How much do Americans have in their 401(k)s by age?

Saving for retirement is an important aspect of every worker’s life, because this prepares them to deal with expenses once they stop working. One way for employees to build a nest egg for the future is to contribute to their 401(k).

What is a 401(k) plan?

Employers offer a 401(k) retirement savings plan to their workers, allowing them to contribute a portion of their pre-tax earnings into an investment account that provides tax advantages to retirement savings. The term “401(k)” comes from the section of the Internal Revenue Code that administers these plans.

Employees can transmit their 401(k) plans contributions through automatic payroll deductions. Because these contributions are deducted from the worker’s paycheck before taxes are calculated, this reduces their taxable income for the year.

Some employers also offer matching contributions to their employees’ plans as part of their benefits package. These matching amounts are usually based on a percentage of the worker’s contributions, up to a certain limit. This employer match can significantly boost the employee’s retirement savings.

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How much savings should you have as you get older?

Everyone wants to retire comfortably, although the details of what this life would look like can vary from person to person. Whatever lifestyle you may be envisioning for your retirement, what is sure is that saving is vital to all plans for the future. How much money then, should one be saving to ensure a secure retirement?

According to financial website Fidelity Investments, it would be ideal to save at least an amount equal to your salary by the time you hit 30, three times your salary when you hit 40, six times by age 50, eight times when you turn 60, and ten times your salary when you hit 67.

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How much do Americans have in their 401(k)s by age?

If you have been contributing to your 401(k) consistently over the past few years, your efforts could pay off despite market volatility and the Federal Reserve’s interest rate hikes.

However, according to figures released by investment advisor Vanguard, Americans are nowhere near this ideal savings scenario. The finance company’s report, titled “How America Saves 2023″, shows that the 401(k) median account balance for people who are 65 and older is only $70,620.

Here is a table of average and median account balances for 401(k) plans according to age, per Vanguard’s report. The average figures are much bigger than the median figures, because they are skewed by workers who are capable of squirreling away more money into the retirement savings plan.