Here’s the Average 401(k) Balance by Age

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Retirement balances go up with age. But when, and by how much? Take a look at the data. 

Building up enough retirement savings is a long process. Ideally, it starts in your 20s (or even earlier!). And even under perfect circumstances, it takes literally decades.

When progres is so slow, it can be hard to recognize it. Even comparing to other folks’ retirement savings can be tough, since time plays such a huge role.

In the end, the best way to gauge your retirement savings progress against other folks is to do so by age. This levels the time advantage enough to get a fairer assessment than comparing yourself to folks much further ahead — or behind.

Retirement balances, by age

One major source of retirement savings data is the annual How America Saves Report from Vanguard. It looks at data from 5 million participants across the brokerage‘s business.

Here’s a look at the data, by age bracket.

As you might expect, account balances increase with age, and folks the closest to retirement age had the highest balances. That said, the highest savings rates were from younger brackets, with balances more than doubling each bracket until participants hit their mid-40s.

The problem with averages

One very important distinction to make with the data above is that between the average balances and the median balances.

Although people casually use the term “average” to mean “typical,” that’s not the case when it comes to statistics. The average balance is found by totaling up everyone’s balances, then dividing that amount by the total number of participants. So if a few of the participants have unusually high balances, the average will be higher than is strictly “typical.”

For example, suppose you look at a subset of 20 participants. Three of them have balances of $1 million each. The other 17 participants each have a balance of $50,000. You’d likely say then that the “typical” balance is $50,000. But the average balance would be: $3.85 million divided by 20 people = $192,500. The average is nearly four times higher than the “typical” balance.

This is why any good dataset includes the median numbers alongside the averages. The median number is the one in the middle. In other words, if you made a list of everyone’s balances, the median balance would be right in the center of the list, so half of the balances will be below the median, and half of them above it.

If you’re going to compare your own progress with that of your age group, look at the median, rather than the average for a more accurate measure.

Keeping your savings goals

Even comparing yourself to the median balances could leave you feeling as though you’ve fallen behind. Or perhaps you know you’re on track — but it’s hard to stay that way.

In either case, here are a few tips for reaching your retirement savings goals.

Maximize employer matches. Many employers offer 401(k) or IRA matches. Contribute at least enough to maximize this each year (it’s part of your compensation package, after all).Save every pay period. Even if you make only small contributions each pay period, try to set something aside every time. Getting into this habit makes it easier to save consistently. Moreover, many employers will do this for you. Alternatively, set up automatic withdrawals from your checking account to your retirement account through your bank.Keep an eye on your portfolio. Don’t invest your money then forget about it. Check in on your portfolio regularly and rebalance as necessary.

One final bit of advice: Don’t be afraid to speak with a professional. If you’re truly concerned that your investments aren’t doing as well as they should, consider consulting a wealth management advisor. They may be able to help you optimize your investments and increase your savings.

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