Americans’ workplace retirement account balances are growing — but they’re still lower than what people say they should be on track to retire, new data finds.
The average account balance in the U.S. is now $35,286, according to Vanguard’s annual How America Saves report, which tracked the performance of 401(k) and similar plans in 2023. That’s a 29% increase over last year, per due to a mix of market gains and ongoing contributions, the report notes.
Those benefits still won’t cover most workers’ retirement costs: Americans say they need $1.46 million to “live comfortably” in retirement, a recent Northwestern Mutual study says. This will be particularly difficult for people with lower incomes to achieve, as account balances vary widely based on how much account holders earn – and, therefore, can contribute.
Here’s a look at average account balances in 2023 by income:
- Less than $15,000: 3691 dollars
- $15,000-$29,999: 6142 dollars
- $30,000-$49,999: $10,072
- $50,000-$74,999: $24,939
- $75,000 – $99,999: $51,073
- $100,000 – $149,999: $91,323
- $150,000 or more: $188,678
Vanguard’s account balance totals don’t include any savings outside of the workplace, such as brokerage accounts, individual stock and bond holdings, real estate investments, savings accounts or inheritances — so they don’t necessarily give a complete picture. of Americans’ retirement savings.
Some of the lower balance totals are also related to age: people often earn and save less money early in their careers.
“People tend to accelerate retirement contributions as they get older because they tend to earn more, but also because they’re getting closer to retirement age,” says Michelle Gessner, a certified financial planner in Houston. “But it’s a big mistake for young people to downplay the importance of retirement contributions at a young age because of the time value of compound interest.”
Compound interest is interest that is earned continuously on both the principal amount and any accrued interest, leading to exponential growth over time. The longer you invest, the more your money theoretically grows.
How much should you save for retirement?
Your retirement savings goal will likely depend on factors such as lifestyle, income, debt and the age you want to retire, so you may want to consult a financial professional to develop a plan. A common standard uses your income and age, as recommended by Fidelity:
- Until the age of 30: Save 1x your annual salary
- At the age of 40: Save 3 times your annual salary
- At the age of 50: Save 6 times your annual salary
- At the age of 67: Save 10 times your annual salary
Don’t take those numbers as gospel, says Andrew Herzog, a CFP in Plano, Texas. After all, most Americans struggle to meet these goals, especially early in life.
“These standards are a great way to start the conversation, but that’s it,” says Herzog. “Beyond that, there are many other factors to consider for these standards to really apply to someone in particular.”
In general, aim to put at least 10% of each payments into retirement savings, says Gessner. Increase your contributions by one percentage point per year, she adds: “A 1% increase each year will hardly be noticeable and is easy to manage.”
If you can’t save 10% of each paycheck, start by saving everything you can, says Gessner. “Saving just $100 a month with a 7% annual return can grow to over $100,000 in 30 years,” she says. “Saving works best over time, so start early.”
She offers one more tip: If your company matches employee contributions to retirement funds, take advantage.
Employers often match up to 3% or 6% of each worker’s salary. Since retirement funds grow with compound interest, contributing enough to get the full matching contribution — what some financial professionals call “free money” — is the key, says Gessner: “Never leave money on the table.”
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