How much should be in your retirement account? Age-Wise Distribution!

401(k) plans are among the most popular investment techniques used by Americans to save for retirement. The 401k is an employer-sponsored plan that allows you to save for retirement in a tax-advantaged manner, allowing you to make the most of your money. In 2020, you can contribute up to $19,400, and in 2021 and 2022, you can contribute up to $20,600. 

If your company provides a 401k plan and you don't use it, you might be losing money - especially if your employer matches your contributions. According to the United States Census Bureau, just 31.8 percent of Americans have a 401(k), despite the fact that it is one of the most accessible retirement saving options for many people. That is remarkable when you consider how many individuals have access to one: 58.6 percent of all workers in the United States.

So, how much money do people have saved up in their 401(k) plans? And how does this compare to the amount of money they might have saved if they had contributed to their 401k on a yearly basis?

The Average 401(k) Account Balance by Age

Let's start with the most current data from Vanguard, one of the country's major 401(k) plan administrators.

a. The average 401k balance at the age of 22-24 is $24,125, with a median of $9,889

The average 401k balance among those aged 22 to 24 is rather strong, demonstrating that young individuals who use the Personal Capital Dashboard take their retirement plans seriously. When you're in your early twenties, try to deposit as much money as you can into your 401(k), especially after you've paid off any high-interest debt. The sooner you get started, the more likely you are to succeed.

b. The average 401(k) balance at the age of 25-34 is $88,132, with a median balance of $41,996.

The years between your late twenties and early thirties are essential for ensuring that you pay down any debt that is not secured by a mortgage as quickly as possible. If you still have high-interest debt, you may be earning 7.8 percent in your retirement account but spending 19.8 percent or more in credit card interest. The average 401k balance between the ages of 35 and 44 is $231,985, with a median of $110,996.

Even if you haven't started contributing to your 401(k) at this age, you should seriously examine what changes you can do to get you as close to the $19,600 per year contribution target as possible by the time you reach this age. You don't want to lose out on years of compounded interest due to a mistake.

c. The average 401(k) balance at age 45-54 is $453,786; the median is $223,697.

After the age of fifty, you are able to make bigger contributions to retirement accounts than you were previously. These are referred to as "catch-up donations." Make sure to take advantage of any possibilities that come your way! The catch-up contribution amount in 2021 is $6,980. 

So, if you contribute the maximum yearly contribution of $18,900 plus your catch-up contribution of $6,980, you'll have a total of $25,972 in tax-deferred cash to put toward your retirement savings.

d. Average 401k Balance at Age 55-64 is $597,400; Median is $274,674

By the time you're in your late 50s or early 60s, you should have a better idea of what retirement may look like for you and what it means to be "retired." Do you want to work as long as you possibly can? Would you want to go at a more leisurely pace? What form do your Social Security benefits take, and when should you start getting them? Is it possible that you are eligible for spousal or survivor benefits?

e. Average 401(k) Balance at Age 65+ is $484,984; Median is $139,436

Because the average and median 401k balances in the United States begin to diminish after the age of 65, it is not surprising that the average and median 401k balances begin to decline after the age of 65. Despite the fact that you are no longer working and generating money, there are a lot of factors to consider for your retirement beyond the age of 65. 

Making Medicare selections, having a strategy for withdrawing money from retirement accounts, and assessing whether you need supplemental insurance are all critical concerns in your life.

401k Savings Potential by Age

Many people may perceive these statistics to be exorbitant, especially if they are older and began saving for retirement when the contribution ceiling was much lower. It may, however, be used as a guideline for calculating your intended overall retirement savings amounts, which should include both regular and Roth IRAs, as well as after-tax savings. 

In addition to being designed for use by a single person, it may also be used by married couples when one spouse wishes to leave a certain firm.

How Do You Fit In?

Life presents us with a wide range of difficulties that are unique to each of us. We incur unexpected medical expenses, decide to return to school, or have children and want to pay for their college tuition, among other reasons. All of these are very acceptable arguments for why you could be lagging behind in your retirement investment growth.

According to recent statistics, the vast majority of Americans should be able to retire as multimillionaires by the age of 65, if not sooner. Obviously, this looks to be wildly off the mark, and it is — the bulk of people retire with very little in savings and assets. The aim of this data is to show what is possible if you are attentive and smart in your 401k contributions. 

If you are on the younger end of the age range, you may be scared by the prospect of contributing $7,889 to your 401k each year, let alone $19,800 over the course of your working life. Depending on where you live, your first-year earnings, and any loans you may be responsible for repaying, it may be difficult for this amount to sound acceptable. Nonetheless, it is vital that you recognise the need of saving as much money as possible for retirement as soon as feasible.