The money in your 401(k) plan could end up serving a very important purpose: helping you cover your living costs throughout retirement. And so it's a good idea to close out your career with as high a balance as possible.
Granted, your 401(k) plan might not be the only income source you have in retirement. You'll most likely have some income from Social Security to count on as well.
But still, it's a good idea to kick off retirement with a robust nest egg. So you might be wondering whether you're on track to do that.
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The average 401(k) plan balance as of March 2023 was $78,800, according to Bank of America. That's down from $86,000 a year prior.
Given that the stock market has been volatile over the past year, it's easy to see why 401(k) balances are down. But if you're not happy with what your balance looks like, then it's important to address that immediately.
You don't want to end up falling short
If you're in your 20s or 30s with a 401(k) plan balance of $78,800, or something in that vicinity, you're not necessarily in poor shape. But if you're closer to retirement and haven't even hit the $100,000 mark in your 401(k), that's a little more of an issue.
If you're not thrilled with the amount of money you've saved in your 401(k), the obvious answer is to try to save more. But that might not be easy these days thanks to inflation.
What you should do in that case, however, is aim to contribute enough to your 401(k) plan to snag your employer match in full. That's free money you can invest during the remainder of your career to grow your 401(k) balance.
And you might want to look at how your 401(k) plan is invested to be sure your strategy is working. If you have the bulk of your 401(k) in a target date fund, for example, your money might be invested somewhat conservatively. That could be stunting your account's growth. So it might pay to move over to mutual funds or index funds (the latter come with much lower fees).
And speaking of fees, you'll want to make sure those aren't contributing to a lower 401(k) balance. Some of the fees you're paying, like administrative fees, could be unavoidable. But if you're loaded up on mutual funds, for example, swapping some for low-cost index funds could work wonders for your plan balance.
Focus on your own needs and goals
Knowing that the average 401(k) balance as of March 2023 was $78,800 may or may not be helpful to you. After all, the needs of the typical retiree might differ from your needs. So think about how much savings you want to retire with, see how much time you have left in the workforce, and set yearly goals to increase your chances of getting to where you want to be.
