate in Q2 as Average Account Balances Continue to Increase,” Page 2. Accessed Sept. 27, 2019.
Internal Revenue Service. “Retirement Topics: Catch-up Contributions.” Accessed Sept. 27, 2019.
Economic Policy Institute. “The State of American Retirement.” Accessed Sept. 27, 2019.