Retirement accounts serve as a crucial income source for seniors. Social Security alone provides enough money to replace just 40% of pre-retirement income -- which won't cover the necessities. But are Americans on track to producing enough income in their later years?

Let's take a look at the average combined 401(k) and IRA balance among savers with both accounts and see how much money it would end up providing. 

Adult looking at laptop.

Image source: Getty Images.

This is the income a typical American would have as a senior based on average 401(k) balances

According to Fidelity, the average combined 401(k) and IRA balance was $382,800 in 2021.

This may sound like a hefty sum, but if your account had around the average amount of money in it and you followed the 4% rule -- which means you withdraw 4% of your account balance in the first year of retirement and adjust for inflation in subsequent years -- your savings would produce about $15,312 in annual income. For most people, even when combined with Social Security, that would likely leave them with too little to live on. 

Now, this is an average balance across all retirement savers. So it's very possible that people nearing retirement have much more saved, while those who are far away from retirement have smaller balances but have more time to grow them.

Still, Fidelity's data also suggests many people are likely not saving quite enough to be prepared for the future. Fidelity found the average savings rate in tax-exempt plans,, including an employer match, was around 11.6%. Saving closer to 15% of income could be crucial to building a large enough nest egg, thanks to lengthening life expectancies and lower projected future returns. 

How to beat the average

Seeing how much income the average benefit will produce can be sobering, since it makes it clear that even a relatively large account will produce a limited amount of money to survive on as a senior. That's especially true once you remember that you have to take taxes and inflation into account -- so if you aren't retiring for a long time, a $15,312 income will give you even less buying power than it may seem. 

The good news is, you can end up with a nest egg that's much larger than average if you follow a few simple steps, including:

  • Starting to save as soon as possible to put the power of compound growth to work for you. The sooner you begin investing, the sooner your money can earn returns that can be reinvested and grow your account balance quickly. 
  • Setting detailed retirement goals so you can know how much you'll need in your later years, and so you can identify exactly how much money should be saved each month to stay on track to achieving your target.
  • Automating contributions to retirement accounts so you will always contribute the necessary amount of money each month without any effort on your part. 
  • Investing in an appropriate mix of different assets so you're exposed to the right level of risk. 

A larger-than-average account balance will be crucial to a secure future, so start working on these steps today so you'll amass more than the typical American by the time you reach retirement age.