There's a reason working Americans are often warned to not rely too heavily on Social Security for retirement. Those benefits will only replace about 40% of the average earner's pre-retirement wages, and most seniors need roughly 70% to 80% of their former income to maintain a decent lifestyle. Furthermore, because Social Security cuts may be on the table, it's even more important to save independently for retirement.

If you have access to a 401(k) plan through your employer, you have a prime opportunity to accumulate some nice cash reserves for your senior years. Currently, annual 401(k) plan contributions max out at $19,500 for workers under 50 and $26,000 for those 50 and older. And since many employers offer matching incentives, it's possible to sneak even more money into a 401(k) plan (to be clear, employer contributions don't count toward the aforementioned limits).

If you're saving for retirement in a 401(k), you may be wondering how your balance compares to that of the average American. And Vanguard may have your answer.

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How does your 401(k) balance stack up?

In 2020, the average 401(k) balance for Vanguard participants was $129,157, according to Vanguard's 2021 How America Saves report. The median balance, however, was considerably lower, coming in at $33,472.

Whenever you have a median that's considerably lower than the mean, you can infer that more people have less than the average than more. Or, to put it another way, that average $129,157 balance may be coming as a result of a small percentage of 401(k) participants who have saved extremely well and are pulling the mean upward. But that $33,472 may be more reflective of what the typical saver has actually socked away to date.

How much retirement savings should you have?

There's no magic savings number that'll guarantee you financial security in retirement. A good rule of thumb is to stash away enough cash so that by the time you leave the workforce for good, you have 10 to 12 times your ending salary on hand in savings.

But remember, that's the total you should be aiming for at the time of your retirement. And so if you're 30 years old and are sitting on a retirement plan balance of $33,472, or something in that vicinity, you may not be in such poor shape.

On the other hand, if you earn a salary of $80,000 a year and you're already in your 50s, that $33,472 becomes problematic if it reflects your balance. In that case, you might really consider making major lifestyle changes that allow you to pump more money into your retirement plan. Those could include downsizing your home, spending a lot less on leisure, and working a second job.

Should the average 401(k) balance matter to you?

Not really. Knowing how much Americans have saved might satisfy your curiosity, but remember, the amount of money you'll need for retirement will depend on the income you're used to living on and the goals you have for your senior years.

In fact, the rule of starting retirement with 10 to 12 times your ending salary may not apply to you if you live very frugally in general and don't tend to spend a lot of your income. For example, if you earn $80,000 a year but mostly manage to live on $40,000 a year, you may not need an $800,000 to $960,000 nest egg.

Ultimately, knowing what the typical American has on hand for retirement shouldn't change your savings strategy. But if you're well into your career and have saved much less than the average person, that alone might motivate you to ramp up. And that's not a bad thing at all.