The average 401(k) balance has recently topped $100,000, fueled by a strong market run since 2009 and even holding steady through the global pandemic. Vanguard reports that the average balance hit a new high of $120,650 at the end of 2020, while Fidelity places it around $120,000 as of early 2021. Notably, long-term participants, those invested for over a decade, have seen their balances soar to an average of $251,600, a 12% increase from the previous year.
In the bigger picture, 51 million American workers actively participate in 401(k) plans, about half of the U.S. workforce. With the average balance at $101,650, it appears the retirement outlook isn’t as grim as it might seem. While IRAs and MyRAs cater to the rest, personal savings, investments, and pensions are taking care of the broader American populace.
However, achieving a robust retirement fund isn’t a walk in the park. It requires meticulous planning and saving. To aid this, I’ve laid out recommended 401(k) savings targets by age and work experience, aiming for significantly higher figures than the reported averages—because in personal finance, average just won’t cut it.
Most Americans save less than 10% of their income and splurge on cars that eat up more than half their yearly earnings. It’s clear that if we aim to ensure a comfortable retirement for ourselves, it’s imperative to adopt a disciplined approach to savings and investments.
For those starting early, I advocate for aggressive contributions to retirement accounts from a young age, with the assumption that individuals will secure a median full-time income by their mid-20s. I’ve also laid out conservative growth projections in my recommendations, though historical returns on investments like the S&P 500 suggest potential for higher yields.
I also encourage viewing these 401(k) targets as benchmarks for all your pre-tax retirement accounts. Whether it’s an IRA, a Roth, or any other, aiming high and planning prudently can only serve to enhance your financial stability down the line.
Furthermore, real estate should not be overlooked as a vital component of a diversified investment strategy. With historically low interest rates enhancing the value of rental income, now is an opportune time to consider investing in property, which can yield passive income and contribute significantly to long-term wealth accumulation.
In conclusion, while the average 401(k) balance provides a glimpse into the current state of retirement savings, striving for above-average savings rates and diversifying your investment portfolio is key to securing a financially comfortable retirement.
