When planning for retirement, many Americans rely on their 401(k) savings as a key component of their financial strategy. However, recent data suggests that the median 401(k) balance is much lower than many people might expect. According to a report from Vanguard titled "How America Saves 2023," the average 401(k) balance varies significantly by age group.
According to Vanguard's data, here are the average and median balances:
Age Average Account Balance Median Account Balance
Under 25 $5,236 $1,948
25-34 $30,017 $11,357
35-44 $76,354 $28,318
45-54 $142,069 $48,301
55-64 $207,874 $71,168
65+ $232,710 $70,620
Why the gap between the average and median balances? It reflects the savings habits of high earners who might save closer to the $23,000 annual limit for 2024 as well as the very low or zero balances of other participants.
Both the average and median balances fall well short of a common $2 million retirement nest egg. Following the 4% withdrawal guidelines, a $2 million balance would mean someone could take out $80,000 per year without negatively impacting the principal. It's an amount that takes into consideration rising healthcare costs in retirement and staying close to a preretirement lifestyle.
