The simple act of thinking about retirement is exciting for some … but nerve-wracking for others. And it largely comes down to how much they have in their retirement accounts.
Retirement anxiety is very real, and very understandable: Running out of money at an age when it’s difficult to make more money is a terrifying thought. Indeed, it’s that very fear that compels us to stash money away for retirement and feverishly check our 401(k) balances.
But when we look at that number … well, how do we have any idea if the number is high enough, close to the mark, or much lower than where it needs to be?
Today, we’re going to look at several data points to help answer that question. We’ll look at the average 401(k) balance by age, yes, but we’ll also look at how much each generation thinks they need to have saved by retirement, as well as what age each generation has set as their retire-by number. After that, I’ll provide some ideas for anyone trying to level up their retirement savings.
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Using 401(k) Balances as Retirement Guideposts
The 401(k) is one of the most popular types of retirement account; a little more than two-thirds of Americans have access to a 401(k) plan, and roughly half of those people participate. That comes out to about 70 million Americans, spread out across every adult-aged generation.
That makes 401(k) balances a plenty-adequate guidepost for anyone trying to gauge their own progress as they save for retirement.
Just understand that “adequate” doesn’t mean “perfect.”
For instance, different generations participate at much different rates. Roughly 85% of Baby Boomers (born 1946-1964) who are still working use a 401(k) to save for retirement; that number is 81% for Gen X (1965-1980), 78% for Millennials (1981-1996), and 66% for Gen Z (1997-2012).
Also, 401(k)s aren’t the only way people save for retirement. Many people invest through individual accounts such as traditional individual retirement accounts (IRAs) and Roth IRAs. Not to mention, there are loads of other workplace accounts, such as 457(b)s, 403(b)s, SEP IRAs, Thrift Savings Plans (TSPs), and pensions.
And consider this: If you have a 401(k) account through an employer, and you leave that employer for another, you can leave the money where it is or roll it over into your new 401(k) account (keeping that money in a 401(k) of some sort) … or you can do what millions of Americans do and roll it over into an IRA. So over time, 401(k) balance data (including your own balance!) might become less reflective of overall retirement savings because some people roll over their 401(k)s into IRAs as they change jobs.
A long way of saying: While comparing 401(k) balances can be very helpful for keeping your retirement savings on track, just remember that they don’t paint a perfect picture. (In general, we recommend consulting with a financial advisor to make a detailed plan of what you should have saved from one year to the next.)
With that out of the way …
What Are the Average 401(k) Balances by Generation?
Today, we’re going to help you measure your 401(k) balance by contrasting it with Fidelity data gathered from 23,900 corporate defined contribution plans and 23.3 million participants. These numbers, divulged in Fidelity’s “Building Financial Futures” report, are as of March 31, 2024. The average 401(k) balance across all accounts was $125,900, but that’s not a useful number. So we’ll dig into how that number varies by generation.
Additionally, we’ll want to talk about how much people think they need to have saved to live comfortably in retirement. Americans as a whole think they’ll need $1.46 million, on average, according to Northwestern Mutual’s Planning & Progress Study 2024. But again, to give you an idea of what your retirement goal should look like (and how far or near you are), we’ll want to look into the generational data.
Finally, we’ll think a little bit about age. Different generations have different expectations about when they’ll be able to retire, and we’ll get that data from Charles Schwab’s 2023 401(k) Participation Study.
Gen Z
— Average 401(k) balance: $11,300
— How much they think they need for retirement: $1.63 million
— Expected retirement age: 61
It’s safe to assume that most Gen Z members (born 1997 to 2012) with a 401(k) are from the higher end of the generation’s age range. Sure, there’s no age restriction under Internal Revenue Code section 401(a), but other constraints make it challenging for a minor to participate in a 401(k). Plans aren’t required to let anyone under age 21 participate, and most plans have a minimum participation age of 21 (though some allow younger participants).
Regardless, as the youngest workers, it should come as no surprise that Gen Z has the lowest average 401(k) balance, at just $11,300—an understandably far cry from the $1.63 million they expect they’ll need for retirement.
If you’re in Gen Z and have this much saved, you’re on par with your cohort … but you’re also well behind the savings pace you’ll need to hit retirement by 61—the youngest age expectation out of all the adult generations. The good news? You have time to catch up! The less-good news? You’ll need to step up your savings.
Gen Z Retirement Example
You just turned 26 years old—near the older end of the Gen Z spectrum. You have been working for a full four years and have been contributing to your 401(k) from the very start. I’ll provide two scenarios: 1.) You have earned a conservative rate of return (6%) until now, and you will continue to do so until retirement. 2.) You have earned a rate of return consistent with the S&P 500’s long-term average annual return (9%), and will continue to do so until retirement:
— Conservative scenario (6% return): To reach a 401(k) balance of $11,300 in four years, you contributed roughly $215 per month on average. To hit Gen Z’s retirement goal ($1.63 million by age 61), you would need to contribute about $850 per month, or $635 more per month, going forward.
— S&P 500 scenario (9% return): To reach a 401(k) balance of $11,300 in four years, you contributed roughly $210 per month on average. To hit Gen Z’s retirement goal ($1.63 million by age 61), you would need to contribute about $400 per month, or $200 more per month, going forward.
A good rule of thumb: The younger you are, the more allocated to stocks you’ll be, thus the fairer an assumption the S&P 500 scenario will be. So, anyone feeling behind at this point in their careers has ample time to catch up—and you’ll be able to do so with a meaningful, but not unrealistic, increase in your contribution rate.
Related: 5 Best Schwab Retirement Funds [High Quality, Low Costs]
Millennials
— Average 401(k) balance: $59,800
— How much they think they need for retirement: $1.65 million
— Expected retirement age: 64
As you might expect, Millennials (born 1981 to 1996) have much more saved in their 401(k)s than Gen Z, with an average 401(k) balance of $59,800, according to Fidelity data.
That said, Millennials also think they’ll need slightly more money—$1.65 million—to retire, and they also believe they’ll need a few more years in the workforce, expecting on average that their retirement will start at 64 years old.
Many people in this age range are becoming more settled into careers and might be able to start contributing more to retirement accounts than they could previously afford. That’s good, because if you’re only at $59,800, you’re in line with Millennials’ standards, but you’re not going to reach your retirement goals in time without putting more money into your 401(k) every month.
Millennial Retirement Example
Because all Millennials are working age, I’ll look to the middle of the generation’s age range for our example.
You’ve just turned 35 years old. You have $59,800 saved up in your 401(k), and for easy math’s sake, I’ll assume you’ve been contributing to your 401(k) ever since you started working at a job with a 401(k) at age 22. (While I’ll calculate an average monthly savings since age 22, I obviously expect the number would have been lower at the start and become greater over time.)
Again, I’ll provide two scenarios: 6% past and future average annual returns, and 9% past and future average annual returns.
— Conservative scenario (6% return): To reach a 401(k) balance of $59,800 in 13 years, you contributed roughly $260 per month on average. To hit Millennials’ retirement goal ($1.65 million by age 64), you would need to contribute about $1,200 per month, or $940 more per month, going forward.
— S&P 500 scenario (9% return): To reach a 401(k) balance of $59,800 in 13 years, you contributed roughly $210 per month on average. To hit Millennials’ retirement goal ($1.65 million by age 64), you would need to contribute about $520 per month, or $310 more per month, going forward.
The 9% return scenario is still realistic, though you certainly have fewer years to be all-in on stocks than Gen Z does.
Perhaps more importantly: At this point, the 401(k) data might be a little muddied by rollovers. Yes, the average Millennial’s 401(k) account balance might be $59,800, but they might also have a few thousand (or even tens of thousands of) dollars in a rollover IRA after quitting their first job. Indeed, according to the 2022 Survey of Consumer Finances, the 35-44 age group—so, basically, the older half of Millennials—boasted $141,520 in total retirement savings, on average. (Those under 35 averaged a little more than $49,130.)
Related: Best Vanguard Retirement Funds for a 401(k) Plan
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Gen X
— Average 401(k) balance: $158,500
— How much they think they need for retirement: $1.56 million
— Expected retirement age: 65
Even the youngest Gen Xers (born 1965 to 1980) have been in the workforce for decades. That has given them much more time to build up their retirement accounts, and given an average 401(k) balance of more than $158,000, they have.
Retirement is only a few years away for the older members of this generation, while the youngest among them have a couple more decades to go. Gen X tends to look to age 65 for retirement, and they have a lower savings target of $1.56 million.
Many Gen X members don’t think they’ll have enough money. In a 2023 survey conducted on behalf of Natixis Investment Managers, almost half (48%) of Gen X respondents said it would take a miracle to retire securely.
As the example below indicates, at least based on 401(k) balances, they might be right.
Gen X Retirement Example
I’m going to use the midpoint of Gen X (51) for the example, but we’re getting to a point where the math looks really different depending on your age. For instance, if you have $158,500 at age 44, that’s a much better position than a Gen Xer who has $158,500 at age 59.
You’ve just turned 51 years old. Your 401(k) now has $158,500 in retirement savings, and for easy math’s sake, I’ll assume you’ve been contributing to your 401(k) ever since you started working at a job with a 401(k) at age 22. (Again, my scenarios will use an average monthly savings, but it’s a good guess that you contribute much more now than you did when you were younger.)
Here’s what the 6% and 9% scenarios look like:
— Conservative scenario (6% return): To reach a 401(k) balance of $158,500 in 29 years, you contributed roughly $175 per month on average. To hit Gen X’s retirement goal ($1.56 million by age 65), you would need to contribute about $4,300 per month, or $4,125 more per month, going forward.
— S&P 500 scenario (9% return): To reach a 401(k) balance of $158,500 in 29 years, you contributed roughly $100 per month on average. To hit Gen X’s retirement goal ($1.56 million by age 65), you would need to contribute about $3,000 per month, or $2,900 more per month, going forward.
There’s a lot to unpack here, so let’s look at some considerations:
1. $158,500 is well behind what Gen Xers need to hit their target. If you’re in Gen X, and that’s all you’ve saved up, you’ll need to make stark changes to your retirement savings habits.
2. But again, total retirement savings are a different story. 2022 Survey of Consumer Finances data shows the 45-54 group (entirely Gen X) averages $313,220 in total retirement savings. And the 55-64 group (which includes older Gen Xers) averages $537,560. So, Gen Xers closer to those numbers across all their accounts might need to save more each month … but they might not.
3. If you’re a Gen Xer and you are behind, you have a way of getting a leg up. If you are 50 or older at the end of the calendar year, you can start making additional “catch-up” contributions to most retirement plans, such as 401(k)s, IRAs, 403(b)s, etc. For instance, the 401(k) contribution limit for 2024 is $23,000, up $500 from 2023. However, workers who will be 50 by the end of the calendar year can put an additional $7,500 in their 401(k) plans for 2024 (thus, a total of $30,500).
4. But if you’re far enough behind, that contribution boost won’t be enough. Both scenarios require updates to your savings amounts that exceed the 2024 401(k) contribution limit ($4,300 x 12 = $51,600, and $3,000 x 12 = $36,000). In other words, if your shortfall exceeds a certain amount, you might need to both max out your 401(k) and contribute to other retirement plans.
5. Lastly: The 9% return scenario is becoming less realistic at this point. You’ll still be invested predominantly in stocks for at least a few years longer. However, many financial advisors will tell you that as you approach retirement, you’ll want to invest more in bonds to protect the wealth you’ve already built.
Related: 15 Alarming Gen X Retirement Statistics
Baby Boomers
— Average 401(k) balance: $241,200
— How much they think they need for retirement: $990,000
— Expected retirement age: 68
The Baby Boomers (born 1946-1964) are the oldest generation I’ll discuss today, and they boast the highest 401(k) balance of $241,000. They also boast the lowest expected goal for retirement, at just under $1 million. It’s also worth noting that, with retirement so close, this generation likely has a better idea of their estimated cost of living compared to younger generations.
The majority of Baby Boomers are past the traditional retirement age of 65; the youngest among them are 60 years old. So it’s also not surprising, given that they have the clearest view of retirement, that they expect retirement will be much later in life—age 68!—than younger generations anticipate.
Baby Boomer Retirement Example
Because many Boomers are already retired, my example will lean toward the younger side of the generation. And here, you’ll find that there’s very little wiggle room—if you’re short on your retirement savings goals, what you’d have to do to reach them by the projected age of 68 veers into the unrealistic.
You’ve just turned 62 years old. Your 401(k) now has $241,200 thanks to 40 years of saving. The 6% and 9% scenarios are as follows:
— Conservative scenario (6% return): To reach a 401(k) balance of $241,000 in 40 years, you contributed $83 per month on average. To hit the Baby Boomers’ retirement goal ($990,000 by age 68), you would need to contribute about $7,500 per month, or $7,417 per month, going forward.
— S&P 500 scenario (9% return): To reach a 401(k) balance of $241,000 in 40 years, you contributed roughly $58 per month on average. To hit the Baby Boomers’ retirement goal ($990,000 by age 68), you would need to contribute $6,210 per month, or $6,152 more per month, going forward.
The additional savings needed to dig out of this hole are simply massive, and they would require more capacity than what you’re limited to in a 401(k).
But at the same time, the average 401(k) balance of $241,000 is just a fraction of what Baby Boomers actually have saved across all accounts. According to 2022 Survey of Consumer Finances data, the 55-64 cohort (which includes younger Boomers) has $537,560 saved, and the 65-74 cohort (entirely made up of Boomers) has $609,230. In other words, the typical Baby Boomer has less than half their retirement savings in a 401(k) by this point in their lives.
Related: 9 Financial Mistakes That Can Quickly Drain Your Retirement Savings
Should I Be Worried If I’m Behind?
If you’re behind based on 401(k) numbers alone, the answer is “no.” As I’ve mentioned several times above, average 401(k) balances data doesn’t necessarily reflect what people actually have saved across all retirement accounts.
Also, people have different career trajectories. If you’re a member of Gen Z or even a Millennial that’s currently behind your peers in saving, you’ll naturally save less in early-career jobs with a lower salary, but you can afford to save more as you earn more. Also, many people decide to pay their student loans and other debts off immediately after college, but have more capacity to save once their loans are knocked out.
Additionally, you might have other sources of retirement income to help you bridge a savings gap. Social Security immediately comes to mind, but you might also be collecting a pension or annuity income in retirement. Other forms of income include life insurance and legal settlements.
If you’re really behind, though, you might have to make some sacrifices. This could include putting off your retirement date, working a part-time job in retirement, and/or adjusting your lifestyle expectations.
Related: 5 Best Fidelity Retirement Funds [Low-Cost + Long-Term]
How Else Can I Know if My Retirement is on Track?
There are a couple of different popular guidelines people use to gauge whether their retirement savings are progressing quickly enough. Fidelity’s general guidelines by age decade are as follows:
— By age 30 = 1x your salary saved
— By age 40 = 3x your salary saved
— By age 50 = 6x your salary saved
— By age 50 = 8x your salary saved
— By age 67 = 10 X your salary saved
If you’re willing to do a bit more math, you can get a more accurate number for your situation. Many financial experts agree that most people need around 70% to 80% of their pre-retirement income to retire comfortably. If you add up your retirement income sources, such as Social Security and investment income from retirement accounts, does your projected income exceed your projected expenses? Or do you fall short?
Ultimately, these are still pretty rough guidelines. If you want a more granular plan, you’ll want to discuss your retirement plans with a financial advisor who can dive deeper into your unique financial situation and help you draw a retirement roadmap.
Related: Best Fidelity Retirement Funds for a 401(k) Plan
How Can I Save More for Retirement?
Here are a few quick tips if you want to save more toward your retirement. Just note that you should only do any of the below if you can afford to do so without negatively impacting your ability to pay for basic necessities:
— If you’re not already contributing to your 401(k) (or other employer-sponsored retirement account), and your company offers a contribution match, contribute at least up to the match limit. It’s literally free money. (And if you can afford to contribute more, contribute more.)
— If you’re already maxing out your 401(k), consider contributing even more to your retirement via a personal account, such as a traditional or Roth IRA.
— If your employer offers a health savings account (HSA), and you don’t already take advantage of it, open an HSA and max it out if possible.
— Take advantage of catch-up contributions if you’re 50 or older as of the end of the calendar year.
— Get a side gig and dedicate the income from it to retirement savings.
Related: 5 Best Vanguard Retirement Funds [Start Saving More, for Less]
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