Last year, the National Institute on Retirement Security reported that 79% of Americans feel there's a broad retirement crisis. And 55% said they're worried they'll never achieve financial security once their careers come to an end.
A big reason so many people have a bleak outlook on retirement is that they lack savings for that stage of life. But that's understandable.
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It's hard to set money aside consistently in an individual retirement account (IRA) or 401(k) when you have pressing expenses you can't put off. This especially applies to workers today, who have been battling stubborn inflation for years.
But it's important to try to save for retirement as best as you can so you don't have to rely mostly on Social Security for income later on. If you earn an average wage and benefits aren't cut, Social Security will replace about 40% of your pre-retirement earnings. Most retirees need about twice that much replacement income to maintain their standard of living, though. And that's where personal savings come in.
You may be curious as to what the typical American today has saved for retirement. Vanguard has some data on that, and the number may surprise you.
What the typical 401(k) balance looks like today
Each year, Vanguard reports on Americans' savings progress by compiling data from the 401(k) plans it manages. Now, to be clear, Vanguard's data, though comprehensive, is not reflective of Americans' savings habits as a whole. It's important to recognize that before reading further.
That said, based on 2024 data, Vanguard reports the average 401(k) balance among savers of all ages today at $148,153. The median 401(k) balance, however, is only $38,176.
Now, you may have fallen asleep in Statistics 101 back when you were forced to take it, so here's what this means. When you have a median that's much lower than an average, it typically means that the median is a more representative number.
There are some people -- think higher earners -- who may have very large 401(k) balances. So, when Vanguard compiles its data, it takes those balances into account.
Those higher balances may be skewing Vanguard's average upward, though. For this reason, it pays to look at the median $38,176 balance as a better representation of what Americans have saved today.
How to get your 401(k) balance to be above-average
When you look at data on average retirement savings balances, it's important to consider it in context. A balance of $38,176 -- or even $148,153, for that matter -- is not all that great for someone in their late 50s who may have under a decade of working years left. But for someone in their 20s, either figure is fantastic.
Still, no matter your age, there are steps you can take to grow your 401(k) nicely.
First, do your best to keep your largest expenses, like housing and transportation, as low as possible. If you can afford a monthly rent of $2,500 and a $600 car payment, get a $2,000 apartment and buy a car that costs you $500 a month instead. Keeping big expenses down could pretty seamlessly free up money you can save in your 401(k) instead.
It's also a good idea to be strategic about your spending in general. This doesn't mean you shouldn't splurge on things you enjoy so that every spare dollar you earn can go into your 401(k). Rather, spend on extras mindfully.
It's also important to try to snag your workplace 401(k) match in full. An employer match represents free money for your 401(k). So, if your employer will match 100% of up to your first $3,000 in contributions and you only put $2,400 into your 401(k), you're giving up $600.
Worse yet, you're also giving up the opportunity to invest that $600 so it grows into a larger sum over time. So, do what you can to avoid giving up employer matching dollars. If need be, grab a side hustle that boosts your income enough to make larger contributions.
Clearly, the typical American's 401(k) balance isn't so large. But with the right approach, you can do a lot better -- and set yourself up for a more financially sound retirement.
