Ranking Your 401K Account Against Your Peers

The average 401k account contains a lot less than it should, experts say.

Once in a while, U.S. retirement savers should sit down and compare their 401k amount totals with peers in the same age group.

That task is made easier by the California Society of Certified Public Accountants (CalCPA), which, with help from a separate study from Vanguard on retirement savings, recently released a comparative breakdown of how much Americans are saving in their 401k funds compared to their demographical peers.

Here’s what the data showed:

“The average percentage contributed by employees for 2021 was 7.3%, and 11.2% with employer matches,” CalCPA reported. “The overall average amount in a 401(k) account is $141,542, but this number includes balances for workers across all experience levels and tenure. When broken down by age, the average account amounts are significantly different.”

Under 25—$6,264





65 and older—$279,997

Those numbers may actually look more robust than they should, thanks to a vast minority of solid 401k savers.

“The numbers are extremely low,” said Robert R. Johnson, a professor at the Heider College of Business at Creighton University. “According to a June 2022 study by Vanguard (entitled “How America Saves”), the average account balance for Vanguard participants was $141,542.”

However, a better indication of how little Americans have saved is that the median balance was $35,345.

That’s because the average account 401k balance is skewed by a relatively few high account balances,” Johnson noted.

‘Appalling’ 401k Savings Numbers

At first glance, it doesn’t seem like U.S. retirement savers are on track for a comfortable retirement. An even closer look by investment experts shows that many Americans may spend their golden years working under the Golden Arches to stay afloat financially.

“The 401k saving averages are appalling,” said Laurie Itkin, a financial advisor at Coastwise Capital. “There’s a high probability that people with an “average” amount of retirement savings will run out of money before they die. There is no way to sugar-coat this bitter pill.”

Given the status quo, as exemplified by the CalCPA numbers, millions of Americans face a serious uphill financial climb during their retirement years.

‘Unless Americans abide by the philosophy of living below their means, they won’t save enough for retirement,” Itkin said. “You must make a non-discretionary item in your monthly budget for saving and investing. If your employer offers a 401k or similar plan, you should increase the percentage of your salary you contribute whenever you get a raise or cost of living adjustment to your salary.”

Getting Uncle Sam more involved in the retirement savings picture could help, Itkin noted.

“Perhaps the government could mandate that once a year every American must type into an Internet search box, “How Long My Savings Will Last Calculator,” she said. “Americans should spend ten minutes playing around with their retirement savings calculator to see where they stand. After all, fear is a good motivator.”

As usual, a lack of financial literacy, especially with savings needed for retirement, keeps holding Americans back with their 401k holdings.

“Actually, $140,000 average 401k savings seems low,” said Teresa Arrigo, a financial advisor at GenWealth Financial Advisors , in Conway, Ark. “Even the top average of $280,000 for the 65 and over category seems low, too.”

There’s a good reason for the low savings figures, Arrigo noted. Americans remain adrift on long-term savings needs, goals, and education.

“Based on conversations we regularly have, many Americans don’t fully understand how their 401k plan works and how to use it over the long-term to build wealth,” Arrigo said. “They aren’t getting coaching either, so when market volatility strikes, they may choose to stop investing or go to cash.”

Additionally, many people still live paycheck to paycheck and don’t prioritize employer plan contributions because they can’t see the long-term benefits when they are focused on short-term budgeting challenges.

“Consequently, while circumstances Americans are facing make these numbers understandable, that doesn’t take away the impact of how low they are relative to the income need of retirees,” she said. 

A Way Forward for 401k Savers

One major move 401k-slacking Americans make is to latch on to technology to turbo-boost their retirement savings.

“You have to make saving money a habit,” Johnson said. “And habits — good or bad —develop over time. So, one of the best ways to save money is to make it automatic.”

Smart 401k investors have leveraged automatic payroll deductions for years, primarily because the strategy works, Johnson said.

“If you don’t receive money rerouted to a 401k, you’ll act like you never earned it – it’s essentially, out of sight, out of mind,” he noted.

Your best move? Have an amount taken out of each paycheck and put directly into an investment fund such as a low-cost stock index fund.

“This strategy means you’ll be putting money into the market whether stocks are rising, falling, or treading water,” Johnson said.

Another smart 401k move is to start by capturing employer matching contributions to your 401k plan.

“Whatever amount you need to put in to get the maximum 401k contribution from the employer, start there,” Arrigo said. “Then, every time you get a raise, increase your contribution by 1%. You won’t really feel it, but it adds up over time.”

One more tip from Arrigo — avoid taking loans or withdrawals from your 401k fund.

“Basically, think of the money in the 401k as dead to you until retirement,” she said. “Do that and reap the rewards of a smartly-planned 401k strategy.”

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