Social media has turned a lot of people into more curious versions of themselves. And when it comes to financial matters, it's natural to want to draw a comparison between yourself and others.
For example, you may be wondering if your home cost more or less than the homes your friends own. And you may be wondering who drives the most or least expensive car.
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Similarly, you may be curious to know how your 401(k) plan balance compares to the general population's. And to that end, Vanguard has some answers.
The average 401(k) balance might surprise you
Vanguard reports that among its 401(k) plan participants, the average balance in 2022 was $112,572. But that doesn't tell the whole story.
Vanguard also says that the median 401(k) balance in 2022 was $27,376. And when you have a discrepancy like that, where a median falls well below an average, it's reasonable to infer that more people have less than $112,572 in retirement savings than those who have more.
You may also be surprised to see that the average 401(k) balance isn't higher than $112,572. But to be fair, in 2022, the stock market tanked, taking many 401(k) plan balances down with it.
This year, the market has performed better on a whole, and many 401(k) balance are up at this point compared to last year. So in reality, that $112,572 might be an underrepresentation of what savers have accumulated.
Are you doing well with your retirement savings?
If you're sitting on a 401(k) plan balance that's comparable to $112,572, you might assume that you're in good shape. And you might assume that you're in poor shape if your balance is well below that point.
But remember, there are different factors that go into determining whether you're on track with your savings efforts or not, and a big one is your age. If you're 24 years old with $20,000 saved for retirement, you're doing splendidly. If you're 44 years old with that same balance, you're not doing as well.
Similarly, you may have a 401(k) balance of around $112,572 at age 35. That's a nice amount of progress to have made at that point. But if you're a couple of years away from retirement with around $112,572 in savings, you're frankly not in such good shape at all.
As such, rather than fixate on a single number, think about where you are in life and what your personal retirement goals entail. From there, you can try to figure out if you're saving adequately enough or if your nest egg needs a serious boost.
And if you're not sure how to determine that on your own, call in some help. Find a financial advisor who can set you up with a savings plan and help you work toward your goals.
It's perfectly OK to want to know how your 401(k) balance compares to other people's. But you have to consider your age and goals in the course of doing those comparisons.
In fact, your best bet may be to ignore what the average 401(k) plan participant has saved and simply focus on the amount you want to be saving. Doing so could be your ticket to meeting your goal and getting to enjoy the retirement you've always dreamed of.
